Retirement agreements: The next frontier in employment contracts?

Without mandatory retirement, employers will be looking for ways to bring certainty to planning of staff levels
By Nicole Byres
|Canadian Employment Law Today

With the elimination of mandatory retirement in most provinces, employers cannot require nor compel employees to retire at 65 or any other age. Consequently, employers will be looking for ways to bring some certainty to human resource planning. Retirement agreements, if drafted carefully, can be a tool which helps achieve that objective.

Employers who previously relied on retirement at 65 to manage and predict employee turnover will be looking for new ways to do it without breaching human rights laws. However, conflicting objectives could present a problem. Some older employees might have valuable skills and experience, while it would be preferable for others to retire because of operational needs or poor performance. With the conflict between an employee’s right to choose her retirement date and the employer’s need for certainty, retirement agreements might be able to bridge the gap.

Employment contracts are usually a good way to ensure clarity on important terms of the employment relationship and the limits of an employer’s liability for notice or pay in lieu of notice for termination without cause. Provided they are truly voluntary, retirement agreements can confirm a fixed date an employee will retire and any changes in employment terms and conditions leading up to it.