The Year Ahead for Canadian Employees
A front-page article on December 31, 2022, in the Wall Street Journal highlighted a massive downsizing of middle management. This trend is not unique to the United States and has significant implications for Canadian employers.
Declining Productivity and the Resulting Consequences
It’s 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 worse than their U.S. counterparts.
The Wall Street Journal points out that many U.S. employers are demoting their middle managers. In some states, they can do so with impunity. However, 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, with outright termination being an untenably costly option.
The Impact of Artificial Intelligence on Middle Management
The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have combined to eliminate many employees occupying positions between front-line workers and executive teams. According to research firm Gartner, U.S. managers now oversee three times the number of employees they did in 2017.
A LinkedIn survey found that close to one-third of employees claim to have bosses who are too stressed to support them. This trend is a clear indication that middle management is becoming increasingly unnecessary.
Advance Written Working Notice: A Viable Alternative
One alternative seldom used by employers is advance written working notice. This makes sense in the context of demotions where the employer wishes to retain the employee and provides them with advance notice of their demotion. The length of notice for a demotion is identical to that of a dismissal.
Its purpose is to provide an employee, if they don’t wish to accept the change, a reasonable opportunity to find a job 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 in a job that is undesirable because it is coming to an end.
The Coming Corporate Crisis
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 at 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."
Conclusion
Downsizing is a reality that Canadian employers cannot ignore. With declining productivity, increased competition, and the impact of artificial intelligence, middle management is becoming increasingly unnecessary. Employers must consider alternative solutions, such as advance written working notice, to mitigate the consequences of layoffs.
The coming corporate crisis will require policymakers to be proactive in addressing the challenges facing Canadian employers. By understanding the causes and effects of this trend, we can work towards creating a more sustainable and competitive business environment.
Recommended Reading:
- "Top 10 Employment Law Stories of 2024"
- "8 Tactics That Defined Toxic Bosses in 2024"
