Canadian employers stepping into 2026 are confronting a stark new reality: the legal framework governing the workplace has shifted dramatically. According to prominent employment lawyer Howard Levitt, the law is no longer a flexible or neutral playing field. Courts have sent a clear message that businesses treating employment obligations as mere technicalities will face severe financial consequences for their miscalculations.
The New Era of Employment Discipline
Levitt, writing in early January 2026, emphasizes that survival for companies this year will not stem from clever legal maneuvers. Instead, it will be rooted in fundamental discipline and a rigorous approach to human resources and legal compliance. The cost of getting it wrong has never been higher.
1. Overhaul Outdated Employment Contracts
If your employment agreements were drafted before the last year, you should consider them potentially defective. Termination clauses are being invalidated by courts with remarkable consistency, often due to minor drafting errors. Language that is overreaching, confusing, internally inconsistent, or that attempts to limit statutory entitlements is frequently fatal. Relying on a "standard form" contract is a dangerous gamble with corporate funds. In 2026, the safest agreement is not the most aggressive one, but the clearest, most conservative, and most up-to-date.
2. Terminate with Legal Precision, Not HR Convenience
A critical mistake many executives make is delegating dismissals to human resources or middle management with insufficient oversight. Courts are punishing this approach, as the manner of dismissal now carries almost as much weight as the severance amount itself. Abrupt meetings, careless wording, delays in providing final compensation, and poor timing—such as around holidays, medical leaves, or during complaint periods—can all lead to claims for aggravated damages. Every termination must be planned, scripted, and executed as if a judge were observing, because in many cases, one eventually will be.
3. Do Not Revoke Granted Flexibility
Remote and hybrid work arrangements have evolved. In many organizations, they are no longer considered mere perks but have become implied terms of employment. CEOs who insist on rigid return-to-office mandates without clear contractual authority are inviting constructive dismissal claims. The courts will not rescue employers from the consequences of their own prior generosity. If a change in flexibility is necessary, it must be negotiated, not imposed.
4. Treat Layoffs as Terminations
Temporary layoffs remain a legal minefield for Canadian employers. Without explicit, contractual authority to implement them, they almost invariably constitute wrongful dismissal. This holds true regardless of economic conditions or the employer's good intentions. In 2026, Levitt warns that courts will continue to reject the defense that "everyone does it." The rule is simple: if your contracts do not grant the right to lay off, you do not have the right to use it.
5. Scrutinize Independent Contractor Classifications
Businesses that depend on contractors must conduct a serious review. Assume that most, if not all, of these individuals could be deemed employees by a court. The legal focus is on the reality of the relationship—factors like control, dependency, and economic integration—not the label placed on it. Companies that ignore this risk face significant retroactive liabilities for termination pay, overtime, vacation pay, and statutory benefits.
The Path Forward for Canadian Business
The overarching theme from Howard Levitt's analysis is that proactive, disciplined compliance is the only viable strategy. The era of treating employment law as an afterthought is conclusively over. For employers, the priority must be to audit contracts, formalize policies, and execute people decisions with the highest degree of legal care. The financial penalties for failing to adapt to this stricter legal environment in 2026 promise to be substantial and unforgiving.
