Howard Levitt predicts the impending mass layoff of Canadian middle managers.

The Middle Management Cull is Coming to Canada, Too

A front-page article in The Wall Street Journal on December 31st forecasted a massive downsizing of middle management positions. This trend is not only affecting the United States but also has significant implications for Canadian employees.

Declining Productivity and Its Consequences

It’s worse here. Declining productivity under the Liberal government, coupled with an increasing productivity gap with the US, higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring have made the situation for Canadian employers much worse than their US counterparts. The Wall Street Journal points out that many US employers are demoting their middle managers, a practice that is becoming increasingly common in Canada as well.

The Impact of Artificial Intelligence

Artificial intelligence (AI) has been a major driver of change in the workforce, leading to increased efficiency and productivity gains. However, this has also led to job displacement, particularly for middle management positions. According to research firm Gartner, US managers now oversee three times the number of employees they did in 2017. Similarly, LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses who are too stressed to support them.

The Rise of Demotions

Demotions are becoming a more popular way for companies to downsize their middle management ranks. However, this practice is not without its challenges. In Canada, demotions can be considered constructive dismissal, which allows the employee to resign and sue the company as if they had been fired. This makes demotions unworkable for most companies, with outright termination being an untenably costly option.

Advance Notice: A Solution in Search of a Problem?

Advance notice is a common practice in employment law, where the employer provides the employee with written notice of their intention to terminate or change their employment contract. In the context of demotions, advance notice makes a lot of sense. The length of notice for a demotion is identical to that of a dismissal, and its purpose is to provide the employee with a reasonable opportunity to find new employment.

The Consequences of Downsizing

Downsizing will result in far fewer comparable positions for laid-off employees to secure, leading to greater severance pay. This, in turn, will further worsen the plight of Canadian employers and set up an unanticipated corporate crisis for the next government to contend with.

Expert Insights

Howard Levitt, senior partner at Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta, and British Columbia, practices employment law in eight provinces. He is also the author of six books, including "The Law of Dismissal in Canada." According to Levitt, downsizing will have far-reaching consequences for Canadian employers and employees.

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