Introduction
The year ahead for Canadian employees was foretold by a front-page article on December 31 in the Wall Street Journal, discussing the massive downsizing of middle management. The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have combined to eliminate many of the employees occupying those positions between frontline workers and the executive team.
The U.S. Experience: A Warning Sign for Canada
U.S. managers now oversee three times the number of employees they did in 2017, according to research firm Gartner, while LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses too stressed to support them. The Wall Street Journal points out that many U.S. employers are demoting their middle managers. In many states, they can do this with impunity.
The Canadian Context: A Different Story
However, the situation in Canada is worse. Declining productivity under the Liberal government and the resulting increased productivity gap with the U.S., along with higher taxes, reduced foreign investment, and the Trump government’s emphasis on reshoring have made the plight of Canadian employers worse – much worse – than their U.S. counterparts.
The Challenges Faced by Canadian Employers
Canadian employers are facing a perfect storm of challenges. The cost of severance pay is a significant burden, and demotions are often unworkable due to the potential for constructive dismissal claims. Advance written working notice of downsizing may be an option, but most employers are unaware of this alternative.
The Benefits of Advance Notice
Advance notice makes sense in the context of demotions where the employer wishes to retain the employee and is providing them advance notice of their demotion. The length of notice for a demotion is identical to that of a dismissal. Its purpose is to provide an employee, if they don’t wish to accept the change, a reasonable opportunity to find a job they wish elsewhere.
The Consequences of Middle Management Layoffs
An abundance of management layoffs will mean far fewer comparable positions for the laid-off employees to secure. This will result in greater severance pay, further worsening the plight of Canadian employers and setting up an unanticipated corporate crisis for the next government to contend with.
Conclusion
The middle management cull is coming to Canada. Despite the cost of severance, employers will ultimately have no economic choice but to downsize their middle management ranks. This will have far-reaching consequences for both employees and employers, making it essential for Canadian businesses to be prepared for this change.
About the Author
Howard Levitt is a senior partner at 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."
