Howard Levitt
As we enter a new year, Canadian employees should be aware of the significant changes that are looming on the horizon. A recent article in the Wall Street Journal highlighted the massive downsizing of middle management in the United States. Similarly, our neighbors to the north can expect a similar trend.
The Perfect Storm
A combination of factors has led to this shift in the US job market:
- Drive for Efficiency: Companies are constantly seeking ways to increase productivity and reduce costs.
- Higher Profits: The desire for higher profits has led to a re-evaluation of middle management roles, which are often seen as a drain on resources.
- Increased International Competition: With the rise of globalization, companies must adapt to changing market conditions and competition from abroad.
- Impact of Artificial Intelligence: AI has automated many tasks, making some jobs redundant.
In the US, 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 close to one-third of employees claim to have bosses too stressed to support them.
The Situation is Worse in Canada
However, things are even more dire for Canadian employers. Declining productivity under the Liberal government and the resulting increased productivity gap with the US, along with higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring, have made the plight of Canadian employers worse.
The Wall Street Journal points out that many US employers are demoting their middle managers. In Canada, such demotions would likely be viewed as a demotion rather than a promotion, leading to increased severance pay.
Advance Notice: A Solution?
In some cases, advance notice can make sense in the context of demotions where the employer wishes to retain the employee and is providing them with advance notice of their demotion. The length of notice for a demotion is identical to that of a dismissal.
The purpose of advance notice is to provide an employee, if they don’t wish to accept the change, a reasonable opportunity to find a job they want elsewhere. If they find such other employment, it reduces the employer’s liability and eliminates the incentive to stay unemployed longer if the employee is going to be working anyway.
A Coming Storm for Canadian Employers
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.
Howard Levitt is senior partner of Levitt LLP, employment and labor 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.
The Future Looks Bleak
As we head into a new year, Canadian employers should be aware of the challenges that lie ahead. With the trend of middle management layoffs expected to continue, it’s essential for companies to adapt and innovate to stay competitive.
The situation is dire, but with the right approach, Canadian employers can navigate this storm and emerge stronger on the other side.
