Williams HR Law LLP

Navigating the Threat of U.S. Tariffs and Preparing for a Potential Pandemic-Style Relief Package

January 30, 2025

The global economic landscape continues to shift with increasing uncertainty, especially as the United States threatens to impose 25% tariffs on Canadian goods as early as February 1, 2025. This could lead to massive disruptions for Canadian businesses, from layoffs to production cuts. In response, the federal government has indicated that it is planning a contingency multi-billion economic relief package designed to assist workers and businesses should the US impose tariffs. While the scope and scale of the impending aid package remain to be seen, the federal government’s prior pandemic relief programs could offer insight into how tariff relief programs could take shape.

What Could the Relief Package Look Like?

The Canadian government’s aid package could be similar in scale to the pandemic-era measures introduced in 2020. The response could include a combination of programs aimed at supporting businesses by helping them cover expenses and manage payroll. In 2020, Canada rolled out an $82-billion aid package to help workers and businesses weather the economic storm. That relief package included $27 billion for workers, offering direct support such as income assistance and wage subsidies, and another $55 billion in tax deferrals aimed at helping businesses maintain liquidity.

A primary concern is the potential for widespread layoffs and production slowdowns as Canadian companies grapple with the financial fallout of US tariffs.

Potential Programs to Support Employers

The aid package could involve a combination of subsidies designed to keep businesses afloat. For example, programs like the Canada Emergency Wage Subsidy (CEWS), which was extended in 2021, might serve as a model. Under CEWS, eligible employers were able to receive subsidies to cover a portion of their employees’ wages, helping them retain staff even during financially challenging times. If subsidies offered in response to US tariffs follow the same principles as CEWS, employers will need to demonstrate revenue declines relative to pre-tariff levels to qualify.

A program similar to the Canadian Emergency Business Account (CEBA), introduced in 2020, could also assist businesses in addressing the impacts of significant tariffs. The CEBA provided eligible small and medium-sized businesses up to $60,000 in interest-free financing to help cover operating costs. A similar program could be a relief to employers who operate qualifying businesses, particularly if the proposed increased scope of coverage includes coverage of rent, a significant fixed cost that many businesses struggle with.

Support for Workers

For individual workers, the federal government may again offer additional support in the form of expanded employment insurance benefits, which could include waiving waiting periods or extending benefit durations. The goal would be to provide a safety net for Canadians who lose their jobs due to tariffs and subsequent business closures or slowdowns.

Takeaways for Employers

The threat of US tariffs looms large over the Canadian economy, and the government’s response will be critical to mitigating the impact on workers and businesses alike. While the details of the relief package are currently unknown, it is clear that both the federal government and business leaders must act swiftly to protect the Canadian economy from the disruptive effects of tariff imposition. Employers who stay informed and proactive will be better positioned to navigate these uncertain times, ensuring that they are prepared for whatever challenges lie ahead.

For Canadian employers, it’s essential to stay informed and prepare for potential disruptions. If the US tariffs take effect, businesses should:

Assess Workplace Policies: If US tariffs lead to business slowdowns or operational changes, employers should assess workplace policies to ensure they are flexible and capable of responding to a potentially rapidly changing economic environment. Having clear policies around flexible work will allow businesses to respond quickly to tariff impacts while ensuring that employees remain productive and engaged.

Assess Workforce Needs and Structure: Employers should evaluate the current staffing levels and assess whether they align with the potential impacts of tariffs on their business. Certain roles or departments may become more critical, while others may need to be reduced or adjusted. For businesses facing revenue declines due to higher costs from tariffs, workforce adjustments might be necessary, whether through temporary layoffs, reduced hours, or changes in shift patterns.

Review and Update Employment Agreements: As economic conditions evolve, it’s crucial for employers to assess their Employment Agreements to ensure that they contain enforceable clauses related to temporary layoffs, adjustments to working hours, and/or termination of employment. Employers should work with legal professionals to adjust their contracts accordingly. By having clear, legally sound agreements, employers can protect their business from legal disputes, be better positioned to provide flexibility to adapt to changing economic conditions, and maintain a range of options to address business realities during challenging times. Understanding whether key clauses are enforceable will help employers assess risks as they contemplate next steps.

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.

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