Laid Off Because of Tariffs in Ontario? Your Severance and Legal Rights

Can my employer temporarily lay me off because of tariffs?

Only if your employment contract actually gives them that right. This is the single most misunderstood point in every downturn. The Employment Standards Act, 2000 (section 56) describes how long a temporary layoff can last before it becomes a termination, but the ESA does not hand employers a free-standing right to lay anyone off. The right has to come from your contract, a signed policy, or a well-established practice you clearly accepted.

The Ontario Court of Appeal confirmed this in Elsegood v Cambridge Spring Service, 2011 ONCA 831: once a layoff crosses the ESA limits, the employee is terminated, full stop, and can sue for common-law wrongful dismissal damages. And in Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127, the court held that placing an employee on an unpaid layoff the contract never authorized was a constructive dismissal from day one; the employee did not have to wait out the ESA clock at all.

Here is the decision tree when a tariff layoff notice lands on your desk:

1. 1.Check your contract for a layoff clause. No express right to lay you off? The layoff is a dismissal. You can treat it as a termination immediately and pursue full severance.
2. 2.If there is a layoff clause, watch the ESA clock. A layoff generally becomes a termination after more than 13 weeks in any 20-week window, or after 35 weeks in 52 weeks if benefits and certain payments continue.
3. 3.If the clock runs out, you are deemed terminated under ESA section 56, with entitlements calculated from the day the layoff began.
4. 4.If you accept severance while holding a recall right, you may have to choose between taking the money and keeping the recall right; get advice before electing. Our guide to recall rights during a layoff covers this in detail.

If you are weighing whether to sit out a layoff or treat it as a dismissal, our post on temporary layoffs as constructive dismissal walks through the timing and the risks of each path.

Does a tariff downturn reduce how much severance I get?

No. The Ontario Court of Appeal settled this in Michela v St. Thomas of Villanova Catholic School, 2015 ONCA 801: an employer's financial difficulties do not justify reducing the reasonable notice period. Notice is assessed from the employee's perspective (your age, length of service, the character of your job, and the availability of similar work), not from the employer's balance sheet.

If anything, a tariff-driven downturn can push your notice period up, not down. When an entire sector (auto parts, steel, aluminum, food processing) is shedding jobs at once, comparable work is harder to find, and courts recognize that reality in the 'availability of similar employment' factor.

What if 50 or more people were cut? The mass termination rules

Tariff layoffs often come in waves, and that matters legally. When an employer terminates 50 or more employees at one establishment within a 4-week period, the ESA's mass termination regime (section 58) replaces the usual notice schedule with enhanced minimums:

Two mechanics employees rarely hear about. First, the employer must file a Form 1 (Notice of Termination of Employment) with the Ministry of Labour's Director of Employment Standards, and your notice does not legally start running until the Director receives that form; a company that hands out termination letters but files Form 1 late owes you more. Second, the Form 1 information must be posted in the workplace on the first day of the notice period. There is a narrow exception where the terminations are 10 percent or less of the establishment's workforce and are not caused by a permanent discontinuance of part of the business, so the headcount math is worth checking with a lawyer.

Separately, ESA severance pay (sections 63 to 65) applies if you have 5 or more years of service and either your employer's global payroll is at least $2.5 million or you are one of 50 or more employees severed within 6 months because part of the business is permanently discontinued. That is 1 week per year of service, up to 26 weeks, on top of notice. We break the group-layoff rules down further in our mass termination guide.

The three excuses tariff-hit employers use, and why they fail

• 'We had no choice; the tariffs forced our hand.' Economic necessity explains the business decision, but it does not discount your entitlements. Michela holds that financial hardship cannot shrink the notice period. The employer chooses who to cut; the law decides what the cut costs.
• 'The contract is frustrated by the trade war.' Frustration of contract requires a supervening event, something neither side foresaw, that makes the contract radically different or impossible to perform. Market downturns, lost customers, and tariffs are ordinary (and in 2026, highly foreseeable) business risks. Courts have consistently refused to let employers use economic conditions as frustration, because it would gut wrongful dismissal law in every recession.
• 'Everyone got the same package, so it must be fair.' Severance is individual. A 55-year-old supervisor with 18 years of service is owed far more than a 26-year-old with 2 years, even if both got the identical 'company standard' offer. A uniform package almost always underpays the long-service and older employees in the group.

What is a tariff layoff actually worth? A worked example

Take a 48-year-old production supervisor at a Windsor auto-parts plant: 12 years of service, $70,000 salary (about $1,350 per week), plus an annual bonus that has averaged $6,000. The plant cuts 80 positions citing US tariffs. Here is the gap between what the ESA guarantees and what a court would likely award:

The bonus line comes straight from the Court of Appeal. In Paquette v TeraGo Networks, 2016 ONCA 618, and Lin v Ontario Teachers' Pension Plan, 2016 ONCA 619, the court held that if a bonus is an integral part of your compensation, you are entitled to it through the reasonable notice period unless the bonus plan unambiguously takes that right away; a clause requiring you to be 'actively employed' on the payout date is not enough on its own.

How does severance interact with EI?

Apply for EI within 4 weeks of your last day even if you received or expect severance; late applications can cost you benefits. Service Canada treats severance as earnings and allocates it forward, which delays the start of your EI rather than disqualifying you. If your severance later increases through negotiation or a lawsuit, some EI already paid may need to be repaid out of the settlement, and a properly structured deal accounts for that. Make sure your employer issues your Record of Employment promptly; you do not need the severance question resolved to apply.

What should I do if I was laid off because of tariffs?

1. 1.Do not sign anything on the spot. Tariff-wave packages are built for speed, not fairness, and deadlines like '5 days to accept' are pressure tactics, not law.
2. 2.Pull your employment contract and check for a layoff clause before you accept that a 'temporary layoff' is legal.
3. 3.Note the headcount. If roughly 50 or more people were cut at your location within a month, ask whether Form 1 was filed and when.
4. 4.Apply for EI within 4 weeks of your last day worked.
5. 5.Get the offer reviewed before the deadline. Most severance offers in group layoffs sit at or near ESA minimums, and most can be improved.

The bottom line: tariffs may explain why you lost your job, but they never discount what your employer owes you for it. Start with our complete guide to severance pay in Ontario, and if a package is sitting in front of you, our severance review service will tell you quickly whether it is fair or thousands short.

About the Author

Daniel Carter

Legal Writer, Mirza Law

Daniel Carter is a legal writer at Mirza Law in Toronto. He writes about layoffs, employment contracts, and the steps to take before you sign anything from your employer.

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