Howard Levitt Predicts a Middle Management Cull in Canada Similar to the US Experience

The year ahead for Canadian employees was foretold by a front-page article on December 31 in the Wall Street Journal, discussing the massive downsizing of middle management.

It is 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 have made the plight of Canadian employers worse — much worse — than their U.S. counterparts.

The Wall Street Journal points out that many U.S. employers are demoting their middle managers. In many states, they can do this with impunity. In Canada, such demotions would be a constructive dismissal, permitting the employee the option of resigning and suing as if they had been fired. That reality makes demotions unworkable for most companies, with outright termination an untenably costly option.

Table of Contents

The Impact of Artificial Intelligence

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. U.S. managers now oversee three times the number of employees they did in 2017, according to research firm Gartner, while LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses too stressed to support them.

The Middle Management Cull

Despite the cost of severance, employers will ultimately have no economic choice. Downsizings are coming to Canada’s often long-tenured middle management ranks. The Wall Street Journal points out that in many U.S. companies, middle managers are being replaced by technology or being asked to take on more responsibilities without additional compensation.

Advance Notice: A Solution?

Advance notice makes 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. Its purpose is to provide an employee, if they don’t wish to accept the change, a reasonable opportunity to find a job they wish elsewhere.

The Unintended Consequences

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.

What This Means for Employers

Employers will ultimately have no economic choice but to downsize their middle management ranks. Despite the cost of severance, this is a necessary step to ensure the long-term survival of companies. The impact on employees will be significant, and employers must be prepared to provide support and resources to those who are laid off.

Conclusion

The middle management cull is coming to Canada, too. Employers must be prepared for the unintended consequences of this trend and take steps to mitigate its impact on their employees. Advance notice may be a solution in some cases, but ultimately, downsizings will become a reality for many companies.

Recommendations for Employers

Consider advance notice for demotions where possible
Provide support and resources to laid-off employees
Develop strategies to mitigate the impact of severance pay on the company’s bottom line
Prepare for an influx of job applicants as a result of downsizing

Conclusion

The middle management cull is a reality that employers must face. By being prepared and taking proactive steps, companies can minimize the impact of this trend on their employees and ensure the long-term survival of their businesses.

Howard Levitt’s Bio

Howard Levitt is senior partner of Levitt LLP, employment and labor 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".