End of mandatory retirement shreds workplace fabric:
But, following last week’s announcement by the Ontario government, the employment contract is now burdened with it. Mandatory retirement at 65 years will soon come to an end, effective one year from the date the legislation receives Royal Assent, with Ontario joining the ranks of Quebec, Alberta, Manitoba and Prince Edward Island.
There is good reason that retirement at 65 has been integral to our workplace fabric. In addition to recognizing the reduced productivity of older employees, it allowed for regeneration of the workforce, creating room for younger employees without the burden of wrongful dismissal damages.
The Ontario government rationale, that we are living and remaining productive longer, is true but irrelevant. That rationale would justify increasing the age of retirement — not abolishing it entirely. By doing so, and making employment lifelong, the government fails to recognize that everyone’s capacity and productivity eventually wane. This abolition dramatically increases the cost of removing employees, converting “retirements” into wrongful dismissals that, because of the employees’ age and length of service, will be an extreme burden on corporate Canada. The other defence to mandatory retirement, that Canada anticipates a labour shortage, is similarly flimsy. Mandatory retirement does not force employers to terminate employment at age 65. It simply permits it.
The determination of when one is no longer productive will shift to the employer. Proving that will be inefficient and costly. The legislation contemplates the entitlement of older employees to their jobs as long as they remain minimally capable of performing them. Employees seldom share their employers’ evaluations of their substandard performance. Terminating employees for inadequate performance is already exceedingly difficult. It will be come almost impossible as the legislation gives the employee another defence — age discrimination — that could prevent the employer from dismissing older employees at all, however much severance it is prepared to pay. A successful complaint of age discrimination could result in reinstatement of the employee, or alternatively, the potential for years of severance!
Although employers can, in extremely limited circumstances, use age as a qualification for employment, such “legal” age discrimination is limited to those positions for which age is a bona fide occupational requirement, such as firefighters or police.
Mandatory retirement will be removed from collective agreements. Unionized labour, particularly those in blue-collar positions, for which skill and physical stamina are important, will now be able to keep their positions for virtually as long as they want. When an older unionized worker is terminated, the union can grieve. The employer’s defence will require establishing just cause for dismissal, which can be extremely difficult to establish. With the remedy of reinstatement, unionized employers will have little recourse but to either maintain an increasingly ineffective workforce or to incent employees to leave. The latter will not be affordable to some employers. If the dismissal is based on the employee’s age, it will be illegal from the outset.
This legislation flies in the face of the issues surrounding our ageing population and its increasing demands on the health care system. As employers cannot generally terminate disabled or ill employees, but must accommodate them, the employer’s costs for an elderly workforce will dramatically increase as aged, ill workers are placed in positions, other than their own, at tremendous cost to the employer. Accommodation will require that the employer modify positions, workstations and schedules, to the point of undue hardship. So too, as the level of disability increases in the workplace due to a larger number of older employees, the cost of disability insurance and benefits will escalate.
Given the consequences of maintaining and terminating older employees, this legislation will have the reverse effect of discouraging employers from hiring older employees whom they would have otherwise.
In preparation for the abolition of mandatory retirement, Ontario employers should do the following while they can:
1. Terminate unproductive employees who are over the age of 65 prior to the implementation of this legislation.
2. With new employees, enter into fixed-term employment contracts terminating on specific dates. Care must be taken to ensure that older employees are not singled out for such agreements since that would be in violation of the Human Rights Code.
3. In restructuring the workforce, ensure that all employees are equally considered and age is not a factor. Targeting older employees will result in their potential reinstatement and a higher level of damages from the court or human rights tribunal.
4. If you have concerns about an older employee’s performance, ensure that those concerns are well documented so the employee cannot legitimately assert that they were targeted based upon their age.
5. Review your disability benefits to ensure the potential expense involved in greater usage can be met. If self-insured, limit the recovery of short-term disability coverage.
6. Consider increased use of early retirement incentives, which when voluntarily accepted, will likely not be viewed as discriminatory.
If you, or someone you care about, is dealing with employment law issues in the Toronto, Ontario Region, contact Lang Michener LLP.