By: Stephanie McDonald and Baljinder (Bal) Singh Tiwana
Mass layoffs across Canada’s tech sector are about more than short-term cost-cutting. They reflect a deeper shift. Companies are investing heavily in artificial intelligence and are reorganizing their workforces around it.
The impact is uneven. Entry-level roles are the most exposed, as many foundational tasks can now be automated faster and more cheaply. Senior software developers are not disappearing, but their roles are changing. Increasingly, they are expected to oversee AI systems, validate AI outputs, and make higher-level technical decisions. Companies are now operating with smaller teams.
The Blame Game
Employers are increasingly relying on “AI transformation” to justify restructuring. But a business decision does not erase legal obligations.
When a role is eliminated or significantly changed, employers cannot avoid responsibility by framing it as a “performance issue” or a “failure to adapt.”
In many cases, the reality is simple: the company is changing direction, and the employee is being impacted by that decision. The law does not allow employers to avoid their legal obligations in that way.
What the Law Requires
Canadian employment law is clear. When an employee is terminated without cause, the employer must provide reasonable notice or pay in lieu of such notice.
Under the Employment Standards Act (ESA), employees are entitled to minimum notice based on length of service. This is only the starting point.
ESA entitlements set the minimum standard—they are the floor, not the ceiling.
Many employees are also entitled to reasonable notice under common law, which is often significantly higher. Courts consider what are known as Bardal factors such as:
- Length of employment
- Age of the employee
- Seniority and type of role
- Availability of similar employment
For software developers—especially those in specialized roles with high income—finding comparable work can take time. This often increases the notice period owed.
AI “Skill Gaps” Are Not Just Cause
A lack of familiarity with AI tools, or difficulty adapting to new systems, does not amount to just cause.
Courts clearly distinguish between misconduct and changing job requirements.
A shift towards AI is a business decision—not an employee wrongdoing. If an employee was performing well in their role before expectations changed, a new requirement to use AI tools does not convert a skills gap into just cause.
In most cases, these situations are treated as terminations without cause, which means employees are entitled to notice and, in many cases, severance.
While employers may try to frame these terminations as performance-related, the legal threshold for just cause is high. It is generally limited to serious misconduct—not restructuring, automation, or evolving technical expectations.
Constructive Dismissal
Employers cannot make significant changes to the fundamental terms of an employment relationship without the employee’s agreement.
This issue is particularly relevant in the tech sector. For software developers—especially senior roles—responsibilities are increasingly being shifted from hands-on development work to AI oversight, validation of AI outputs, or entirely different technical functions.
Where these changes are substantial and imposed unilaterally, they may amount to constructive dismissal. In such cases, the law may treat the employee as having been effectively terminated, because the employer has fundamentally changed the role they were hired to perform. This could give rise to a claim for constructive dismissal.
Courts will focus on whether the changes go to the core of the employment relationship, rather than being minor adjustments or reasonable updates to job duties.
Conclusion
AI is transforming the tech industry, but it is also changing how employers explain workforce decisions.
Too often, restructuring is framed as “individual underperformance” or a “lack of adaptability”. In reality, it is a business decision—and the law requires employers to take responsibility for it.
When roles are eliminated, downgraded, or fundamentally changed, employees are generally entitled to common law reasonable notice.
If you have been impacted by a termination or a significant change in your role, it is important to understand your rights before accepting the employer’s explanation at face value. Workplace Sage Legal can assist in assessing your situation and help you take informed next steps.
Follow us on our social media pages below:
Learn more about employment law through the articles below:
- Who is entitled to Reasonable Notice, and how is it calculated?
- How to Read a Severance Package Like a Lawyer
- Ontario Severance Packages: Why You Should Almost Never Accept the First Offer
DISCLAIMER: This article/blog is provided for educational/informational purposes only. This blog does not constitute legal advice. Do not rely on any advice before speaking with a lawyer. This blog does not form a solicitor-client relationship.
