A Front Page Article Foreshadows a Challenging Year Ahead for Canadian Employees
As we step into the new year, a concerning trend is unfolding in the world of employment. A recent article in The Wall Street Journal highlights the massive downsizing of middle management in the United States, and unfortunately, this trend is likely to have a similar impact on Canada.
The Factors Contributing to Middle Management Downsizing
A perfect storm of factors has contributed to the elimination of many employees occupying positions between front-line workers and executive teams. The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence (AI) have all combined to make middle management a vulnerable position.
According to research firm Gartner, U.S. managers now oversee three times the number of employees they did in 2017. Additionally, LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses who are too stressed to support them. These statistics paint a grim picture and indicate that middle management is indeed under threat.
Canada’s Unique Challenges
While the trend may be similar to what we’re seeing in the United States, Canada faces unique challenges that will only exacerbate the situation. The declining productivity under the Liberal government has resulted in a widening productivity gap with the U.S., along with higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring. These factors have made the plight of Canadian employers worse than their U.S. counterparts.
Demotions vs. Termination: A Costly Conundrum
The Wall Street Journal article notes that demotions are becoming a more common approach to downsizing in the United States. However, this raises questions about the cost and feasibility of such an approach for Canadian employers. Advance notice is required for demotions, which can be identical to that of dismissal. The purpose of advance notice is to provide employees with a reasonable opportunity to find alternative employment if they do not wish to accept the change.
Advance Notice: A Practical Solution
In the context of demotions where the employer wishes to retain the employee and provides them with advance notice, advance notice makes a lot of sense. The length of notice for a demotion is identical to that of dismissal, providing employees with a reasonable opportunity to find alternative employment.
However, this approach also has its drawbacks. An abundance of management layoffs will result in fewer comparable positions available for laid-off employees to secure, leading to greater severance pay and further worsening the plight of Canadian employers.
The Unanticipated Corporate Crisis
As the middle management cull continues, Canadian employers can expect to face a significant corporate crisis in the coming years. The trend towards downsizing will lead to a shortage of management positions available for laid-off employees to secure, resulting in increased severance pay and further exacerbating the challenges faced by Canadian employers.
Conclusion
The warning signs are clear: the middle management cull is coming to Canada, too. As employers grapple with the costs and complexities of downsizing, they must also consider the long-term implications for their businesses. Advance notice may be a practical solution in some cases, but it will not alleviate the underlying issues driving this trend.
As we navigate these challenging times ahead, Canadian employees and employers alike must be prepared to adapt to a rapidly changing landscape. The next government will face an unanticipated corporate crisis, one that requires immediate attention and innovative solutions.
Author Bio
Howard Levitt is the 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.