Strategic Moves Ontario Businesses Can Make to Mitigate U.S. Tariff Turmoil

• 
  Cristina Tomaino
  Lawyer

This article by Cristina Tomaino was first published in Guelph Today.

Lawyer Cristina Tomaino at McKenzie Lake Lawyers in Guelph offers guidance to help employers adapt, protect their workforce and survive this tumultuous period

With President Donald Trump’s tariffs shaking up trade, Ontario businesses are bracing for impact. With the anticipated higher costs, disrupted supply chains, and squeezed profit margins, many employers may be forced to make some tough decisions in tightening budgets, restructuring operations, and reducing staff. These are strategic moves Ontario businesses can make to mitigate U.S. tariff turmoil.

Ontario businesses have been through this before when the COVID-19 pandemic threw workplaces into crisis mode, forcing employers to pivot, adapt, and find creative solutions to keep their businesses running. Cristina Tomaino, a management-side labour and employment lawyer at McKenzie Lake Lawyers in Guelph says, “Those same lessons, strategic workforce planning, and navigating legal complexities can help businesses weather the tariff storm and survive this tumultuous period.”

Risks of Temporary Layoffs

If tariffs drive up costs, employers will look for ways to cut expenses, and temporary layoffs may seem like a logical first step. Temporary layoffs can effectively mitigate short-term work slowdowns as they alleviate the employer’s burden of paying affected employees for a period of time but maintain the employment relationship. This allows employees to return to work once business conditions improve.

Under the Ontario Employment Standards Act, 2000 (the ESA), a temporary layoff cannot exceed 13 weeks in any consecutive 20-week period or 35 weeks in any consecutive 52-week period if prescribed conditions are met. If a layoff extends beyond the period of time allowed by the ESA, it is deemed to be a termination of employment.

Employers may assume that as long as a temporary layoff is compliant with the legislation, they must be in the clear. But Tomaino says, “What employers may not realize is that they do not necessarily have the right to temporarily lay off employees. This is unfortunately a lesson that many Ontario employers learned the hard way during the COVID-19 pandemic.

In a non-unionized workplace, the absence of an employment contract that allows for temporary layoffs may open the door to constructive dismissal claims if layoffs are unilaterally implemented by an employer.”

In some sectors, seasonal layoffs or occasional plant shutdowns do occur. But in other industries, a layoff is unheard of and, as a result, may present a greater degree of risk to the employer. Tomaino adds, “Although employers may see temporary layoffs as a cost-saving measure, it is critical not to dismiss or underestimate the potential cost if constructive dismissal claims do arise.” Understanding the risks involved in a temporary layoff can save businesses a lot of trouble down the road and getting the right advice from the start allows employers to take strategic steps to protect themselves from liability.

Staying Agile When Tariffs Hit

No one would have predicted that we would be in a trade war with the U.S. and now the reality is, businesses need to be prepared to pivot quickly, whether that means downsizing, right-sizing, or reshaping their workforce. Tomaino says, “Employers should ensure they have the tools, resources, and knowledge to be able to act quickly to changing economic conditions and protect their business interests.”

Tomaino adds, “My strongest advice for employers is to look at your employment contracts as soon as possible. An enforceable and well-drafted employment contract will allow employers to successfully navigate an economic downturn.” A proactive approach is key to get ahead of the challenges on the horizon.

Negotiate an Agreement

If tariffs start hammering Ontario’s economy, smart businesses might strike a deal with their workers rather than implement a mass layoff. The federal government has expanded the Employment Insurance Work-Sharing Program in response to the current economic uncertainty to help employers avoid layoffs. Other options include, offering employees voluntary separation agreements to reduce payroll costs without inviting the liability associated with a termination.

Tomaino says, “Some negotiating and flexibility now could mean keeping the doors open and jobs intact when the storm finally passes. If both sides can come to an agreement, even if it’s a temporary agreement, that is absolutely something to explore.”

Employee buy-in is important and having a collaborative rather than a confrontational relationship goes a long way to ensuring success. Tomaino adds, “There is a shared interest in protecting Canadian jobs and minimizing the impact of tariffs on Canadian workers. Every employer that I have spoken to is working hard to keep their doors open and maintain their workforce if at all possible.”

Tariff Safety Net

Premier Doug Ford has promised there is a plan in place to support workers and businesses hit by tariffs which includes tax relief, cash-flow support, and targeted support for impacted industries and communities. Tomaino says, “We may be able to take our cue from some of the measures enacted by the provincial government during the COVID-19 pandemic. I’m hoping for protections or stopgaps that would allow employers to hold jobs for their employees.”

Maintaining Employee Morale

Everyone is feeling the pressure, and the worst part isn’t just the economic hit; it’s the uncertainty. Will there be layoffs? Reduced hours? Pay cuts? Not knowing is what really fuels stress. Tomaino says, “That’s why open communication in the workplace is essential. Even if employers don’t have all the answers, keeping workers informed helps ease the anxiety. Regular updates, honest conversations, and advance notice of changes can go a long way in maintaining trust.”

Clearly communicating and documenting workplace changes will help mitigate employee concerns and prevent risk. Tomaino says, “Give employees the opportunity to ask questions. And try to keep things positive, but realistic. It helps keep morale up and prevent panic.”

A workforce that feels informed and valued is far more likely to stick together, adapt, and push through tough times as a team. Tomaino adds, “I believe we’re going to see Canadian employers and unions unified in a way that we don’t see very often, especially in areas of manufacturing such as the auto sector.”

Contact a Lawyer

With tariffs threatening to shake up Ontario’s economy, employers cannot afford to wing it when it comes to possible layoffs and terminations. A simple misstep can lead to costly legal trouble. While the tariff storm may be inevitable, sinking isn’t. That’s why it’s important to get the advice of an expert in employment and labour law. Cristina Tomaino says, “Getting expert advice is the best way for employers to protect themselves against possible employment exposure. With smart strategies businesses can stay afloat. The key is planning and navigating liability pitfalls before they become legal headaches. With some strategic considerations, I’m confident businesses will be able to weather the storm and survive this turbulent period.”

Tough times test businesses, but the ones that adapt, communicate, and make strategic moves will be the ones still standing when the dust settles. Cristina Tomaino says, “What is important is having that knowledge, knowing what the risks are, and mitigating those risks to the greatest extent possible. That is where I think every employer would benefit from consulting a lawyer to ensure they are protecting their interests.”

About The Author

Cristina brings extensive labour, employment, and human rights law expertise to our Guelph office. Contact Cristina Tomaino at (519) 826-4333 Ext 7632, Email: cristina.tomaino@mckenzielake.com.