Canadian employers are responding to economic uncertainty and U.S. tariff-related disruptions by pausing hiring, reducing workforces and increasing automation, according to a new survey examining the challenges facing businesses across the country. The 2026 Canadian Employer Survey Report, released by employment and labour law firm Littler, found that 77 per cent of respondents had taken at least one workforce-related action in response to business or economic pressures over the past year.
The report draws on responses from 200 in-house lawyers, C-suite executives and human resources leaders representing organizations across various industries and company sizes. It also examines how employers are adapting to changing employment regulations, artificial intelligence adoption, workplace expectations and labour relations challenges.
Economic uncertainty influences workforce decisions
Paused or reduced hiring was the most common response to business pressures, cited by 46 per cent of respondents. Another 35 per cent reported layoffs or workforce reductions, while 28 per cent said they had increased their use of automation or artificial intelligence to reduce labour requirements.
U.S. tariff-related disruptions are also influencing workforce decisions. Among employers that took workforce-related actions, 83 per cent said trade disruptions played a role, with 54 per cent indicating the impact was large or moderate.
“Economic uncertainty and trade disruption are clearly influencing workforce decisions, and those impacts could intensify if U.S.-Canada trade tensions escalate further,” said Stephen Shore, Office Managing Partner for Littler’s Canadian offices. “Employers must remain flexible as conditions change, while carefully considering the legal and workforce implications of AI adoption, layoffs and other cost-saving measures.”
The findings suggest businesses are balancing cost pressures with the need to assess the potential legal and operational implications of changes to staffing and workplace practices.
Regulatory requirements create compliance challenges
Canadian employers are also facing an evolving regulatory environment, with varying levels of preparedness for new and proposed federal and provincial requirements.
The survey found that 55 per cent of respondents had updated job postings to address pay transparency requirements and expectations, while 37 per cent had conducted pay equity, compensation or pay-gap reviews.
Progress has been less extensive in addressing forced labour, child labour and human rights risks. Nearly half of respondents, or 48 per cent, said they had developed or updated policies, codes of conduct, contractual provisions or governance processes in response to related legislation in Canada.
However, just 29 per cent had conducted risk assessments or mapping of their operations or supply chains.
“Whether the issue is pay transparency or other emerging requirements, it’s important for businesses to do more than just monitor developments,” said Paul Pulver, a Littler partner in Vancouver. “Employers should be evaluating what the rules mean for their own policies and practices and considering practical changes to guide compliance.”
Québec employers face additional workplace requirements
Employers operating in Québec reported challenges complying with French-language requirements and addressing workplace psychosocial risks.
Among respondents with operations or employees in the province, 61 per cent said meeting French-language obligations presented a moderate or large challenge.
Meanwhile, 40 per cent of Québec employers had developed or updated prevention programs, policies or action plans to address newer requirements for managing psychosocial risks in the workplace.
“Québec employers shouldn’t assume that existing policies or smaller headcounts mean they’re covered as workplace regulations evolve,” said Olivia Girouard, of counsel in Montréal. “When it comes to the newer psychosocial risks and other health and safety requirements, employers need to make sure they’re assessing risks, putting preventive measures in place and training their people.”
Artificial intelligence reshapes workforce planning
Artificial intelligence is increasingly influencing how Canadian employers approach staffing and job responsibilities, although many organizations are still developing formal policies governing its workplace use.
The survey found that 44 per cent of respondents had reassessed or were reassessing job responsibilities because of actual or anticipated increases in AI use.
Another 36 per cent had reduced or were reducing hiring, while 33 per cent had made or were making workforce reductions.
Despite the changes, fewer than half of respondents reported having formal workplace AI policies. The survey found that 49 per cent had a formal policy governing workplace AI use, while 42 per cent had a formal review or approval process for AI tools or applications.
Those figures compare with a separate Littler survey of U.S. employers earlier this year, in which 68 per cent reported having a formal workplace AI use policy and 55 per cent had a formal review or approval process for AI tools and use cases.
Return-to-office requirements increase accommodation requests
Workplace flexibility remains an issue as employers adjust their in-office requirements.
Half of Canadian respondents said they had increased the number of required on-site workdays over the past two years. Among those employers, 81 per cent reported some increase in requests to work remotely based on protected grounds, while 91 per cent reported an increase in requests based on personal preference.
Separately, 59 per cent of respondents said they had experienced an increase in requests for leaves or accommodations related to employee mental health.
Employers assess union and labour relations challenges
The survey also identified differences in how prepared unionized and non-unionized employers feel to respond to labour relations challenges.
Among unionized employers, 81 per cent said they were very or moderately prepared to respond to escalated bargaining tactics.
Confidence was considerably lower among non-unionized organizations, with just 29 per cent describing themselves as very or moderately prepared to respond to potential union organizing activity.
Employers also reported challenges navigating differences in labour relations requirements and strategies across jurisdictions. The survey found that 52 per cent considered differences between Canada and the United States a moderate or large challenge, compared with 44 per cent who said the same about differences among Canadian provinces and territories.
The findings point to a range of workforce, regulatory and labour relations issues that Canadian employers are managing as they respond to economic pressures and changes in workplace practices.
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