CHAUDHRI: AI may be cheaper than hiring a new employee but the lawsuits are not

AI may be the cheapest employee a company ever hires, but the humans it replaces are not

Published Apr 25, 2026  •  Last updated 18 minutes ago  •  4 minute read

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For better or worse, we all carry the same untested assumption that using AI will save us heaps of money and will give us back hours of the day.

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It will increase productivity, reduce the size of teams, delivered through the use of shiny, new automated systems.

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But I must ask all businesses using this technology, have you felt the euphoria that AI has promised to deliver?

Indeed, I have not.

While I am, admittedly, a slow adopter of AI, I can tell you there are some nifty tools and functions that I have incorporated into my law practice. These powerful tools added some gasoline to the fire, meaning AI has strengthened our work product in discrete areas, but with careful close monitoring.

AI tools expensive

It has not, however, saved my business money.

In fact, it is an expensive tool that we invested in to better arm our team to provide better service to clients. For example, where some research can be done at a better price point through the use of a powerful legal AI tool, that is a great value add to the client and the overall strategy of the file.

AI is not replacing employees, at least at my shop. If anything it’s added costs. A business owner needs to invest in cutting edge technology to retain great talent as well. Great people want the best tools, and new AI tools are expensive.

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I may be in the minority, but I doubt for very long.

A recent Fortune Magazine article reported that “thousands of CEOs admit AI had no impact on employment or productivity.” The article went on to cite a study published in February by the National Bureau of Economic Research that polled 6,000 CEOS, CFOS and other executives.

The research produced two notable findings:

– Nearly 90% of firms said AI has had no impact on employment or productivity over the past three years;

– Executives also forecast AI will increase productivity by 1.4% and increase output by 0.8% over the next three years.

While I am not a strong mathematician, executives expect a much slower, gradual impact to their businesses when it comes to AI adoption. Despite this, we have still seen many employers jump to reducing teams substantially.

In February, Jack Dorsey announced Block would cut 40% of its staff and pointed to AI as the reason. Amazon is reportedly cutting 16,000 corporate roles. And Accenture is exiting 11,000 employees who purportedly “cannot reskill.”

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The common thread is likely not the technology. It is the willingness to frame workforce cuts as efficiency gains that may not be realized.

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Termination costs in Ontario significant

In Ontario, those termination costs are significant, and they are not optional.

A long-service employee terminated without cause is entitled to common law notice, on top of statutory severance. For senior or long-tenured staff, courts routinely award 18, 20, or even 24 months of pay in lieu. A 55-year-old manager with two decades at the company is not a $5,000 software subscription. She or he is a six-figure cheque.

The exposure gets worse depending on who gets cut first. AI adoption tends to hit older workers hardest, along with workers with disabilities who were on accommodations, and workers on leave.

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So, the question then becomes, what should employers do?

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Take the legal exposure seriously

The answer is not to abandon AI. It is to build a workforce transition plan that takes the legal exposure seriously before the tool goes live.

First, review your employment contracts. Termination clauses that are enforceable can cap common-law notice at statutory minimums and save six-figure payouts per employee. Contracts drafted five or ten years ago often do not hold up to current judicial scrutiny.

Next, audit who is actually being displaced. If AI adoption is quietly clearing out the employees over 55 years old, or the ones who just came back from parental leave, that is a major liability risk. A clean paper trail showing the business rationale for each role eliminated, with no pattern tracking a protected ground, is the difference between a manageable severance cost and a tribunal proceeding.

Finally, document the business case. Every termination tied to AI should be supported by a written record showing why the role was no longer needed, what work the technology is actually doing, and how the decision was made. That record is what defends against a wrongful dismissal claim down the road.

AI may be the cheapest employee a company ever hires. The humans it replaces are not.

– This column was co-written by employment lawyer Sunira Chaudhri and her associate Samantha Khaouli

Have a workplace problem? Maybe I can help! Email me at [email protected] and your question may be featured in a future column.

The content of this article is general information only and is not legal advice.

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