Hiring and Firing, and Everything In Between: Navigating Employment Practices Liability Claims

Evolving Employer Liabilities

Canadian workplaces are under pressure from a post-pandemic spike in employment disputes. Civil litigation against companies rose over 10% in a three-year span ending in 2025, with 48% of arbitrators reporting more cases. Wrongful dismissal remains the most common claim, often tied to emotional distress from terminations. This trend reflects broader societal shifts, including greater awareness of worker rights amid economic uncertainty.

Key legislative changes in 2025 amplify these risks. The Canada Labour Code amendments, effective June 20, 2025, banned replacement workers during strikes, potentially prolonging disputes and increasing operational costs. Federal pay equity rules now mandate proactive policies to address wage gaps, with non-compliance exposing firms to audits and penalties. Provinces like Ontario introduced job-seeking leaves for mass terminations and extended temporary layoffs up to 51 weeks with director approval, balancing flexibility with worker protections.

AI's role in recruitment adds a layer of complexity. Tools for screening applicants can inadvertently perpetuate bias, leading to claims under human rights laws. In 2025, British Columbia and Ontario tightened pay transparency, requiring salary ranges in job postings and disclosures on AI use, aiming to reduce inequities but sparking more challenges over perceived unfairness. Meanwhile, harassment prevention policies became mandatory, with Quebec's Bill 42 demanding detailed complaint processes.

Stakes are concrete: courts increasingly award notice periods of 24-28 months for long-serving employees, as seen in recent decisions. Punitive damages hit employers for delays in statutory payments, like the $50,000 in Carroll v. Oracle Canada in 2025. Inaction risks not just fines but reputational harm, especially for public entities and non-profits, where claims erode trust and funding.

Non-obvious tensions emerge between innovation and equity. AI boosts efficiency but demands bias audits to avoid lawsuits, as in a $26 million Mastercard settlement over underpayment allegations. Remote work policies, lingering from the pandemic, fuel retaliation claims when enforcing returns to office. Gig economy regulations in Ontario and British Columbia protect platform workers with minimum pay and dispute rights, pitting business models against labor standards.