On August 25, 2026, the Federal Government announced $7.5 billion in new and enhanced support for Canadian workers and businesses affected by U.S. tariffs. The package includes $3.5 billion in Rapid Response Supports for Workers and Employers, temporary changes to EI, expanded workforce-retention measures and additional financial assistance for tariff-affected businesses.
The announcement follows the United States’ decision to impose a 50% tariff on approximately $27.6 billion of Canadian goods. Canada has announced corresponding counter-tariffs on approximately $27.6 billion of U.S. imports, scheduled to take effect on September 8, 2026.
For workers, the most immediate changes involve access to EI benefits following a job loss. For employers, the federal response includes measures intended to help businesses preserve employment relationships while adapting to temporary reductions in business activity.
But government income-support and workforce-retention programs do not replace existing employment-law rights and obligations.
For employees facing a layoff or termination, EI eligibility is only one part of the analysis. Statutory termination pay, statutory severance pay, contractual rights and potentially greater common law reasonable notice may still have to be considered.
What Are the New EI Measures for Workers Affected by Tariffs?
As part of its tariff response, the federal government has announced several temporary changes intended to improve access to EI benefits.
The One-Week EI Waiting Period Will Remain Waived
The government is extending for another year the temporary measure that waives the usual one-week waiting period for EI benefits.
For qualifying workers who unexpectedly lose their employment, the measure can allow EI benefits to begin without the usual waiting period.
This may be particularly important in industries experiencing sudden tariff-related reductions in production, orders or staffing.
Severance and Vacation Pay Will Not Have to Be Exhausted Before EI Begins
The federal government is also extending for another year the temporary EI measure that allows workers to receive benefits without first using up separation payments, including severance or vacation pay.
This is an important practical development for terminated employees.
However, employees should distinguish between EI benefits and termination entitlements owed by an employer.
Receiving EI does not determine whether an employer’s severance offer is adequate. Nor does the availability of EI eliminate an employer’s obligations under employment standards legislation, an employment agreement or, where applicable, the common law.
For a detailed explanation of these different entitlements, see Termination Pay, Severance Pay and Reasonable Notice in Ontario: What Employees Are Actually Entitled To.
Long-Tenured Workers May Receive Additional EI Benefits
The government is extending for eight months a temporary measure that provides qualifying long-tenured workers with an additional 20 weeks of regular EI benefits.
This measure may be particularly relevant where a long-service employee loses employment in an industry experiencing a broader downturn.
A worker who has spent much of their career in a specialized manufacturing, industrial or other tariff-sensitive position may require considerable time to find comparable employment, particularly if several employers in the same industry are reducing their workforces at the same time.
The additional EI entitlement can provide greater income support during that transition.
A New Temporary Measure Will Address Certain Previous Voluntary Departures
The federal government has also announced a new temporary one-year measure concerning workers who voluntarily left previous employment.
Under the announced measure, workers who voluntarily left jobs in recent months will no longer be penalized when seeking EI where their most recent job loss occurred through no fault of their own.
This could be significant for an employee who voluntarily changed jobs, only to subsequently lose the new position because of a tariff-related slowdown or other circumstances outside the employee’s control.
EI eligibility remains subject to federal requirements and the circumstances of the individual claim.
EI Benefits Are Not a Substitute for Severance
For terminated employees, one of the most important points arising from the government’s announcement is what it does not change.
EI is a federal income-support program. It does not determine an employee’s termination entitlement against an employer.
An employee who loses their job because of tariffs, restructuring, declining orders or other economic pressures may still have rights to:
- statutory notice of termination or termination pay;
- statutory severance pay, where the applicable requirements are satisfied;
- continuation of benefits during the applicable statutory notice period;
- outstanding wages and vacation pay;
- contractual termination entitlements; and
- potentially significantly greater common law reasonable notice.
Ontario’s Employment Standards Act, 2000 establishes minimum termination requirements for provincially regulated employees. Depending on the employee’s contract and circumstances, those minimums may represent only part of the employee’s overall entitlement.
For more information, see How Much Severance Am I Really Entitled to in Ontario?.
The fact that an employer is experiencing genuine economic difficulty does not ordinarily transform a without-cause termination into a termination for cause. Tariffs may explain why a business eliminated a position, but they do not necessarily determine what the employee is owed.
Can Federal Programs Help Employers Avoid Layoffs?
The government’s response is not limited to providing income support after employment ends.
Another objective is to help employers maintain employment relationships where a decline in business activity may be temporary.
The federal government has announced that it will establish a new Workforce Retention and Retraining Program, combining the existing EI Work-Sharing Program and Worker Retention Grant into a single program intended to be more accessible.
The government has also announced that employers will be eligible for additional funding of up to $1,000 per participant for training and administrative costs under the new program.
The existing Work-Sharing framework is designed to help employers and employees avoid layoffs during temporary reductions in normal business activity that are beyond the employer’s control. Eligible participating employees reduce their working hours and can receive EI benefits to partially compensate for the reduction.
For a tariff-affected employer facing a temporary decline in orders, a workforce-retention arrangement may therefore be worth considering before permanent positions are eliminated.
Reduced Hours and Temporary Layoffs Can Still Raise Employment-Law Issues
Government support does not necessarily give an employer an unrestricted right to change an employee’s terms of employment.
This distinction can be particularly important where an employer responds to tariff pressures by:
- substantially reducing hours;
- reducing compensation;
- temporarily laying off employees;
- changing responsibilities or positions; or
- making other significant unilateral changes to employment.
Depending on the employment agreement and surrounding circumstances, a substantial unilateral change to a fundamental term of employment can potentially amount to constructive dismissal.
Temporary layoffs require particular caution.
Ontario’s Employment Standards Act, 2000 contains rules determining when a layoff can remain temporary for statutory purposes. However, satisfying the statutory temporary-layoff rules does not necessarily resolve the separate contractual and common law question of whether the employer had the right to impose the layoff in the first place.
For a broader discussion of these issues, see Canada-U.S. Tariffs: Ontario Employment Law & Layoff Rights.
What Should Employees Do If They Lose Their Job Because of Tariffs?
Employees should distinguish between the employer’s business reason for the termination and the employee’s legal entitlement following termination.
An employer may legitimately need to restructure because of tariffs, declining demand or increased costs. That does not necessarily mean that the employer’s initial termination package represents the employee’s complete entitlement.
Before signing a release, employees should consider:
- whether the termination package satisfies minimum employment standards;
- whether statutory severance pay applies;
- whether the employment agreement contains an enforceable termination provision;
- whether common law reasonable notice may exceed the amount offered;
- whether bonuses, commissions, benefits or other compensation are owed;
- whether the termination forms part of a larger mass termination; and
- how the new EI measures may apply following the loss of employment.
Employees who have recently received a termination package can also review Just Been Laid Off? Do These 5 Things Before You Sign Anything.
What Should Employers Consider Before Reducing Their Workforce?
For employers, the expanded federal measures create another consideration in workforce planning.
Where a reduction in business activity is expected to be temporary, employers should consider whether Work-Sharing or the government’s announced workforce-retention measures could provide an alternative to eliminating positions.
Where layoffs or terminations remain necessary, employers should consider the employment-law consequences before implementing the restructuring.
That analysis can include:
- reviewing employment agreements for temporary-layoff and termination provisions;
- assessing statutory termination and severance obligations;
- estimating potential common law notice exposure;
- considering benefit, bonus, commission and other compensation obligations;
- determining whether proposed reductions in hours or compensation could create constructive dismissal risk;
- assessing whether mass-termination requirements may apply; and
- coordinating the timing and implementation of workforce reductions.
Early planning can be particularly important where reductions are expected to occur in stages.
What If Tariffs Result in a Mass Layoff?
Large-scale workforce reductions can engage additional employment standards requirements.
In Ontario, special mass-termination provisions can apply where 50 or more employees are terminated at an establishment within a four-week period, subject to the requirements and exceptions in the Employment Standards Act, 2000.
Where those provisions apply, statutory notice can increase based on the number of affected employees.
These statutory requirements are minimum standards and do not necessarily replace potentially greater contractual or common law rights.
For more information, see Caught in a Mass Layoff? You May Be Owed More Than You Think.
Tariffs, EI and Severance: Three Different Issues
Employees and employers should be careful not to collapse several distinct issues into one.
Tariffs are the economic issue. They may increase costs, reduce demand and contribute to restructuring.
EI is an income-support issue. The federal measures can provide greater or more immediate support to qualifying workers who lose employment or participate in qualifying workforce-retention arrangements.
Severance and termination rights are employment-law issues. They determine what an employer may owe when employment ends.
The federal government’s latest announcement changes the second part of that equation. It does not eliminate the third.
That distinction is particularly important for employees deciding whether to accept a termination package and for employers determining the potential cost of restructuring.
Frequently Asked Questions About Tariffs, EI and Severance
What EI changes has Canada announced in response to U.S. tariffs?
The federal government has announced an extension of the waiver of the one-week EI waiting period, continued temporary treatment allowing EI to be received without first exhausting separation payments, an extension of additional benefits for qualifying long-tenured workers, and a new temporary measure addressing certain workers who previously left employment voluntarily but subsequently lost their most recent job through no fault of their own.
Do I have to use my severance before I can receive EI?
Under the temporary measure being extended by the federal government, workers can receive EI benefits without first using up separation payments such as severance or vacation pay, subject to applicable EI eligibility requirements.
Does receiving EI mean my employer can pay me less severance?
No. EI eligibility and an employer’s termination obligations are separate issues. An employee may have statutory, contractual and common law termination entitlements regardless of the availability of EI benefits.
Are long-tenured workers receiving additional EI?
The government has announced an eight-month extension of the temporary measure providing qualifying long-tenured workers with an additional 20 weeks of regular EI benefits.
What is the Workforce Retention and Retraining Program?
The federal government has announced that it will establish a new Workforce Retention and Retraining Program combining the existing EI Work-Sharing Program and Worker Retention Grant into a single program. The initiative is intended to assist employers with workforce retention and employee training during periods of economic disruption.
Can Work-Sharing help an employer avoid layoffs?
Potentially. The existing federal Work-Sharing Program is designed for situations involving a temporary reduction in normal business activity beyond the employer’s control. Participating employees agree to reduced working hours and eligible employees receive EI benefits to partially compensate for the reduction.
Eligibility and program requirements should be reviewed before an employer relies on Work-Sharing as part of a restructuring strategy.
Can my employer reduce my hours because of tariffs?
An employer may propose reduced hours as a way of responding to economic pressure, but significant unilateral changes to hours, compensation or other fundamental employment terms can potentially raise constructive dismissal issues. The employment agreement and surrounding circumstances are important.
Can my employer temporarily lay me off because business has declined?
Possibly, but a temporary layoff can raise both statutory and contractual issues. Compliance with the Employment Standards Act, 2000 temporary-layoff provisions does not necessarily establish that an employer has a contractual or common law right to impose the layoff.
Am I still entitled to severance if my position is eliminated because of tariffs?
Potentially, yes. Economic circumstances may explain why a position was eliminated, but they do not automatically eliminate an employee’s statutory, contractual or common law termination rights.
Should I sign a severance package if I can now receive EI immediately?
The availability of EI does not establish that a termination package is adequate. Employees should consider their employment agreement, length of service, compensation, statutory rights and potential common law entitlements before signing a release.
Employment Law Advice for Tariff-Related Layoffs and Restructuring
Canada’s latest tariff response provides additional support for workers and gives employers new and expanded tools to consider when responding to economic disruption.
Those measures may help some employers preserve jobs and provide greater income security to employees who lose employment. They do not, however, replace Ontario employment law.
Pelsmakher Law advises employees and employers on temporary layoffs, constructive dismissal, workforce restructuring, termination packages, wrongful dismissal and severance.
Employees who have been laid off, terminated or presented with a significant change to their employment can contact Pelsmakher Law to understand their rights before accepting a change or signing a release.
Employers considering workforce reductions, Work-Sharing arrangements or other restructuring measures can also contact Pelsmakher Law for advice on the employment-law implications of those decisions.
For the federal government’s description of the new tariff-response measures, see the Government of Canada: Support for Canadian Workers and Businesses Affected by U.S. Tariffs.
