As we bid farewell to another year, a stark warning has been issued by the Wall Street Journal about the fate of middle management in the United States. It’s a trend that is set to unfold in Canada as well, with far-reaching consequences for employers and employees alike.
The Rise of Efficiency-Driven Downsizing
The pressure on companies to increase efficiency, boost profits, and navigate the complexities of international competition has led to a significant shift in management structures. According to research firm Gartner, U.S. managers now oversee three times the number of employees they did in 2017. This trend is not limited to the United States; it’s a global phenomenon driven by the impact of artificial intelligence and the need for organizations to remain competitive.
The Canadian Context
While Canada has long been considered a bastion of stability and security, its employers are facing unprecedented challenges. The decline in productivity under the Liberal government, coupled with higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring, have created a perfect storm that is exacerbating the plight of Canadian employers.
The Middle Management Conundrum
Demoting middle managers is often seen as an attractive option for employers seeking to reduce costs. 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 unworkable for most companies, with outright termination being an untenably costly option.
A Less-Explored Alternative: Advance Written Working Notice
In the context of demotions, providing advance written working notice can be a more viable solution for employers seeking to retain valued employees while minimizing their liability. This approach allows employees to find alternative employment if they choose not to accept the change in role. By doing so, it reduces the employer’s liability and incentivizes employees to seek new opportunities rather than prolonging their unemployment.
The Unintended Consequences of Mass Layoffs
As an abundance of management layoffs unfolds, fewer comparable positions will become available 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.
A Call to Action for Employers
In light of these trends, it’s essential for employers to reassess their management structures and consider proactive measures to mitigate the impact of downsizing. This may involve investing in employee development programs, exploring alternative workforce models, or providing support for affected employees.
The Way Forward: Collaboration and Adaptation
As we navigate this new landscape, collaboration between employers, governments, and employees will be crucial in addressing the challenges posed by mass layoffs. By working together, we can create a more adaptable and resilient workforce that is better equipped to thrive in an ever-changing business environment.
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.
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