A new survey of 200 Canadian business leaders shows how tariffs, AI and a patchwork of new rules are reshaping hiring, layoffs and workplace policy.
More than three in four Canadian employers have changed their workforces in the past year because of business or economic pressure, and U.S. tariffs are a big part of the reason. That is the central finding of the 2026 Canadian Employer Survey Report, released on October 21, 2026 by Littler, the employment and labour law firm that represents management.
The report draws on responses from 200 in-house lawyers, C-suite executives and HR leaders across industries and company sizes. It shows organizations pausing hiring, cutting staff and turning to automation. At the same time, they are working through new pay, supply chain and health and safety rules, and adopting artificial intelligence faster than they are writing policies to govern it.
How U.S. Tariffs Are Feeding Hiring Freezes and Layoffs
Overall, 77% of respondents said they had taken at least one workforce-related step over the past year in response to economic or business pressure. The most common responses were:
- Paused or reduced hiring: 46% of respondents
- Layoffs or reductions in force: 35%
- More automation or AI to reduce labour needs: 28%
Trade friction with the United States runs through these decisions. Among employers that made workforce changes, 83% said U.S. tariff-related disruption played some role. For 54%, tariffs contributed to a large or moderate extent.
Stephen Shore, Office Managing Partner for Littler’s Canadian offices, said economic uncertainty and trade disruption are clearly shaping these choices. He warned that the effects could deepen if U.S.-Canada trade tensions escalate further. He advised employers to stay flexible and to weigh the legal and workforce implications of AI adoption, layoffs and other cost-cutting measures.
For readers following Canada’s broader trade position, the findings arrive as Ottawa works to diversify commercial ties beyond the U.S., including through the Canada-EU digital trade agreement now nearing completion.
Pay Transparency and Forced Labour Rules Expose Uneven Readiness
Beyond economic headwinds, employers face a growing patchwork of federal and provincial requirements. The survey suggests some organizations are moving faster than others.
On pay, 55% of respondents have updated job postings to reflect pay transparency requirements and expectations. Only 37% have gone further and carried out pay equity, compensation or pay-gap reviews. In other words, many employers have changed how they advertise pay without examining how they set it.
The gap is wider on forced labour, child labour and human rights rules. Nearly half (48%) have developed or updated policies, codes of conduct, contract terms or governance processes in response to recent or proposed Canadian legislation. Just 29% have assessed or mapped risks across their operations or supply chains.
Paul Pulver, a Littler partner in Vancouver, said businesses should do more than track new rules. Employers, he said, should work out what the requirements mean for their own policies and practices and make practical changes to support compliance.
General context: Pay transparency obligations in Canada vary by jurisdiction, with British Columbia among the provinces to legislate in this area. Federally, the Fighting Against Forced Labour and Child Labour in Supply Chains Act introduced annual reporting duties for many larger entities. That helps explain why policy updates are more common than deeper supply chain mapping, which takes more time and data.
Québec’s French-Language and Psychosocial Risk Requirements
Québec stands out as a distinct compliance challenge. Among respondents with operations or staff in the province, 61% said meeting French-language obligations is a moderate or large challenge.
Readiness for the province’s newer health and safety rules is lower still. Only 40% of Québec employers have created or updated prevention programs, policies or action plans to address new requirements on managing psychosocial risks at work, such as workplace stress, harassment and violence.
Olivia Girouard, of counsel in Littler’s Montréal office, cautioned employers against assuming that existing policies or a small headcount mean they are already covered. She said organizations need to assess risks, put preventive measures in place and train their people.
Canadian Employers Trail U.S. Peers on AI Governance
Artificial intelligence is already changing how Canadian employers organize work and plan hiring. According to the survey:
- Job redesign: 44% have reassessed, or are reassessing, job responsibilities because of actual or expected growth in AI use.
- Hiring: 36% have reduced, or are reducing, hiring linked to AI.
- Headcount: 33% have made, or are making, workforce reductions tied to AI.
Formal oversight has not kept pace. Fewer than half of respondents have a formal workplace AI policy (49%), and only 42% have a formal process for reviewing or approving AI tools or use cases.
The contrast with the United States is notable. In Littler’s U.S. employer survey published earlier in 2026, 68% of employers reported a formal AI workplace use policy and 55% had a formal review or approval process. That puts Canadian organizations roughly 19 and 13 percentage points behind on those two measures.
The governance gap comes as Canada invests heavily in its own AI sector, including the federal government’s commitment of up to $1.6 billion to Toronto-based Cohere. As AI capacity grows, how employers set internal rules for its use is likely to draw more attention from boards, staff and regulators.
Return-to-Office Mandates Bring a Wave of Accommodation Requests
Flexible and hybrid arrangements are still common, but half of respondents have increased the number of required on-site workdays over the past two years. Those mandates have produced a clear response from employees.
Among employers that raised in-office requirements, 81% saw more remote-work requests based on protected grounds, such as disability or family status. An even larger share, 91%, reported more requests based on personal preference.
Separately, 59% of all respondents reported a rise in requests for leaves or accommodations related to employee mental health. Together, the figures suggest that tighter office policies create real administrative and legal work for HR teams, especially where requests touch on human rights protections.
Union Organizing Readiness Splits Along Union Lines
On labour relations, confidence depends heavily on whether an employer already has a union. Among unionized employers, 81% said they were very or moderately prepared to respond to escalated bargaining tactics.
Nonunionized employers were far less sure of themselves. Only 29% described their organization as very or moderately prepared to respond to possible union organizing activity. That leaves most nonunion workplaces without a clear plan if organizing efforts begin.
Why Provincial Differences Rival the Canada-U.S. Border
One of the report’s more striking findings is about geography. Employers say managing differing labour relations rules and strategies inside Canada is nearly as hard as managing them across the Canada-U.S. border.
About half (52%) said Canada-U.S. differences pose a moderate or large challenge. A close 44% said the same about differences among Canadian provinces and territories. For companies operating in several provinces, labour and employment law is largely set provincially, so a national workforce strategy often has to be adapted jurisdiction by jurisdiction.
Littler’s 2026 Canadian Findings by the Numbers
| Measure | Share of respondents |
|---|---|
| Took at least one workforce action due to economic pressure | 77% |
| Paused or reduced hiring | 46% |
| Conducted layoffs or reductions in force | 35% |
| Tariffs played a role in workforce actions (among those acting) | 83% |
| Updated job postings for pay transparency | 55% |
| Mapped supply chain or operational risks for forced/child labour | 29% |
| Québec employers updating psychosocial risk prevention programs | 40% |
| Have a formal workplace AI policy (Canada vs. U.S.) | 49% vs. 68% |
| Have a formal AI tool review process (Canada vs. U.S.) | 42% vs. 55% |
| Increased required on-site workdays in past two years | 50% |
| Nonunion employers prepared for organizing activity | 29% |
What the Survey Signals for Canadian Business Leaders
Taken together, the results describe workplaces under pressure from several directions at once. Trade disruption is pushing cost cuts, AI is changing job design, and new rules on pay, supply chains and workplace health are adding compliance work. All of this is happening while employees push back on office mandates and seek more accommodations.
A few patterns stand out for leaders and boards:
- Action outpaces policy: Employers are using AI to reshape roles and headcount, yet fewer than half have formal rules for its use.
- Surface compliance is common: Updating job ads and codes of conduct is more widespread than deeper pay reviews or supply chain mapping.
- Tariff exposure is real: For most employers that cut back, U.S. trade disruption was part of the calculation, which ties workforce plans to the direction of cross-border talks.
- Domestic complexity matters: Provincial differences are almost as challenging as international ones for multi-jurisdiction employers.
Because the survey reflects the views of 200 management-side respondents, it captures how employers see these pressures rather than how workers experience them. Still, it offers a useful snapshot of where Canadian organizations feel most and least prepared heading into 2027. The full 2026 Canadian Employer Survey Report is available from Littler for readers who want the detailed breakdowns.
