The Writing on the Wall
The year ahead for Canadian employees was foretold by a front-page article in The Wall Street Journal on December 31, discussing the massive downsizing of middle management. This trend is not limited to the United States; it’s a global phenomenon that will soon affect Canada as well.
Declining Productivity and the Resulting Consequences
It’s worse here. Declining productivity under the Liberal government has led to a significant increase in the productivity gap with the U.S. Higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring have further exacerbated the situation, making it even more challenging for Canadian employers.
The Impact of Artificial Intelligence
Artificial intelligence (AI) has combined with other factors to eliminate many employees occupying positions between front-line workers and executive teams. U.S. managers now oversee three times the number of employees they did in 2017, according to research firm Gartner. LinkedIn’s Workforce Confidence survey found that nearly one-third of employees claim to have bosses who are too stressed to support them.
The Demotion Dilemma
Many U.S. employers are demoting their middle managers, often with impunity. However, in Canada, such demotions would be considered constructive dismissals, allowing the employee to resign and sue for wrongful dismissal damages. This reality makes demotions unworkable for most companies, as outright termination is an untenably costly option.
Advance Written Working Notice: A Viable Alternative
One alternative seldom used by Canadian employers is providing advance written working notice of demotion or dismissal. The length of notice for a demotion is identical to that of a dismissal and serves the same purpose: to provide employees with a reasonable opportunity to find new employment.
The Consequences of Downsizing Middle Management
Downsizing middle management will result in an abundance of layoffs, leading to far fewer comparable positions for laid-off employees. This will inevitably lead to 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 writing is on the wall; downsizing middle management is a coming reality in Canada. Employers must adapt to this new landscape and find ways to mitigate the costs associated with it. Advance written working notice may be a viable alternative, but its effectiveness will depend on various factors. One thing is certain: the next government will face a corporate crisis that requires immediate attention.
About the Author
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 has written six books, including "The Law of Dismissal in Canada."