The Ending Mandatory Retirement Statute Law Amendment Act, 2005 (the Act) comes into effect on December 12, 2006. Subject to some limited exceptions, as of December 12, 2006, provincially regulated employers in Ontario will not be able to use mandatory retirement policies to terminate the employment of older workers.
Currently, the Ontario Human Rights Code (the 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 will be removed. Accordingly, subject to limited circumstances where age is a bona fide occupational qualification, employers in Ontario can no longer have policies requiring employees to retire upon reaching 65 years of age after December 12, 2006.
The Act amends the Code to state that it is no discrimination with respect to employment because of age if an employee benefit, pension or group insurance plan complies with the Employment Standards Act, 2000 (ESA 2000). The Benefit Plans Regulation to the ESA 2000 continues to define age as "18 years or more and less than 65 years" and permits differentiation in the provision of pension, life insurance and disability benefits plans if the differentiation is made on an actuarial basis because of an employee's age.
The government has stated that the Act should maintain the status quo with respect to disability, life insurance, and health plans (that is, the continuation of these benefits to employees 65 years or older will continue to be at the employer's discretion). However, despite what the government has stated, the Employment Services Practice Group at Bennett Jones believes there is a gap in the Act with respect to health benefit plans. The Benefit Plans Regulation to the ESA 2000 does not include a right to differentiate in the provision of health care benefits on the basis of an employee's age. Accordingly, we recommend that employers continue to provide employees age 65 or over with benefits such as extended medical benefits (but not necessarily prescription drug coverage), dental and vision coverage where such benefits are provided generally to employees. Since employees age 65 and over are eligible for prescription drug coverage under the government-funded Ontario Drug Benefit Plan, employers should check with their insurers to ensure that the Ontario Drug Benefit Plan is the "first payer" in respect of prescription drug costs.
The Act 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 Act 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. However, under the Income Tax Act, employees age 69 and older are not able to accrue further pension benefits.
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 Act 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.
In late October 2006, the Termination and Severance Regulation to the ESA 2000 was amended. The amendment is a relatively narrow exception to the payment of statutory termination pay. In particular, if an employee is working in a workplace where there is a bona fide occupational requirement that permits the employer to use a mandatory retirement practice (for example, a firefighter), such employee will not be entitled to termination pay under the ESA 2000 if the employee retires in accordance with the retirement practice. The important point for the majority of employers is that in all other circumstances, an employee who is 65 years or older and whose employment is terminated will likely be entitled to statutory notice of termination or pay in lieu of notice (both under the ESA 2000 and at common law).
No amendments were made to the portion of the Termination and Severance Regulation dealing with exceptions to the payment of severance pay. If an employee's employment is terminated and the employee retires and receives an actuarially unreduced pension benefit, such employee is not entitled to severance pay under the ESA 2000. However, if an employee who is 65 or older has his or her employment severed and the employee does not immediately retire, the employee is entitled to severance pay. In an involuntary severance situation (for example, the employee does not resign or voluntary decide to retire and commence pension benefits) the employer should anticipate having to pay statutory severance pay, regardless of whether the employee is eligible to receive an actuarially unreduced pension. From a practical point of view, an employee who is eligible for an actuarially unreduced pension and has his or her employment severed may not want to immediately commence his or her pension benefits. In that situation, the employee could say that he or she is not retiring, receive his or her statutory severance pay and then retire immediately after receiving his or her statutory severance pay.
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. As a result of the Act, it is more important than ever to establish practices for managing older employees, including:
There are at least two significant consequences of not establishing proper practices for managing older employees. First, there will likely be increased termination costs (age is a factor in assessing reasonable notice at common law). Second, there will be an increased risk that a dismissed employee successfully alleges that his or her employment was terminated as a result of age discrimination.
If you have not done so yet, you will need to review your company's collective agreements, employment contracts and employee handbooks and policies in the next month to identify and revise provisions that require mandatory retirement. Such provision will be unlawful and unenforceable as of December 12, 2006.
Bans on mandatory retirement have already been implemented in several other provinces, including Alberta, Manitoba and Quebec. Anecdotal evidence suggests that most employees continue to retire near age 65. However, employers in Ontario need to remember that as of December 12, 2006, the choice of whether to retire or not will belong to the employee alone. If you have any questions about the Act or how it will affect your workplace in Ontario, please contact one of the lawyers in Bennett Jones' employment services practice group.