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For American Companies with Operations in Ontario Navigating Employment Strategies Amidst Tariffs

Bonni Titgemeyer CEBS, SPHR, CHRL, SHRM-SCP

As a seasoned human resources professional with over thirty years of working experience in Canada, I have witnessed firsthand how shifting political and economic environments impacts businesses and their human resources planning. Navigating employment strategies in Ontario requires a proactive approach. In today’s world, companies must be agile and able to pivot on a dime. This holds true whether you are a Canadian company or an American company operating in Canada.

The shock of Trump’s tariff and sovereignty threats has put Canadians into overdrive in terms of their desire to make Canada less reliant on trade with the U.S. If you’re an American company and producing in Ontario, you have a good chance of being viewed as the friend, not the enemy, and Canadian consumers and businesses will buy from you. Staying competitive in a Canadian-centric environment is more challenging though. Businesses operating in Ontario must manage the workforce effectively now—whether through strategic growth or thoughtful contraction—to ensure long-term stability.

Impact of Tariffs on Business Operations

Recent U.S. policies imposing tariffs have created uncertainty for businesses. I have watched clients facing increasing costs and challenges from buying further afield looking for ways to buy local, leading them to reassess their partners, their hiring needs, opportunities to take advantage of AI, pricing strategies, and operational efficiencies. Everything is on the table.

For companies operating in Ontario, especially those with base operations in the United States or elsewhere, employment strategies must be carefully aligned with the shifting economic environment. Businesses must be able to navigate between expansion opportunities and potential downsizing. The evolving regulatory landscape, supply chain challenges, and labour market trends require companies to make informed decisions about the impacts of short-term and long-term planning, even if difficult given the unpredictability. In my years of living and working in Canada I’ve not quite seen anything like this before.

Comparing U.S. and Canadian Employment Practices

For those businesses who operate or are considering operating in Ontario that come from the United States, it is important to know that “things are different” here. Maybe in the past you relied on your representatives in Canada to help you operate, but the time has come that you really must come to understand how Canada/Ontario employment works or you will miss out on opportunities.

Lots of things that you will read will tell you that employment laws in Canada differ significantly from those in the United States, particularly in areas such as layoff and termination rights, employment standards, unionization, and workplace safety regulations.  What not enough articles tell you is that first and foremost, attempting to apply Canada from an American lens is futile. The Canadian way is employee-centric, diversity focused, and supportive. Employment is a contract to be broken by notice or pay-in-lieu. It is designed to prevent people from falling into an economic abyss. You may or may not like this, but it is ingrained in the very fabric of Canada including its tax system. 

Fundamentally, employment is the jurisdiction of the provinces first, whereas in the United States employment is a national jurisdiction first with overlapping state laws. American companies operating in Canada must ensure compliance with provincial employment laws to avoid legal complications.  As an example, when it comes to employment practices, Ontario is more like California than North Carolina.

In general, there is a great deal of similarity among employment standards among the provinces, except Quebec, however the minor differences among provincial employment standards creates a major headache for any provincially regulated company attempting to have one set of national human resources policies that meet provincial employment standards minimums. 

As an example, there is high variability among overtime standards across the country in terms of who is eligible, when overtime kicks in (40 hours in some provinces, 44 in others), when it must be paid, and whether it can be averaged.  There is no one-size-fits-all policy to be used.  And then for American companies who are used to operating according to the Fair Labor Standards Act (FLSA) and state wage and hour laws, understanding the nuances of Canadian employment standards legislation can be daunting at first.  Understanding these key differences is essential for proper workforce management and legal compliance. Businesses accustomed to at-will employment in the U.S. must adjust their termination procedures to comply with Ontario’s more structured severance and notice requirements, and have to understand that both statutory and common law forces are at play. And, unlike what is currently happening the U.S. Federal government, mass termination in Canada could never happen without payment of notice. Similarly, companies in the Canadian market must be able to navigate around higher rates of unionization and understand that attempts to bulldoze a union will backfire, badly.

Below is a chart that compares the U.S. and Ontario employment practices:

Diversity, Equity and Inclusion

Canada has long been the bastion of diversity, equity and inclusion.  Indeed, the country’s growth has largely been predicated on its ability to attract workers and their families from all over the world.  In Ontario, nearly half of residents are foreign born.  This leads to an environment that needs and embraces diversity, equity and inclusion-friendly policies, practices and hiring processes, which are bolstered by strong anti-harassment and human rights laws.  This contrasts with the United States where such practices in recent times have been reversed and cancelled. Understanding how to position diversity, equity, and inclusion in the Canadian context is key.

Despite Differences Ontario is Navigable

Although it is important to know that there are differences in employment practices, it isn’t so unnavigable that foreign organizations can’t be successful here.  In fact, thousands of American companies and other businesses from all over the world have derived substantial economic benefits from operating in Ontario.  With regards to your employment practices, it just can’t be that one size fits all.

Preparing for Growth in a Tariff Environment

Strategic Workforce Planning

For businesses aiming to expand, workforce planning must be based on projected demand, skills availability, cost competitiveness, and regulatory compliance. Companies should assess their hiring needs and ensure they attract talent with the necessary expertise. For instance, Ontario's growing technology sector demands software engineers, cybersecurity professionals, and AI specialists. Knowing how to attract, retain and motivate this workforce in a fast-moving economy is key.  This includes thinking carefully about remote work policies in Canada. Due to number of factors, including the price and availability of housing, traffic issues, and the portability of a spouse’s work, Canadians are less able to move unless it is to a place out of urban centres.

Rethinking Employment Agreements

Employment agreements should be designed to allow flexibility for changing circumstances while ensuring compliance with Ontario’s employment laws. Employers should structure contracts to allow for necessary modifications over time without triggering claims of constructive dismissal. Clear terms on job descriptions, duties, and potential changes to working conditions can provide businesses with the ability to pivot in response to market shifts without violating employee rights. Additionally, well-drafted agreements should include provisions allowing for temporary layoffs, which are otherwise impermissible unless explicitly stated in the contract.  So often we see companies attempt to create these documents alone when it is crucial to get legal advice to ensure they are strong enough to address the latest thinking and important legal decisions.

If a company is considering making several changes to employment, it should consider whether to implement continuing employment agreements. Implementing continuing employment agreements has become an increasingly larger part of our employment practice. This approach allows you to make changes to existing employment agreements without triggering constructive dismissal.  To do so, the company has to offer something as consideration in exchange for potential concessions the employee is making in accepting the new agreement.  Finding the right consideration is key.  In our experience, companies who foist new and potentially onerous agreements on existing employees without offering something meaningful in exchange for their agreement risk finding not only that the new agreements are unenforceable but also that they have soured the relationship with their workforce. 

Given the level of change a foot in Canada we feel that right now the environment is better than in other times to visit this option.

Rethinking Compensation