Bill Ending Mandatory Retirement in Ontario Passes Third Reading

Written By Carl Cunningham

On December 8, 2005, Bill 211, the Ending Mandatory Retirement Statute Law Amendment Act, 2005 (the "Bill") passed its third reading in the Legislative Assembly of Ontario. Subject to some limited exceptions, as of December 12, 2006, provincially regulated employers in Ontario will no longer be able to use mandatory retirement policies to terminate the employment of older workers. There is a one year transition period before the bill comes into effect on December 12, 2006.

What You Need to Know About the Bill

New definition of "age" under the Ontario Human Rights Code

The Ontario Human Rights Code defines "age" for the purposes of employment to be "eighteen years or more and less than sixty-five years". The cap at 65 years in the definition of "age" permits employers in Ontario to implement policies requiring employees to retire upon reaching 65 years of age. The Bill removes the upper cap on the definition of "age". This change means employers in Ontario will need to cease using mandatory retirement policies as of December 12, 2006.

Distinction on Age Still Permitted in Benefit Plans

The Benefit Regulations to the Ontario Employment Standards Act, 2000 (ESA 2000) define age as "18 years or more and less than 65 years". This definition remains unchanged. However, the Bill does amend the Ontario Human Rights Code to state that it is not discrimination with respect to employment because of age if an employee benefit, pension or group insurance plan complies with the ESA 2000. The government has stated that the purpose of this amendment is to maintain the status quo with respect to disability plans, life insurance plans, and health benefit plans (i.e. the continuation of these benefits to employees 65 years or older will continue to be at the employer's discretion).

Pension Benefits

The Bill does not amend the Pension Benefits Act and should have little, if any, effect on pension benefits. Pension benefits may already accrue past the "normal retirement age" (when the employee is legally entitled to an actuarially unreduced pension) under the pension plan, which is normally age 65. The effect of the Bill is that it is now more likely that employers will have more employees/pension plan members working past the "normal retirement age" under the pension plan.

No Changes to Workers' Compensation

The workers' compensation scheme under the Ontario Workplace Safety & Insurance Act (WSIA) provides for the cessation of benefits upon an employee turning 65 years of age. The Bill amends the WSIA to include a specific provision stating that such a distinction because of age is permissible despite the provisions of the Ontario Human Rights Code.

Transition Period

There is a one-year transition period between the Bill receiving Royal Assent and the Bill becoming law. This transition period provides employers with a reasonable opportunity to review their existing employment policies, benefit plans and develop strategies for dealing with the end of mandatory retirement.

Issues to Consider During the Transition Period

No Retroactivity

Some media reports have incorrectly stated that mandatory retirement is now unlawful in Ontario. Mandatory retirement policies continue to be lawful during the transition period and employers can continue to apply their existing mandatory retirement policies during the transition period. An employee who turns 65 between now and December 12, 2006 can be required to retire in accordance with the terms of an existing policy.

Potential Exception to the Ban

The Ontario Human Rights Code will continue to permit mandatory retirement based on age if there is a bona fide occupational requirement that justifies the distinction based on age. The most common example is fire departments that have policies requiring firefighters to retire earlier than age 65. Generally speaking, however, it is difficult to prove there is a bona fide occupational requirement and the nature of most employers' businesses will not allow them to fit within this exception.

Establish Practices for Managing Older Employees

There is sometimes a tendency to avoid difficult discussions with under-achieving older employees because it is assumed that the issue will be resolved when the employee turns 65 years of age and retires. That assumption is no longer true and employers need to actively manage the performance of older employees. In addition, employers might consider establishing or expanding the number of voluntary flex or part-time roles for employees who want to continue to work past age 65, but who want to do so in a reduced role.

Increased Termination Costs

Once the Bill becomes law, an employee whose employment is terminated at age 65 or older will be entitled, as may be applicable at common law, under the collective agreement or contract, to notice of termination or pay-in-lieu of notice and statutory severance pay. Given that older employees are traditionally awarded longer notice periods, employers should understand that there may be a significant cost associated with terminating the employment of an employee 65 years of age or older. Since the Bill does not affect the ability of employers and employees to enter into voluntary separation programs, employers should evaluate whether such a program is appropriate for their workplace.

Review Existing Benefit Plans

The government has stated that the provision of disability plans, life insurance plans, and heath benefit plans to employees 65 years or older will continue to be at the employer's discretion. However, for such a differentiation to be permissible, it must comply with the ESA 2000 Benefit Regulations (i.e., the differentiation in the provision of benefits based on age is made on an "actuarial basis"). Employers should check with their insurers and/or legal counsel to confirm whether any revisions are needed to the employer's benefit plans. Employers will also likely want to check with their insurers to determine the costs of continuing such benefits beyond age 65.

Review Employment Contracts and Policies

In addition, to reviewing their benefit plans, we suggest that employers review their collective agreements, employment contracts and employee handbooks/policies for provisions that require mandatory retirement which will need to be amended by the time the Bill becomes law. The effect of failing to make such amendments will be that such provisions will be unlawful and unenforceable.

Conclusion

Bans on mandatory retirement have already been implemented in several other Provinces, including Alberta, Manitoba and Quebec. No significant issues appear to have arisen in those jurisdictions. This is likely in part as result of the fact that most employees continue to retire near age 65. If you have any questions about the Bill or how it will affect your workplace in Ontario, please contact one of the lawyers in our Employment Services Practice Group.