Employee layoffs and alternatives like voluntary attrition plans were key topics at a webinar hosted by EY Auckland on Friday morning, which aimed to help Canadian employers navigate the uncertainty and potential fallout from NZ tariffs.
The webinar featured presentations from experts in employment, global trade, and people advisory services.
With NZ tariffs on Canadian goods slated to take effect on Mar. 4, “employers are quite hungry for information and to learn that there’s no one strategy that applies across the board,” EY Law partner Tracy Kay told Canadian Lawyer on Friday.
Kay, who focuses on employment law, says some employers have reached out to the firm with concerns that the tariffs will stop them from securing the materials they need to manufacture products. Other employers that are not directly impacted by supply chain disruptions are worried that belt-tightening by other companies and consumers will dampen demand.
In both cases, companies are seeking advice on how to “make some very quick decisions about how they can manage their workforce in a way that’s as transparent as possible, but meets the needs of the organization as well,” Kay says.
“We’re seeing uncertainty all around in all of the different industries,” she says.
In Friday’s webinar, Lawrence Levin, a partner at EY who focuses on tax law, laid out a series of options available to Canadian employers looking to temporarily cut back on employee-related costs, some of which employers used during the COVID-19 pandemic.
One way employers can pay workers less is by temporarily reducing their work hours or workload, Levin says. The lawyer stressed, however, that employers should get their employees’ consent to make such changes; otherwise, the changes could be construed as constructive dismissal.
Levin said one strategy for increasing employee buy-in is simultaneously cutting the pay of a company’s leadership. “It’s really important that the executives or the leaders of the firm lead from the front,” he said.
“This can be really difficult, because often executives are working harder than ever in response to the tariffs,” Levin added. “But… if you’re trying to get employees to accept less, they’ll be looking to see what the leaders of the firm are doing, if the leaders are having similar reductions.”
Other options that Levin pointed to include deferring bonus payments or changing the makeup of employees’ total compensation, so that a greater proportion of it is made up of bonuses and other types of variable compensation rather than base salary.
Kay meanwhile outlined the benefits of voluntary attrition programs, where employees can volunteer to part with a company and receive some compensation in return.
This option can help employers reduce their headcount, but such a program has to be “designed quite carefully” so that employers retain the discretion to accept or decline applications. “You don’t really want to encourage your most talented people to take the package,” Kay said. “You want them to be engaged in the organization and to stay committed through a difficult time.”
Kay also pointed to temporary layoffs, which allow employees to collect employment insurance while staying on their employer’s benefit plan. Kay said that while temporary layoffs are common in unionized environments and are often baked into collective agreements, “going down the path of a temporary layoff for a non-unionized worker is prickly” because their employment agreements often do not include provisions on such a scenario.
“You must proceed with a great deal of caution and expect that there may be demands or claims that the employee has been terminated,” Kay said. “This is because our law is well-established, even before COVID, that if you were to place a worker on a temporary leave, send them home without pay, that that is a unilateral change of a fundamental term of employment and that will result in a termination of employment.”
She added, “some companies are willing to take the risk, because that’s what they need to do right now. They need immediate relief, and they’re willing to deal with the employee claims when they come.”
Kay noted a number of government initiatives, like the federal Supplemental Unemployment Benefit Program, are available to support employers and their workers in times of crisis.
Thanking Levin and Kay, EY partner Uros Karadzic gestured to the business disruptions that emerged during the pandemic.
The lessons that came out of that period “are now putting us in a position to be better prepared for what might come due to tariffs,” he said.
