By Ralph N. Nero and Keri L. Bennett
Following the earlier lead of many Canadian provinces, the federal government has now outlawed mandatory retirement for federally regulated employers such as banks, telecommunications companies, airlines, and railways.
Like many provincial governments have done, the federal government has repealed provisions under the Canadian Human Rights Act that have permitted federally regulated employers to enforce mandatory retirement policies. This amendment is a somewhat delayed response that follows a countrywide trend to end mandatory retirement.
Federal legislative amendments
Bill C-13, Keeping Canada’s Economy and Jobs Growing Act, received Royal Assent on December 15, 2011. Part 12 of the bill repeals provisions under the Canadian Human Rights Act and the Canada Labour Code that allow for mandatory retirement. The amendments will come into force on December 15, 2012.
What next?
These amendments mean that federally regulated employers will no longer be able to manage their staff planning by relying on a predetermined point in time when employees will leave employment. Similarly, employers cannot “wait out” employees with performance problems.
In some circumstances, an employer may still be able to justify a mandatory retirement policy if it can establish a bona fide occupational requirement (BFOR) requiring an employee to retire at age 65 or earlier. This sort of exception, however, has traditionally been narrowly interpreted and is difficult to establish.
Take away for employers
Absent a mandatory retirement policy enacted pursuant to a BFOR, an employee older than 65 whose employment is terminated without just cause may have significant termination entitlements under statute or at common law. Similarly, the employee may also have human rights remedies if he or she can establish that the termination is related to age.
Rather than relying on a predetermined end date, employers must implement succession planning to ensure that institutional knowledge is passed to younger workers. Performance issues for older workers should not be ignored. Instead they should be documented and addressed.
These developments also increase the need for tightly worded employment agreements and offer letters that clearly address an employee’s termination entitlements. Policies and procedures for layoff or terminations in workforce reduction situations must be carefully established and implemented to avoid discrimination claims.
Employers in the federal sector will likely still be permitted to implement retirement programs based on age provided that these programs are not mandatory. Employers could still provide incentives to aging employees to leave the workplace as long as an employee’s decision to leave is voluntary.
Developing a comprehensive incentive plan that encourages early retirement or a reduced workload may be one way to ensure a steady rejuvenation of the workforce. It may also shield employers from costly wrongful dismissal or human rights claims. Canadian employers should examine their employment contracts, collective agreements, benefit plans, and retirement policies to ensure that they will be in compliance with this new legislation.