The U.S. Trend Comes to Our Shores
A recent article in the Wall Street Journal on December 31 warned of a massive downsizing of middle management positions in the United States. This trend is not limited to the U.S.; Canadian employees can expect to face similar challenges in the year ahead.
The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have combined to eliminate many of the employees occupying those positions between front-line workers and the executive team. 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 close to one-third of employees claim to have bosses who are too stressed to support them.
A Tale of Two Countries: Declining Productivity and Increased Taxes
While the situation is dire in the U.S., it is even worse here in Canada. Declining productivity under the Liberal government, along with higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring, have made the plight of Canadian employers far more severe than their U.S. counterparts.
The Wall Street Journal points out that many U.S. employers are demoting their middle managers, a move that can be done with impunity in some states. In Canada, such demotions 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, making outright termination an untenably costly option.
The Unspoken Truth: Demotions vs. Termination
Advance notice can make a lot of sense in the context of demotions where the employer wishes to retain the employee and is providing them advance notice of their demotion. The length of notice for a demotion is identical to that of a dismissal, with its primary purpose being to provide an employee with a reasonable opportunity to find alternative employment if they don’t wish to accept the change.
If the employee finds new employment, this reduces the employer’s liability and eliminates the incentive to stay unemployed longer. In contrast, wrongful dismissal cases often lead to prolonged unemployment, further exacerbating the employer’s financial burden.
Downsizings on the Horizon
Downsizings are coming to Canada’s often long-tenured middle management ranks, despite the significant costs associated with severance pay. Employers will ultimately have no economic choice but to adapt to this new reality.
The abundance of management layoffs will lead to far fewer comparable positions for laid-off employees to secure, resulting in greater severance pay and further worsening the plight of Canadian employers. This sets up an unanticipated corporate crisis for the next government to contend with.
Expert Insights
Howard Levitt, senior partner of Levitt LLP, a leading employment and labor law firm, notes that "an abundance of management layoffs will mean far fewer comparable positions for the laid-off employees to secure. That will result in greater severance pay, further worsening of the plight of Canadian employers and setting up an unanticipated corporate crisis for the next government to contend with."
As Canada’s economy continues to evolve, one thing is clear: middle management positions are facing unprecedented scrutiny. With downsizings on the horizon, it’s essential that employers, employees, and policymakers alike understand the implications of this trend.
Bookmark Our Website and Support Our Journalism
Stay informed about the latest business news and trends by bookmarking our website financialpost.com. Sign up for our newsletters to receive exclusive insights and analysis directly in your inbox.
