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title

The Retirement of Mandatory Retirement

DATE

April 11, 2006

EXPERTISE

Employment and Labour

One of Canada's largest Employment and Labour Law practices, dedicated to service and excellence.

INTRODUCTION

Following in the footsteps of other jurisdictions such as Manitoba and Quebec, Ontario retired mandatory retirement on December 12, 2005, when the Ending Mandatory Retirement Statute Law Amendment Act ("Bill 211") received Royal Assent. The changes to the law contemplated by Bill 211, however, will only take effect on December 12, 2006. Until that time, Ontario employers may compel employees to retire at age 65. After Bill 211 comes into force, all provisions requiring mandatory retirement, including those in existing collective agreements, will cease to be valid.

As we reported to you in June 2005, Bill 211 amends several statutes that have provisions connected to mandatory retirement. The following is a brief summary of the changes to the law introduced by the legislation. You may also consult the Ontario Ministry of Labour's FAQ on mandatory retirement.

(a) The Human Rights Code

Although the Ontario Human Rights Code, R.S.O. 1990 c. H. 19 (the "HRC") prohibits discrimination on the basis of age, the statute currently defines "age" for the purposes of employment as being 18 years and older, but less than 65. As a result, employers have, until now, been able to require employees to retire at age 65 without contravening the HRC. When Bill 211 becomes law, there will no longer be an upper limit on the definition of "age" in the HRC, so that the anti-discrimination protections of the statute will apply to individuals over age 65.

In light of the new definition of "age" provided for in subsection 1(1) of Bill 211, mandatory retirement policies or practices will be permissible only in cases in which Ontario employers can show that age-based job requirements or qualifications are bona fide occupational requirements, as contemplated by the HRC. To this end, employers must demonstrate that:

the age-based job requirement or qualification is an essential part of the performance of critical job duties and tasks;
the employee does not meet the job requirement or qualification; and
the employee could not be accommodated without causing undue hardship to the employer.

Employers will need to take active measures in order to establish that they have satisfied their duty to accommodate older employees. In unionized workplaces, this will likely involve joint consultations between the employer and the union regarding the limitations and capabilities of the employees in question. Employers should accordingly prepare themselves for their imminent obligations, as they will have a duty to accommodate employees who have age-related illnesses and disabilities.

(b) Termination and Severance Pay

Employers currently do not have to provide notice of termination or pay in lieu to employees whose employment is terminated pursuant to a mandatory retirement policy or practice. However, once Bill 211 becomes law, employees over age 65 will be entitled to receive termination pay in accordance with the Employment Standards Act 2000, S.O. 2000, c. 41 (the "ESA, 2000") and "common law" notice if there is no collective agreement or employment contract in place.

Employers should remember that they are obliged to comply with the anti-discrimination provisions in the HRC when terminating employees. Accordingly, employees may not be terminated because of their age, even if they have received appropriate notice of their termination.

Bill 211 does not change the severance pay exemption in the ESA, 2000 that applies in cases in which an employee receives an actuarially unreduced pension.

(c) Pension and Benefits

Bill 211 has no effect on pension benefits already earned. Once Bill 211 comes into force, the status quo will be maintained, and employees over age 65 may continue their membership in pension plans and may continue to accrue benefits, subject to service or contribution caps. Further, as a result of section 1(5) of Bill 211, no changes will be made to the provisions of the ESA, 2000 that prohibit employers from discriminating on the basis of age in providing benefits to employees aged 18 to 64. As such, once Bill 211 takes effect, employers may continue to exercise discretion in providing benefits to employees over age 65.

It should be noted, however, that Bill 211 provides no guidance as to how employers must administer pension and benefit plans in light of the amended definition of "age" in the HRC. Because of the legislation's silence in this regard, some may argue that any age-based threshold for benefits would constitute age-based discrimination. Similarly, even though Bill 211 appears to permit service or contribution caps on the accrual of pension benefits, such caps may be challenged as discriminatory.

(d) The Workplace Safety and Insurance Act, 1997

Section 7 of Bill 211 amends the Workplace Safety and Insurance Act, 1997, S.O. 1997, c. 16, Sched. A (the "WSIA") by adding a provision to that statute which states that distinctions because of age apply despite the amended definition of "age" in the HRC. When Bill 211 comes into force, injured workers will accordingly still cease receiving loss of earning benefits at age 65 and workers aged 63 or more at the time of injury will continue to receive loss of earning benefits for up to two years.

In light of the fact that the WSIA only provides loss of earning benefits to injured workers over age 63 for up to two years, an important issue that will need to be addressed when Bill 211 takes effect is the degree to which employers will be liable to employees who have sustained workplace injuries but who are no longer covered under the workers' compensation scheme because of their age.

CONCLUSION

Employers should use the months leading up to the date on which Bill 211 takes effect to modify any human resources policies and practices relating to mandatory retirement. To this end, employers may consider adopting voluntary retirement incentives to encourage individuals to retire. Employers may also consider implementing phased retirement, which can be achieved through a gradual reduction in the workload of older employees. Finally, employers should ensure that the proper mechanisms are in place so that they can monitor the performance of older employees. In all cases, proper legal and human resources planning on the part of employers will be necessary in order to be prepared for the retirement of mandatory retirement.

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault LLP or any member of the firm on the points of law discussed.

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