Canadian Work-Sharing: Special Measures Now In Place
In response to the recent economic hardship caused by U.S. tariffs and related issues, Canada’s federal government introduced the Special Measures for Work-Sharing Program in March 2025. The stated purpose of this Program is to support employees and help prevent layoffs or dismissals when there is a decrease in the normal level of business activity caused by factors outside the control of employers. Some of the concepts which this adopts are based on lessons learned during the COVID-19 pandemic.
The Program allows for Service Canada, employers, and employees, to enter a three-party agreement under which a group of employees can each agree to a reduced work schedule, with those in the group sharing the available hours for the duration of the agreement. As an adjunct to Service Canada’s Employment Insurance (EI) program, the Work-Sharing Programs will provide income support to employees that work a temporarily reduced work week during the term of the agreement. In unionized workplaces, the relevant union must also agree to the Work-Sharing Agreement.
Prior to the adoption of the Special Measures, Work-Sharing Agreements must normally last for a minimum of six weeks and can last up to a maximum of 38 weeks. Under this regime, once the term of any initial Agreement is complete, a mandatory cooling off period equal to the duration of the Agreement must be served before a new agreement can be entered into.
The Special Measures implemented in response to U.S. tariffs are effective from March 7, 2025, to March 6, 2026. Employers experiencing a decline of business activity on account of tariffs, or the threat of tariffs, may be eligible for participation in the Special Measures if they have been operating in Canada for at least a year, and have at least two employees who are eligible for EI and agree to participate in the Work Sharing Program.
The Special Measures have introduced several modifications to the Work Sharing Program, these include but are not limited to: (1) the maximum potential duration of an Agreement has been increased to 76 weeks; and (2) the cooling-off period has been waived.
Even if employers comply with the terms of the Work Sharing Program, they may not be in compliance with the rules in applicable employment standards legislation, such as the Ontario Employment Standards Act, 2000 (the “ESA”), which govern temporary layoffs. Cutting back on an employee’s work hours without ending their employment may be deemed as placing that employee on temporary layoff. If the employee’s contract or terms of employment do not explicitly permit that employee to be temporarily laid off, then a temporary layoff of the employee may be deemed to constitute constructive dismissal, which may then give the employee a right to claim damages for termination of employment.
Under the ESA and comparable statutes across Canada, an employee is generally deemed to be laid off on a week where they earn less than half of what they ordinarily earn in a week. Temporary layoffs in Ontario must last less than 35 weeks in a period of 52 consecutive weeks, and only if the employer meets certain conditions. Different rules apply in other parts of Canada, and there are also special rules of unionized employees. In this regard, where the employee is represented by a union and the union and the employer agree to a longer temporary layoff period. As a result of the combination of ESA and other legislated rules, together with potential limitations under a contract or collective agreement, employers may be prevented from taking full advantage of the Special Measures regarding Work-Sharing Agreements. In some cases, this may mean that a modified form of reduced hours or reduce work will be required.
Takeaways for Employers
The Work-Sharing Program on the one hand, and the ESA and related employment standards rules on the other hand each establish two separate set of requirements that are not necessarily compatible with each other. Implementing a Work-Sharing Program may breach temporary layoff and termination requirements under the ESA or applicable rules. There may also be issues under relevant employment contracts, company polices or collective agreements. Employers must therefore ensure they are complying with both provincial and federal law prior to implementing any reduction of hours or Work-Sharing Agreement.