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By Howard Levitt and Jarret Janis

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On the surface, international trade wars and domestic employment disputes don’t have much in common, but both call for a strategy employed in many negotiations: leverage. Former U.S. president and now president-elect Donald Trump’s 25 per cent tariff threats and the principles of severance negotiations under Canadian employment law both showcase how power dynamics can shape outcomes — whether in global trade or workplace relations.

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The Trump tariff threat: setting the stage

In 2018, Trump’s administration threatened 25 per cent tariffs on various imports. The strategy was simple: use economic pressure to compel other countries to bend to U.S. demands on trade terms, intellectual property, and market access.

Trump’s move was widely criticized by economists as risky brinkmanship, with the potential to destabilize industries and increase costs for American businesses and consumers. Yet, it has been effective. Canada and other countries were forced to the negotiating table, often granting concessions or entering new agreements like the USMCA, which replaced NAFTA.

With Trump’s recent threat of a 25 per cent tariff on all goods crossing the border, Canadian leaders are once again in panic mode, preparing for another round of negotiations — with much more at stake. The government is right to take this threat seriously, by joining forces with industry leaders, reaching out to their U.S. partners and stakeholders and developing a comprehensive strategy leveraging the U.S.’ reliance on Canadian exports and our shared economic prosperity.

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As it was in 2018, Trump’s tariff threat is real and Canada must respond as though our livelihoods depend on it — because they do. As the late Charlie Munger once said, “never underestimate the man who overestimates himself.”

Both sides have a hand to play in these negotiations. And while the U.S. may ultimately back down, if Trump does follow through on his threats, the Canadian economy is unlikely to avoid a hit, leading to job losses, higher unemployment and tighter job market conditions — meaning lost jobs will be harder to replace. Much like the Canadian government is preparing for battle, Canadian workers and employers should be prepared for their own negotiations and ready to protect their financial security amid the uncertainty.

‘Brinkmanship’ in employee severance negotiations: a parallel

Under Canadian employment law, workers who are terminated without cause are generally entitled to reasonable notice or severance pay in lieu of notice. The determination of a fair severance package often hinges on an interplay of, well, leverage.

For example, employers wield significant power by setting the terms of the offer and timelines for acceptance, and playing on the fears of employees who may need to dip into savings to retain employment counsel.

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However, employees possess counter-leverage through the right to severance and the threat of bad will if the employer is seen by other employees or the community as being unfair or miserly. In cases where disputes arise, the employee may engage in negotiations, often leaning on the employer’s desire to avoid legal proceedings or bad publicity.

Much like Trump’s tariffs, the outcome depends on which party has more to lose or the perception of the other side’s commitment to their position. If a terminated employee is highly specialized, they may command greater compensation due to the difficulty of replacing them. Conversely, an employer facing a tight budget may offer less, hoping the employee will prioritize expediency over a lengthy dispute.

Regardless of the legal and economic realities of the situation, many trade disputes can be reduced to a game of ‘chicken’ in which the party who is crazier, or perceived to be crazier, wins. The same is true when it comes to employment law disputes, particularly in severance negotiations.

The common thread: stakes and calculated risks

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Both scenarios illustrate a similar dynamic: applying pressure while managing the stakes of escalation. Trump’s tariff threats carry risks of trade wars, domestic inflation and global instability. Employers in Canada risk legal costs, public relations fallout and employee backlash if they misjudge severance offers.

Yet, the key difference lies in the scale and context. Trade negotiations involve billions of dollars, multiple industries, and international diplomacy. Severance discussions, while impactful to individuals, are confined to workplace dynamics and legal frameworks.

Lessons for negotiation

Both cases underscore the importance of understanding power, risk, and mutual dependencies in negotiations, and reveal the need for clear objectives and a willingness to push boundaries — while being prepared for potential fallout.

Whether navigating global trade deals or determining fair treatment for workers, these cases highlight a universal truth: leverage is the currency of negotiation, and its effective use often determines the winner.

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When it comes to severance negotiations, employees and employers should consider playing the ‘Trump’ card, including by:

• Not going it alone — Hiring an experienced employment law firm with a reputation for litigating employment and labour disputes. This will demonstrate your commitment to investing in the legal process to enforce your entitlement, reinforcing the seriousness of your position and capability of executing.
• Being aggressive — Many employees and employers are shy when negotiating these types of matters, not wanting to appear ‘cheap’ or ‘greedy.’ The entire purpose of the negotiation is to find a common ground, which is somewhere in the middle of these two descriptions.
• Knowing your objective — As in all negotiations, employers and employees need to start with an understanding of their bottom line. This can be a complex exercise with many variables; however, knowing what you want to walk away with is essential to developing an effective strategy.
• Being patient — Severance negotiations are a process. Patience is power in negotiations generally, but even more so when it comes to employee severance. Both sides are in a rush — and for good reason — but the side that is prepared to wait and let the process unfold usually does better.

Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practices employment law in eight provinces and is the author of six books, including the Law of Dismissal in Canada. Jarret Janis is a senior partner at Levitt LLP in Calgary.

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