The Middle Management Cull: A Looming Crisis in Canada
The Writing on the Wall
A front-page article in the Wall Street Journal on December 31 predicted a massive downsizing of middle management positions. This trend is not limited to the United States; it’s also coming to Canada.
Declining Productivity and Increased Competition
The Canadian economy is facing a perfect storm of challenges, including declining productivity under the Liberal government, increased taxes, reduced foreign investment, and the emphasis on reshoring by the Trump administration. These factors have made the plight of Canadian employers worse than their U.S. counterparts.
According to research firm Gartner, U.S. managers now oversee three times the number of employees they did in 2017. Meanwhile, LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses who are too stressed to support them.
The Rise of Artificial Intelligence
The impact of artificial intelligence (AI) has also contributed to the decline of middle management positions. AI can automate many tasks and processes, making it easier for companies to eliminate unnecessary layers of management.
Demotions: A Costly Option for Canadian Employers
In Canada, demoting a middle manager would be considered constructive dismissal, allowing the employee to resign and sue as if they had been fired. This reality makes demotions unworkable for most companies, with outright termination an untenably costly option.
Advance Written Notice: A Viable Alternative?
One alternative seldom used by Canadian employers is providing advance written notice of a downsizing. This notice offsets dollar-for-dollar the severance costs of wrongful dismissal damages because wrongful dismissal damages are simply compensation for not providing adequate notice.
Advance notice makes sense in the context of demotions where the employer wishes to retain the employee and provide them with advance notice of their demotion. The length of notice for a demotion is identical to that of a dismissal, its purpose being to provide an employee with a reasonable opportunity to find alternative employment if they don’t wish to accept the change.
An Unavoidable Corporate Crisis
The abundance of management layoffs will result in far fewer comparable positions for laid-off employees to secure. This will 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.
A Word from Howard Levitt
As a senior partner at Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta, and British Columbia, Howard Levitt notes that management layoffs will lead to far fewer comparable positions for laid-off employees. This will result in greater severance pay, further worsening the plight of Canadian employers.
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