The threat of sweeping tariffs on Canadian goods has resurfaced, with significant implications for Ontario’s economy and workforce. Ontario Premier Doug Ford estimates that the tariffs proposed by the Trump administration could impact up to 500,000 jobs in the province, making this an urgent concern for affected employees. If you have been put on a temporary lay off or foresee a temporary layoff as a result of these tariffs, below is what you should know.

Is Your Company Allowed to Lay You Off?

When an employer puts employees on layoffs due to external factors like tariffs, it does not automatically grant them the right to do so. Under the law, unless a specific employment agreement allows for temporary layoffs, employers generally do not have the authority to implement them. As stated by the Ontario Superior Court in Webb v. SDT North America, 2023 ONSC 7170, “It is well established that an employer has no right to unilaterally lay off an employee unless the contract provides otherwise.”

Putting employees on temporary layoffs without a valid layoff clause in the employment contract are seen as a fundamental change to the employment. This change can be viewed as constructive dismissal, which may qualify you for wrongful dismissal damages.

How Long Is Your Layoff?

Even if your employer has the contractual right to temporarily lay you off, under Ontario’s Employment Standards Act, 2000 (“ESA”), they can only do so on a temporary basis. Generally, in the non-unionized context, a temporary layoff can last no longer than 13 weeks within any 20 consecutive weeks or no longer than 35 weeks within any 52 consecutive weeks, provided certain conditions are met (for example, the employer must continue your benefits during the temporary layoff).

Usually, employers would indicate the length of the temporary layoff and include the date of return in the notice of layoff. If the time limit is exceeded, the layoff will automatically result in termination, triggering the employer’s obligation to provide termination entitlements. In this case, the first day of layoff is considered the termination date.

What If You Are Being Recalled?

Some companies may offer to recall employees after the constructive dismissals arising from overlong layoffs. In such cases, employees might wonder whether they should claim constructive dismissal because the position is so different, or accept the recall offer to fulfill their duty of mitigation.

Under common law, the duty of mitigation means that employees should mitigate the damages resulting from dismissal by making reasonable efforts to seek re-employment and by accepting comparable employment.  Generally speaking, “comparable employment” refers to positions that are similar in status, hours, and pay.

The Supreme Court of Canada, in Evans v. Teamsters Local Union No. 31, 2008 SCC 20, stated that employees are only required to accept recall offers that a reasonable person would not find embarrassing, humiliating, and/or degrading to return to work. Specifically, employees should return only if the pay is the same, the working conditions are similar, and the work is not degrading. The court will also consider other factors, such as the employee’s job history and whether they have initiated legal action.

In Michalski v Cima Canada Inc., 2016 ONSC 1925, the court ruled that the employee should have taken the recall offer, which he did not. As a result, his common law entitlement was capped at the date of the recall notice. However, each situation is unique and should be assessed in its entirety. Before making a decision to return, you should consult an experienced lawyer.

Do You Know the Limitation Period?

Generally, there is a two-year limitation period for pursuing constructive dismissal claims. While exceptions have been made in extraordinary circumstances, waiting too long to act could mean forfeiting your right to legal recourse.

It is also worth noting that the longer you remain on layoff without objection, the stronger your employer’s argument becomes that you accepted the layoff as a condition of your employment.

What to Do When You Are Laid Off?

If you are laid off due to U.S. tariffs, it is important to consult an employment lawyer promptly to explore your options. If your layoff is not supported by an enforceable contract or if it exceeds the timeframes defined by the ESA, your employment may already be considered terminated. Taking action now can help protect your rights, secure the compensation you deserve, and prevent any assumption that you have accepted the layoff. When your company recalls you, carefully assess whether you should accept the recall offer and return to work.