Top Three 2026 Labour & Employment Law Trends
Published:
January 27, 2026
Author(s):
Employers faced new challenges in 2025 and will no doubt take those legal learnings with them into 2026. As new labour & employment trends emerge for 2026, three rise to the top: the use of AI in the workplace, termination clauses, and the effects of social media and “adult only” websites (such as OnlyFans) on an employment relationship.
Trend: The AI Revolution Evolution
The evolving impact of artificial intelligence in the workplace presents both opportunity and risk for employers; this publication will help you understand, and subsequently mitigate, the legal risks associated with using AI in the workplace.
Despite the growing prevalence of AI in the workplace, the legal and regulatory landscape in Canada has failed to keep up - and even experienced a setback: the proposed federal Artificial Intelligence and Data Act (known as AIDA) lapsed when Parliament was last suspended. Although the Act sought to ensure accountability for risks associated with AI systems, not everyone was disappointed by its lapse, since some say AIDA, as proposed, was problematic . In the absence of specific AI legislation, each province must rely on a patchwork of provincial laws, including privacy and data protection statutes, human rights codes, and employment standards. Although not every province has AI-specific rules or regulations, employers can look to other jurisdictions for guidance and consider how their approaches might inform their own practices in the workplace:
Privacy legislation, including PIPEDA and its provincial equivalents in some provinces, continue to apply to privacy issues raised by AI use.
Quebec’s Act respecting the protection of personal information in the private sector imposes disclosure obligations on employers that use personal information to make a decision based exclusively on automated processing.
Effective January 1, 2026, Ontario passed a regulation requiring employers that use AI to screen, assess or select job applicants to disclose the use of AI in publicly advertised jobs.
There are many uses – and in turn, many risks – of AI for workplace management or human resources purposes. For example:
Recruitment & Hiring. AI can be used to source candidates, screen resumes, run automated assessments, and support interview scheduling. The risks: the introduction of bias and/or discriminatory outcomes could taint the process.
Making Dismissal Decisions. Many employers now use AI to track productivity via emails, calendars and keyboard activity. The risks: relying solely on this data, without verification, to discipline an employee or even terminate an employee’s employment is highly risky and could lead to a wrongful dismissal claim.
Drafting Employment Documents. AI can be a helpful tool for creating first drafts of employment contracts, policies and procedures. The risks: a first draft or a “template” employment contract can only take you so far; employment contracts are highly technical to draft, and employers should review each contract to ensure it includes the appropriate terms and conditions.
Providing Employment Advice. AI tools provide fast, tailored responses, making them a tempting avenue for answers when employee issues arise. The risks: AI responses can be incorrect, outdated or biased – potentially leading to bad decisions, legal risks and costly mistakes.
How to mitigate the risks of using AI in the workplace:
Promote collaboration between Human Resources, Legal and IT
Start small, pilot & document
Ensure human oversight & appeals
Document everything
Adapt as laws evolve
Review public-facing Generative AI outputs for potential human rights concerns, or limit its use to lower-risk cases
Avoid using Generative AI to make decisions that could substantially impact employees, customers, etc. unless AI’s decision-making is adequately transparent & explainable
Review Generative AI developer’s privacy policies & data practices to ensure intended uses of users’ inputs are compliant with applicable privacy & data protection laws
Consider the privacy impact assessments prior to implementing a Generative AI
Fact check any AI outputs
Consider limiting the use AI to low-risk situations
Avoid uploading any sensitive or confidential information
Stay Informed. As the AI landscape rapidly evolves, employers will need to adapt quickly to ensure their business practices are complying with AI-related regulations and are notn’t exposing them to unmitigated risk. Our experienced lawyers at McInnes Cooper are staying apprised of AI developments and are available to help you navigate the ongoing evolution of AI.
Trend: Turmoil Surrounding Termination Clauses
The interpretation of termination clauses in employment contracts has been fraught with turmoil since the Ontario Court of Appeal’s 2020 decision in Waksdale v. Swegon North America Inc. in 2025, the turmoil was ongoing - and there’s no end in sight for 2026.
When an employer terminates an employee’s employment without cause, there are three sources of the notice of termination to which an employee could be entitled by law:
Statutory Notice. Every employee is entitled to the minimum statutory notice provided for under the applicable employment standards legislation. You cannot contract out of this obligation.
Reasonable (or Common Law) Notice. Historically, courts have recognized the massive effect of a “without cause” termination on an employee’s life. Accordingly, courts read into every employment contract (whether written or unwritten) the implied term that the employer must give the employee “reasonable notice” of termination. Courts consider several factors in determining the reasonable notice period, including age, length of service, the nature of the employee’s job and the availability of similar alternative employment. However, reasonable notice is typically lengthier – and thus more costly - than the statutory notice period.
Contractual Termination Clause. “Reasonable notice” isn’t always a straightforward calculation, so uncertainty and liability can arise from the obligation to provide it. In an effort to displace the implied “reasonable notice” term, employers often include a “termination clause” in employment contracts – but many such clauses are struck down by the courts, who interpret termination clauses very strictly, and in employees’ favour.
Here’s a look at two recent “termination clause” cases, each attempting to limit notice to the statutory minimum, and each decided differently.
Brocklehurst v. Micco Companies Limited (Nova Scotia)
Until June of 2025, termination without cause had caselaw in Ontario and British Columbia that differed greatly from one province to the other, but Nova Scotia solidified its own approach to interpreting “termination without cause” clauses in the Nova Scotia Supreme Court decision of Brocklehurst v. Micco Companies Limited.
In Brocklehurst, the employee’s employment contract included a termination clause that purported to limit their notice entitlement to their statutory notice (in this case, four weeks):
Termination Without Cause:
Your employment may be terminated by Micco without cause, upon provision to you of the following payments:
(i) any portion of the annual salary and accrued vacation pay, if any, that has been earned by your [sic you] prior to the date of termination by [sic, but] not yet paid;
(ii) continued participation in Micco group health plan for such time as may be required under Nova Scotia Labour Standards legislation; and
(iii) only such minimum notice of termination, or pay in lieu thereof, and severance pay (if applicable) to which you are entitled under the Nova Scotia Labour Standards legislation.
The employer terminated the employee’s employment without cause and the employee sued the employer for reasonable notice of termination, arguing the termination clause was invalid. The Court found the termination clause “ambiguous:” it contained typos, misused an oxford comma in subparagraph (iii), and referenced “severance pay” (a legal term in some other jurisdictions but not in Nova Scotia). The Court clarified that the Nova Scotia standard for termination provisions limiting common law notice is “express language that creates a high level of clarity that the agreement limits the employee’s entitlement to common law notice”. The Court differentiated this from the “practical, common sense” approach that BC had taken, but didn’t explore whether Ontario’s more stringent standard applied. Ultimately, the Nova Scotia Court found that the termination clause didn’t meet the standard and awarded the employee eight months’ reasonable notice.
Bertsch v. Datastealth Inc. (Ontario)
In the 2024 decision Bertsch v. Datastealth Inc., the employee’s employment contract included a termination clause:
If your employment is terminated with or without cause, you will be provided with only the minimum payments and entitlements, if any, owed to you under the [ESA] and its Regulations, ... including but not limited to outstanding wages, vacation pay, and any minimum entitlement to notice of termination (or termination pay), severance pay (if applicable) and benefit continuation. You understand and agree that, in accordance with the ESA, there are circumstances in which you would have no entitlement to notice of termination, termination pay, severance pay or benefit continuation.
You understand and agree that compliance with the minimum requirements of the ESA satisfies any common law or contractual entitlement you may have to notice of termination of your employment, or pay in lieu thereof. You further understand and agree that this provision shall apply to you throughout your employment with the Company, regardless of its duration or any changes to your position or compensation.
After eight-and-one-half months’ of service, the employer terminated the employee’s employment without cause with four weeks’ pay in lieu of notice – one week more than the employee’s entitlement under the Ontario Employment Standards Act. The employee sued the employer alleging the termination clause was invalid. At trial, the Court concluded there was no reasonable interpretation of the termination clause that would be contrary to the minimum requirements of the Employment Standards Act and its regulations. The employee appealed. However, the Appeal Court agreed that, “… the termination provision in the employment agreement is unambiguous, and that, when reasonably interpreted, it does not depart from the minimum standards guaranteed by the [Employment Standards Act].”
The takeaway: More than any other contracts, courts continue to scrutinize employment contracts - particularly their termination clauses. If a word is misused or a sentence is phrased poorly, a termination clause might not provide the protection you intended. It’s crucial to regularly review and update your employment contracts generally, and termination clauses specifically, to ensure they comply with the latest legal developments.
Trend: The Effects of Social Media & “Adult Only” Sites on the Employment Relationship
The rise of social media and the continued growth of “adult only” sites like OnlyFans have created a grey area for employers that didn’t exist before. What recourse, if any, does an employer have for an employee’s actions captured online?
An employee’s behaviour outside of working hours generally isn’t subject to scrutiny by their employer. Once off the clock, an employee is generally free to act as they see fit unless their employer could show that the employee’s actions impacted the legitimate business interests of the employer. While the general rule remains the same, the prevalence of the internet and social media has changed the game – and the reason is accessibility. Before its existence, an employee’s private life was just that: private. By contrast, if an employee posts their life online, the likelihood of an employee’s actions impacting the employer’s business interests is increased because the number of potential colleagues, clients or customers who could come across employee’s online activity drastically increases. A recent statistic showed that, out of Canada’s roughly forty-one million people, an estimated 93.8% of them had access to the internet, meaning just about anyone can see what’s posted publicly.
Is the standard different for “adult only” sites?
The legal ability of an employer to discipline or terminate an employee for off-duty conduct has existed for about forty-five years, but with the wide reach of the internet and social media, employers are testing the limits of their legal authority. Whether in a unionized or non-unionized context, the employer’s right to discipline or dismiss an employee for off-duty conduct ultimately comes down to the effect of the conduct on the operations of the business. While the test isn’t specific to “adult only” sites, an employee’s participation in such sites may establish a link between the employee’s conduct and the workplace that empowers the employer to take disciplinary action.
Demonstrating a link between the employee’s conduct and any negative impact on the business
There are five ways that an employee’s conduct could be linked to having a negative impact on an employer’s business; an employer is only required to demonstrate one of them.
The employee’s conduct harms the employer’s reputation or product.
The employee’s behaviour renders them unable to perform their duties satisfactorily.
The employee’s behaviour leads to the refusal, reluctance, or inability of the other employees to work with them.
The employee has been guilty of a serious breach of the Criminal Code, rendering their conduct injurious to the general reputation of the employer and its employees.
The employee’s conduct makes it difficult for the employer to efficiently manage its work and work forces.
The Reputation Test. When it comes to establishing a link between an employee’s conduct and any negative impact on the company’s reputation, the essential question is: would a reasonable and fair-minded member of the public, who is aware of all the facts, consider that the employee’s continued employment would damage the employer’s reputation so much that it no longer makes sense to continue the employment relationship?
The application of the reputation test differs depending on the employee’s occupation: a higher standard may apply to public servants or employees in the public’s view. When a Coldplay concert inadvertently exposed an affair involving Astronomer’s CEO Andy Byron, the reputational damage to the company was severe because Byron was in a position of leadership and in the public’s view. The viral video serves as a cautionary tale about the potential reputational damage arising from actions captured on social media. Although Byron resigned from his role, his resignation was likely pre-emptive to avoid an inevitable dismissal.
When determining whether an employee’s social media use is worthy of discipline or dismissal, the following additional factors are considered:
the employee’s position in the workplace
the seriousness or inappropriateness of the social media use
the overall effect of the use of social media on the employer’s reputation or business; the employer (and any arbitrator) can consider both actual (or presumed) harm and potential harm.
It comes down to this: what an employee does outside of work hours is their business, unless a link can be established between the employee’s actions and reputational damage to the employer. Discipline or termination may also be triggered if the employee’s actions affect productivity in the workplace. For legal advice tailored to your unique set of facts, McInnes Cooper can help.
The year is just getting started, and 2026 is already shaping up to be a year full of legal conundrums for employers. As the year progresses, McInnes Cooper will keep you informed of new issues as they arise.
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