Foreboding Signs
A front-page article in The Wall Street Journal on December 31 foretold a grim future for Canadian employees. The massive downsizing of middle management has become a reality south of the border, and now, it seems, our country is not immune to this trend.
The Drive for Efficiency and Profits
The quest for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have combined to eliminate many positions between front-line workers and executive teams. U.S. managers are now overseeing 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.
A Grim Reality
It’s worse here. Declining productivity under the Liberal government and the resulting increased productivity gap with the U.S., along with higher taxes, reduced foreign investment, and the Trump government’s emphasis on reshoring, has made the plight of Canadian employers worse than their U.S. counterparts.
The Impact on Middle Management
Middle management is facing the brunt of this trend. Employers are demoting or eliminating these positions in an effort to reduce costs and increase profits. In many states, U.S. employers can do this with impunity. However, in Canada, such demotions would be considered constructive dismissal, allowing employees to resign and sue for wrongful dismissal.
A Costly Option
Termination is an untenably costly option for most companies. Advance written working notice of downsizing is a more viable solution. This allows employers to provide employees with reasonable notice of their demotion or termination, giving them time to find new employment.
The Benefits of Advance Notice
Advance notice makes sense in the context of demotions where the employer wishes to retain the employee and provides them advance notice of their change in status. The length of notice for a demotion is identical to that of a dismissal. Its purpose is to provide an employee with a reasonable opportunity to find new employment, reducing the employer’s liability.
A Perfect Storm
An abundance of management layoffs will result in far fewer comparable positions for laid-off employees to secure. This will lead to greater severance pay, further worsening the plight of Canadian employers and setting up an unanticipated corporate crisis for the next government to contend with.
Expert Opinion
Howard Levitt, senior partner at Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta, and British Columbia, notes that downsizings are coming to Canada’s often long-tenured middle management ranks. Despite the cost of severance, employers will ultimately have no economic choice.
The Future Looks Grim
As the trend continues, Canadian employers can expect a perfect storm of increased severance pay, reduced talent pools, and a worsening corporate climate. The next government will need to contend with an unanticipated crisis as a result of these layoffs.
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