What Ontario’s new law means for employers
On June 7, 2005, Ontario introduced Bill 211, the Ending of Mandatory Retirement Statute Law Amendment Act 2005. The bill, if enacted, would end mandatory retirement for Ontario employees over the age of 65.
Canada’s population is aging at a rapid rate. According to Canada’s Urban Futures Institute, about 9.8 million Canadians are approaching the age of 65 and by 2020, 425,000 workers will be retiring each year.
According to a study by staffing firm Robert Half International Inc. of 100 executives at large Canadian companies, 61 per cent were concerned their organizations would lose key staff needed to remain competitive in the next five to 10 years.
The abolition of mandatory retirement, government officials and other proponents of Bill 211 claim, will stem the drain on the workforce caused by key employees who are forced to retire at 65.
Another argument in support of Bill 211 is that it will provide workers with the flexibility to leave their jobs at a time of their own choosing. There are some indications that when mandatory retirement was abolished in Quebec, early retirement actually accelerated and only the most motivated and productive employees chose to stay on after they reached the age of 65.
But critics of the bill condemn it as a “scam” designed to keep older people working while also failing to address the need for pension improvements. Indeed, as discussed further below, the new legislation does not require companies to provide health and other benefits to employees over the age of 64 and it has been suggested that this runs the risk of creating two classes of workers.
While the bill has sparked a huge political controversy, it would appear that the abolition of mandatory retirement in Ontario is inevitable and its impact on the way employees are hired, managed and terminated will be far reaching.
Key aspects of the bill
The centrepiece of the bill is the amendment to the definition of age under the Human Rights Code. Currently the code prohibits discrimination in employment on the basis of age for all workers over the age of 18 but under the age of 65. The bill will amend the code to remove the age 65 cap on discrimination.
At the same time, the bill will “maintain the status quo” under the existing workplace insurance system. The Workplace Safety and Insurance Act (WSIA) makes distinctions based on age and these distinctions will be specifically exempted from the changes to the definition of age under the code.
The bill indicates that it will come into force one year after it receives royal assent.
Impact on collective bargaining agreements
The bill will have a dramatic impact on the unionized workplace. One year after it becomes law, all mandatory retirement provisions in collective bargaining agreements will cease to have effect. Similarly, many workplaces establish a mandatory retirement policy in employment contracts or handbooks.
These provisions will be illegal and invalid a year after the legislation is passed. Thereafter, employers will only be able to enforce a mandatory retirement policy if it can be demonstrated that the employee’s age is a bona fide occupational requirement (BFOR).
The test of what constitutes a BFOR has been examined by the Supreme Court of Canada in British Columbia (Public Service Employee Relations Commission) v. B.C.G.S.E.U., also known as the Meiorin decision. In order to establish a BFOR, the employer would be obligated to establish that:
•the employer adopted the fixed age job requirement for a purpose rationally connected to the performance of the job;
•the fixed age job requirement is imposed honestly, in good faith and with a sincere belief on the part of the employer that such limitation is necessary for the safe or effective carrying out of the work, and not for ulterior or extraneous reasons designed to defeat the purposes of the code; and
•the fixed age job requirement is demonstrated to be necessary on an objective basis for carrying out the work and that it is not possible to accommodate individual employees sharing the characteristics of the claimant without imposing undue hardship upon the employer.
As a result of this stringent test, a mandatory retirement policy will not be sustainable as a BFOR if it is based on a general desire for “new blood,” “fresh ideas,” or even cheaper, younger, labour.
Furthermore, technological advancements such as labour-saving devices exist that reduce the reliance on physical strength and offer employees greater flexibility regarding work hours and work location. Medical technology also now offers much more accurate information regarding an individual’s health and ability to meet the physical and mental rigours of employment.
For these reasons it will be very difficult for an employer to justify a mandatory retirement policy as a BFOR except in rare cases involving health and safety.
Hiring
Employers should expect the Ontario Human Rights Commission to have heightened sensitivity to issues of age discrimination.
Employers will need to take precautions during the hiring process so they can clearly demonstrate the age of the employee played no role in the decision to hire or not hire. For example, comments like “no career potential,” “set in his ways,” “better for a recent graduate,” “will retire soon,” and “too much experience,” can all be interpreted as euphemisms for “too old.”
Performance evaluations and individualized testing
Many employers are reluctant to give truthful or tough performance evaluations to older employees close to retirement because they do not wish to embarrass the loyal employee by highlighting problems. This is particularly the case when an age-related infirmity may be involved. This practice, however, may backfire once mandatory retirement is abolished.
It will therefore be critical to keep detailed and accurate performance records for all employees, documenting accomplishments and failures. Many employers may wish to explore the use of individualized testing, particularly where there may be health and safety concerns. These tests may include physical endurance or strength tests. The tests, however, have to be carefully designed. In many cases, an employee who fails a test may be a good worker. In Meiorin, a female forest firefighter failed the fitness test but was evaluated by her superior as a good worker. Employers will have to collaborate with medical professionals to design meaningful tests that accurately predict or closely proximate job performance.
A good evaluation system, the conclusions of which are communicated to employees on a regular basis, will be useful in the event the employer chooses to promote a younger employee or dismiss an older worker.
Termination
Under ss. 54, 57, 58 and 61 of the Employment Standards Act (ESA), any employee, regardless of age, is entitled to notice of termination. Employers will not be entitled to rely on mandatory retirement as an exemption to these notice provisions.
Given that the court recognizes older workers have tremendous difficulties in finding alternate employment, employers will be facing hefty severance packages. In Emery v. Royal Oak Mines Inc., a senior employee who had worked for a company for 30 years was entitled to 30 months’ notice.
Monies earned by the employee, and pension benefits received during the notice period, were not deducted from the damages for lost salary the employee obtained at trial. Payment of these expensive severance packages can only be controlled by a complete revision to employment contracts in order to limit exposure on any termination.
Accommodation
With greater numbers of employees working past the age of 65, the obligation of employers to accommodate developing physical ailments associated with aging will only increase. Employers should ensure that they have updated policies regarding requests for accommodation.
Scheduling
Despite the abolition of mandatory retirement, studies suggest older workers prefer reduced or flexible hours. According to a CBC news report, only six per cent of workers continue to work full time after the age of 65.
Creative employers will consider a wide variety of options such as flex-time arrangements to accommodate the needs of an aging workforce. Such flexibility also helps retain some of the best and brightest, regardless of age.
Pension plans
Currently there are no plans to amend the federal Income Tax Act (ITA) to compliment the changes stipulated in Bill 211. Section 35(4) of the Pension Benefits Act entitles plan members to continue participation in pension plans after the age of 65.
The ITA, however, requires individuals to draw on pensions, RRSPs and RRIFs starting from age 69 and prevents them from making further contributions.
In effect, an employee over the age of 69 could be earning a full salary and be forced to collect on his pension or RRSP.
The employee would not, however, have a right to make any further pension or RRSP contributions. Undoubtedly, pressure will be placed on the federal government to revamp its tax and pension legislation.
On a final note on this topic, some pension plans restrict the age at which an employee can join the pension plan. The abolition of mandatory retirement therefore will likely require further refinements to provincial pension legislation.
Benefits
Section 43 of the WSIA indicates that disability benefits cease after the employee reaches age 65 or, if injured, after age 63 for a two-year period. Bill 211 expressly preserves this legislated age discrimination.
It can be argued, however, that the status of private health, dental, long-term disability and life insurance has been muddied. Part 13 of the ESA prohibits age discrimination in benefit plans, unless permitted by the regulations. Regulation 286/01 defines age as being between 18 and 65. Some commentators argue this may justify age discrimination in the provision of benefits at age 65. Many private LTD and health plans end benefit payments at age 65.
The Human Rights Code and the charter take legal priority over the ESA and it is therefore an open question as to whether benefit discrimination based on age 65 or older could survive a legal challenge.
Given this uncertainty, and the fact prescription drug and out-of-country medical coverage is very expensive for individuals over the age of 65, it may be tempting for employers to simply refuse coverage to employees over the age of 65.
But this tactic is not recommended as it would undoubtedly expose the employer to an age-discrimination challenge under the code. Employers should discuss with their broker how to contain their benefit costs.
For more information see:
• British Columbia (Public Service Employee Relations Commission) v. B.C.G.S.E.U., 1999 CarswellBC 1907, 1999 CarswellBC 1908 S.C.C.)
• Emery v. Royal Oak Mines Inc., 1995 CarswellOnt 456, 11 C.C.E.L. (2d) 149 (Ont. Gen. Div.)
Neena Gupta is a partner in the Waterloo, Ont., office of Gowling Lafleur Henderson. She can be reached at (519) 575-7501 or [email protected]. Sean Sullivan is an associate in the Waterloo, Ont., office of Gowling Lafleur Henderson. He can be reached at (519) 575-7515 or [email protected].
Canada’s population is aging at a rapid rate. According to Canada’s Urban Futures Institute, about 9.8 million Canadians are approaching the age of 65 and by 2020, 425,000 workers will be retiring each year.
According to a study by staffing firm Robert Half International Inc. of 100 executives at large Canadian companies, 61 per cent were concerned their organizations would lose key staff needed to remain competitive in the next five to 10 years.
The abolition of mandatory retirement, government officials and other proponents of Bill 211 claim, will stem the drain on the workforce caused by key employees who are forced to retire at 65.
Another argument in support of Bill 211 is that it will provide workers with the flexibility to leave their jobs at a time of their own choosing. There are some indications that when mandatory retirement was abolished in Quebec, early retirement actually accelerated and only the most motivated and productive employees chose to stay on after they reached the age of 65.
But critics of the bill condemn it as a “scam” designed to keep older people working while also failing to address the need for pension improvements. Indeed, as discussed further below, the new legislation does not require companies to provide health and other benefits to employees over the age of 64 and it has been suggested that this runs the risk of creating two classes of workers.
While the bill has sparked a huge political controversy, it would appear that the abolition of mandatory retirement in Ontario is inevitable and its impact on the way employees are hired, managed and terminated will be far reaching.
Key aspects of the bill
The centrepiece of the bill is the amendment to the definition of age under the Human Rights Code. Currently the code prohibits discrimination in employment on the basis of age for all workers over the age of 18 but under the age of 65. The bill will amend the code to remove the age 65 cap on discrimination.
At the same time, the bill will “maintain the status quo” under the existing workplace insurance system. The Workplace Safety and Insurance Act (WSIA) makes distinctions based on age and these distinctions will be specifically exempted from the changes to the definition of age under the code.
The bill indicates that it will come into force one year after it receives royal assent.
Impact on collective bargaining agreements
The bill will have a dramatic impact on the unionized workplace. One year after it becomes law, all mandatory retirement provisions in collective bargaining agreements will cease to have effect. Similarly, many workplaces establish a mandatory retirement policy in employment contracts or handbooks.
These provisions will be illegal and invalid a year after the legislation is passed. Thereafter, employers will only be able to enforce a mandatory retirement policy if it can be demonstrated that the employee’s age is a bona fide occupational requirement (BFOR).
The test of what constitutes a BFOR has been examined by the Supreme Court of Canada in British Columbia (Public Service Employee Relations Commission) v. B.C.G.S.E.U., also known as the Meiorin decision. In order to establish a BFOR, the employer would be obligated to establish that:
•the employer adopted the fixed age job requirement for a purpose rationally connected to the performance of the job;
•the fixed age job requirement is imposed honestly, in good faith and with a sincere belief on the part of the employer that such limitation is necessary for the safe or effective carrying out of the work, and not for ulterior or extraneous reasons designed to defeat the purposes of the code; and
•the fixed age job requirement is demonstrated to be necessary on an objective basis for carrying out the work and that it is not possible to accommodate individual employees sharing the characteristics of the claimant without imposing undue hardship upon the employer.
As a result of this stringent test, a mandatory retirement policy will not be sustainable as a BFOR if it is based on a general desire for “new blood,” “fresh ideas,” or even cheaper, younger, labour.
Furthermore, technological advancements such as labour-saving devices exist that reduce the reliance on physical strength and offer employees greater flexibility regarding work hours and work location. Medical technology also now offers much more accurate information regarding an individual’s health and ability to meet the physical and mental rigours of employment.
For these reasons it will be very difficult for an employer to justify a mandatory retirement policy as a BFOR except in rare cases involving health and safety.
Hiring
Employers should expect the Ontario Human Rights Commission to have heightened sensitivity to issues of age discrimination.
Employers will need to take precautions during the hiring process so they can clearly demonstrate the age of the employee played no role in the decision to hire or not hire. For example, comments like “no career potential,” “set in his ways,” “better for a recent graduate,” “will retire soon,” and “too much experience,” can all be interpreted as euphemisms for “too old.”
Performance evaluations and individualized testing
Many employers are reluctant to give truthful or tough performance evaluations to older employees close to retirement because they do not wish to embarrass the loyal employee by highlighting problems. This is particularly the case when an age-related infirmity may be involved. This practice, however, may backfire once mandatory retirement is abolished.
It will therefore be critical to keep detailed and accurate performance records for all employees, documenting accomplishments and failures. Many employers may wish to explore the use of individualized testing, particularly where there may be health and safety concerns. These tests may include physical endurance or strength tests. The tests, however, have to be carefully designed. In many cases, an employee who fails a test may be a good worker. In Meiorin, a female forest firefighter failed the fitness test but was evaluated by her superior as a good worker. Employers will have to collaborate with medical professionals to design meaningful tests that accurately predict or closely proximate job performance.
A good evaluation system, the conclusions of which are communicated to employees on a regular basis, will be useful in the event the employer chooses to promote a younger employee or dismiss an older worker.
Termination
Under ss. 54, 57, 58 and 61 of the Employment Standards Act (ESA), any employee, regardless of age, is entitled to notice of termination. Employers will not be entitled to rely on mandatory retirement as an exemption to these notice provisions.
Given that the court recognizes older workers have tremendous difficulties in finding alternate employment, employers will be facing hefty severance packages. In Emery v. Royal Oak Mines Inc., a senior employee who had worked for a company for 30 years was entitled to 30 months’ notice.
Monies earned by the employee, and pension benefits received during the notice period, were not deducted from the damages for lost salary the employee obtained at trial. Payment of these expensive severance packages can only be controlled by a complete revision to employment contracts in order to limit exposure on any termination.
Accommodation
With greater numbers of employees working past the age of 65, the obligation of employers to accommodate developing physical ailments associated with aging will only increase. Employers should ensure that they have updated policies regarding requests for accommodation.
Scheduling
Despite the abolition of mandatory retirement, studies suggest older workers prefer reduced or flexible hours. According to a CBC news report, only six per cent of workers continue to work full time after the age of 65.
Creative employers will consider a wide variety of options such as flex-time arrangements to accommodate the needs of an aging workforce. Such flexibility also helps retain some of the best and brightest, regardless of age.
Pension plans
Currently there are no plans to amend the federal Income Tax Act (ITA) to compliment the changes stipulated in Bill 211. Section 35(4) of the Pension Benefits Act entitles plan members to continue participation in pension plans after the age of 65.
The ITA, however, requires individuals to draw on pensions, RRSPs and RRIFs starting from age 69 and prevents them from making further contributions.
In effect, an employee over the age of 69 could be earning a full salary and be forced to collect on his pension or RRSP.
The employee would not, however, have a right to make any further pension or RRSP contributions. Undoubtedly, pressure will be placed on the federal government to revamp its tax and pension legislation.
On a final note on this topic, some pension plans restrict the age at which an employee can join the pension plan. The abolition of mandatory retirement therefore will likely require further refinements to provincial pension legislation.
Benefits
Section 43 of the WSIA indicates that disability benefits cease after the employee reaches age 65 or, if injured, after age 63 for a two-year period. Bill 211 expressly preserves this legislated age discrimination.
It can be argued, however, that the status of private health, dental, long-term disability and life insurance has been muddied. Part 13 of the ESA prohibits age discrimination in benefit plans, unless permitted by the regulations. Regulation 286/01 defines age as being between 18 and 65. Some commentators argue this may justify age discrimination in the provision of benefits at age 65. Many private LTD and health plans end benefit payments at age 65.
The Human Rights Code and the charter take legal priority over the ESA and it is therefore an open question as to whether benefit discrimination based on age 65 or older could survive a legal challenge.
Given this uncertainty, and the fact prescription drug and out-of-country medical coverage is very expensive for individuals over the age of 65, it may be tempting for employers to simply refuse coverage to employees over the age of 65.
But this tactic is not recommended as it would undoubtedly expose the employer to an age-discrimination challenge under the code. Employers should discuss with their broker how to contain their benefit costs.
For more information see:
• British Columbia (Public Service Employee Relations Commission) v. B.C.G.S.E.U., 1999 CarswellBC 1907, 1999 CarswellBC 1908 S.C.C.)
• Emery v. Royal Oak Mines Inc., 1995 CarswellOnt 456, 11 C.C.E.L. (2d) 149 (Ont. Gen. Div.)
Neena Gupta is a partner in the Waterloo, Ont., office of Gowling Lafleur Henderson. She can be reached at (519) 575-7501 or [email protected]. Sean Sullivan is an associate in the Waterloo, Ont., office of Gowling Lafleur Henderson. He can be reached at (519) 575-7515 or [email protected].
