Howard Levitt warns that a middle management job purge is looming in Canada

December 14, 2024February 6, 2025 EquityExplained

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.

Table of Contents

Declining Productivity and Rising Costs

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 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. However, in Canada, such demotions would be a constructive dismissal, permitting 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

One alternative seldom used is to provide advance written working notice of a downsizing. This 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 this option.

Work and HR Strategy

FP Work touches on HR strategy, labour economics, office culture, technology, and more.

Advance Notice: A Solution to Demotions?

Advance notice makes a lot of sense in the context of demotions where the employer wishes to retain the employee and is providing 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 they wish elsewhere.

Downsizing in Canada’s Middle Management Ranks

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.

The Corporate Crisis Ahead

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: Expert on Employment Law

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.

The Future for Canadian Employers

In conclusion, the middle management cull is coming to Canada, too. With declining productivity, rising costs, and the impact of artificial intelligence, employers will be forced to make difficult decisions about their workforce. Advance notice may be a solution to demotions, but it’s only a temporary fix. The corporate crisis ahead will require careful planning and strategy from both employers and governments.