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

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.

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 has 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 that 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.

One alternative seldom used is to provide advance written working notice of a downsizing. That notice offsets, dollar per dollar, the severance costs of wrongful dismissal damages because wrongful dismissal damages are, legally speaking, simply compensation for not providing the advance notice the law actually requires. Despite this benefit, most employers are unaware of the option. Most new employer clients are surprised when I recommend it to them.

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. If they find such other employment, that reduces the employer’s liability and, unlike a wrongful dismissal case where an employee is motivated to avoid other work so as not to reduce their entitlement (and their lawyers are quick to tell them this as it reduces their fees as well), there is no 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.

For the reasons noted above, downsizings are coming to Canada’s often long-tenured middle management ranks. Despite the cost of severance, employers will ultimately have no economic choice.

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.

Howard Levitt is senior partner of 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.

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