On August 25, 2026, the Canadian government announced that starting at 12:01 a.m. on September 8, 2026 it will implement “dollar for dollar” retaliatory tariffs against the United States.[1] In anticipation of the economic impact, the federal government has announced a $3.5 billion rapid response support package aimed at assisting affected Canadian businesses and employees.[2]
New and extended temporary employment insurance (“EI”) measures
The federal government has extended the following temporary EI measures to October 10, 2027:
- The one week waiting period is waived for benefit periods beginning after March 30, 2025; and
- monies payable to employees on separation (e.g. termination pay, severance pay and vacation pay) are not considered to be “earnings” for the purposes of determining EI eligibility. In other words, eligible employees are able to receive EI benefits without first using up their separation payments.
The federal government has also extended the temporary EI measure that enables “long tenured workers” to receive 20 additional weeks of regular EI benefits, by an additional eight months (i.e. to May 10, 2027).[3]
The Department of Finance has announced that it will be introducing a new temporary EI measure that will allow employees who voluntarily leave their employment through no fault of their own to access EI benefits without being penalized.[4] Further details regarding eligibility criteria and administration have not yet been released.
Workforce retention and retraining program
The Department of Finance has also announced it will be combining the Work-Sharing and Worker Retention Grant programs into a new “Workforce Retention and Retraining Program”.
The existing Work-Sharing Program enables employers to enter into agreements with Service Canada to reduce employees’ work weeks and still be partially compensated through EI benefits for hours not worked. The Worker Retention Grant provided funding to employers with active Work-Sharing agreements to increase employees’ supplemented income from approximately 55% to 70% for those participating in skills building and training opportunities organized by their employer.
Initially, the program did not offer employers funding to develop and deliver training; however, the new Workforce Retention and Retraining Program offers employers funding of up to $1,000 per participant (i.e. employee participating in the program) to offset training and other administrative costs.
Businesses faced with reduced production/revenue may be able to take advantage of the new program to decrease employee hours rather than implementing large-scale layoffs. Employees with reduced hours could be retrained and acquire new skills to adapt to changing labour market needs while their incomes are supplemented by partial EI payments. Details of the new program and the roll out for this new program have not yet been announced.
What employers should consider when crafting exit packages in light of the temporary EI measures
Documenting the end of an employment relationship
While the eligibility requirements for the temporary EI measure directed at an employee who has voluntarily left their job are unknown, it is anticipated that the employee’s former employer will be contacted by Service Canada to obtain details regarding their departure. To ensure that appropriate information is communicated to Service Canada, it is essential that the employer accurately completes the employee’s Record of Employment (“ROE”) and maintains adequate records regarding the end of the employment relationship.
Structuring termination entitlements
In light of the temporary measure excluding termination payments from the definition of “earnings”, when structuring separation packages, employers should keep in mind that termination entitlements paid by way of pay/salary continuance will still be considered “earnings” for EI purposes as there is no interruption of earnings. Similarly, an ROE should not be issued until the continuance period ends.
However, a lump sum payment, or a series of lump sum payments, paid by the employee’s former employer – provided the employee is no longer on the employer’s regular payroll – will be exempt from the definition of “earnings” while the temporary measures are in place. In that case, an ROE should be issued upon termination. If multiple payments are made to the employee post-termination, the employer should not file a new original ROE after each payment. Instead, if a later payment changes the values on the original ROE that has already been submitted, the employer must issue an amended ROE including the additional payment(s).
Discussing available supports during termination conversations
When an employee is terminated without cause, the employer may wish to provide the employee with information regarding the rapid response support package measures (e.g. the temporary EI measures discussed above). Terminated employees may gain some assurance from the fact that they will have quicker access to income support with the waiver of the EI waiting period. Additionally, they may recognize their employer’s efforts to structure their termination payments and/or packages in a way that takes advantage of the ability to collect benefits payments without first exhausting termination and severance payments. Employers should be cautious during these discussions not to guarantee or comment on the employee’s eligibility under the applicable EI programs. Instead, employees should be directed to the relevant information and encouraged to apply in light of the new measures.
Drawing an employee’s attention to these measures during the termination meeting or in the termination documentation may help soften the impact of the news and reduce the likelihood that the employee will seek extended compensation and benefits.
Considering alternatives to workforce reduction
In addition to the $3.5 billion investment in rapid support initiatives, the Canadian Government is attempting to mitigate the tariffs’ impact on small- and medium-sized businesses by expanding and introducing financial support and funding.
Through the Business Development Bank of Canada (“BDC”) and the Canada Strong Diversification Fund, additional funding will also be available to eligible businesses through loans with more favourable repayment conditions, such as interest-only payments for up to 36 months. Eligibility for loan programs like those offered by the BDC will also be expanded, so that more businesses may access funding.
These additional resources may enable some employers to avoid layoffs, retain skilled employees, and reduce immediate cost-cutting pressures.
Legal considerations
Despite these temporary EI measures and additional funding support, employers’ obligations under employment standards legislation, collective agreements and the common law remain unchanged.
If you are an employer looking for advice on how to approach terminations or layoffs, or any other employment or labour law matter, please reach out to any member of Siskinds’ Labour and Employment Group.
[1] List of products from the United States subject to counter-tariffs effective September 8, 2026 – Canada.ca
[2] Support for Canadian workers and businesses affected by U.S. tariffs – Canada.ca
[3] Temporary Employment Insurance measures to respond to major changes in economic conditions – Canada.ca
[4] Support for Canadian workers and businesses affected by U.S. tariffs – Canada.ca