A looming crisis for Canadian employers and employees
As we usher in a new year, a pressing question looms over the Canadian employment landscape: what’s next for middle management? A recent article in The Wall Street Journal foretold a massive downsizing of middle managers in the United States. We can expect similar trends to unfold north of the border.
The perfect storm of factors contributing to the decline of middle management
A combination of factors has contributed to the dwindling number of middle managers. The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have led many employers to reevaluate their organizational structures. In the United States, 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.
Why Canadian employers will be hit harder than their US counterparts
Declining productivity under the Liberal government and the resulting increased productivity gap with the United States, along with higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring, have made the plight of Canadian employers worse – much worse – than their U.S. counterparts.
The Wall Street Journal points out that many U.S. employers are demoting their middle managers
In an effort to streamline operations and boost productivity, many U.S. employers are opting for demotions rather than outright terminations. This approach allows them to maintain a certain level of control while minimizing the financial burden associated with layoffs.
However, this approach is not feasible in Canada
Under Canadian employment law, demotions are treated similarly to dismissals when it comes to notice periods and severance pay. Employers must provide employees with advance notice of their demotion, which can be a costly proposition. Moreover, if the employee chooses not to accept the change, they will have a reasonable opportunity to find alternative employment, reducing the employer’s liability.
Advance notice: A viable solution for Canadian employers
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, aiming to provide an employee with a reasonable opportunity to find alternative employment.
The consequences of downsizings on Canadian employers
An abundance of management layoffs will result in fewer comparable positions for laid-off employees to secure. This will lead to greater severance pay, further exacerbating the plight of Canadian employers and setting up an unanticipated corporate crisis for the next government to contend with.
Conclusion
As we navigate these challenging times, it is essential for employers and employees alike to understand the complexities surrounding middle management downsizings. By grasping the factors contributing to this trend and exploring viable solutions, such as advance notice, we can better prepare ourselves for the looming crisis that lies ahead.
By: Howard Levitt, 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."
