A Foreboding Future for Canadian Middle Managers
A recent article in the Wall Street Journal on December 31 painted a bleak picture of the year ahead for middle management in the United States. According to the article, massive downsizing is on the horizon, with many employers opting to demote or eliminate their middle managers altogether.
The Impact of Efficiency, Profits, and AI on Middle Management
The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have all contributed to the elimination of many middle management positions. In fact, research firm Gartner has found that U.S. managers now oversee three times the number of employees they did in 2017.
Canada: Where the Situation is Even More Bleak
While the situation in the United States is dire, Canada’s plight is even more severe. 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 administration’s emphasis on reshoring, have all made the situation worse.
A Perfect Storm of Challenges for Canadian Employers
The Wall Street Journal notes that many U.S. employers are demoting their middle managers, often without penalty. However, in Canada, such demotions would be considered constructive dismissals, allowing employees to resign and sue as if they had been fired. This reality makes demotions an unworkable option for most Canadian companies.
Outright Termination: An Untenably Costly Option
The cost of wrongful dismissal damages is a significant concern for employers in Canada. The law requires employers to pay employees a certain amount of severance pay based on their length of service and age, as well as other factors.
Advance Notice: A Viable Solution?
Advance notice can make sense in the context of demotions where the employer wishes to retain the employee but is providing them with advance notice of the change. 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 elsewhere.
The Coming Middle Management Cull: A Corporate Crisis in the Making
An abundance of management layoffs will mean far fewer comparable positions for 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 coming middle management cull is a foreboding future for many Canadian employees. With downsizings on the horizon and the cost of wrongful dismissal damages looming large, it’s essential that employers take proactive steps to mitigate the impact of these changes.
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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 is the author of six books, including "The Law of Dismissal in Canada."
