The Impact of Employee Retirement and Severance Packages in Ontario

Human Rights Consideration

As the “Baby-Boomer Generation” gets older over the next few years (those born between 1946 and 1964), there will be an increasing number of employees nearing retirement as they approach the of age 65. According to Statistics Canada, the average retirement age in Canada has increased over the last five years from 64 to 65 – compared with age 62 in the early-1990’s. In fact, each week in Canada approximately 5,000 employees retire – which adds up to more than 260,000 retirements every year.

But are employees in Ontario required to retire once they turn 65?

No – in Ontario, employees are not required to retire at age 65, nor can they be forced to do so by an employer (but there are some exceptions – see below). This is because under the Ontario Human Rights Code, employers cannot “discriminate” against employees simply because of their age:

Employment

5 (1) Every person has a right to equal treatment with respect to employment without discrimination because of race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, gender identity, gender expression, age, record of offences, marital status, family status or disability.

This means that employees must be treated fairly and equally regardless of their age. Put somewhat differently, employers cannot make decisions about recruitment, hiring, promoting, training or terminating an employee’s job on the basis of their age. For example, an employer cannot single out and fire an employee simply because they are older than all the other employees in the workplace. But what if they do?

In that case, the employer’s decision to treat an employee differently and unfairly compared with their co-workers by firing them, simply because of their older age, would likely constitute illegal discrimination. As a result, the employee may have a claim against the employer under the Human Rights Code, and if they are successful, the employee may be awarded:

financial remedies – “damages” for injury to their dignity, feelings and self-respect as a result of the discrimination
non-financial remedies – e.g., reinstatement to a job they were improperly fired from, or a promotion that was denied
public interest remedies – e.g., change in employer’s workplace policies,

Some examples of where age plays a discriminatory factor in an employee’s wrongful dismissal include:

an employee is terminated from their job soon after they turn age 60
an employer has recently fired several employees, all of whom are older seniors and has demonstrated a preference to hire (or only keep) younger employees
an employee is fired after refusing an employer’s pressure to “consider” going into retirement

There is no specific dollar amount in terms of what financial compensation a court (or tribunal) will award an employee who proves their employer discriminated against them because of their age. In fact, any remedy that is awarded is based on the court (or tribunal’s) assessment of the nature and extent of the discrimination the employee experienced, how much impact the discrimination had on the employee and how unfairly they were treated. In making its decision, it will compare the facts of each case with other similar cases to determine what remedies were awarded in similar circumstances.

While “mandatory retirement” at age 65 is no longer permitted under the Human Rights Code in most workplaces, there are some limited exceptions where age-based discrimination may be permitted. Typically, these are jobs where employers can justify that requiring employees be younger than age 65 is a legitimate (“bona fide“) requirement of the job (e.g., due to a job’s health and safety risks).

For instance, in one case, the court upheld a municipal policy requiring police officers to retire at age 60, citing evidence that proved cardiovascular and physical fitness – both legitimate functions of a police officer’s job – decline the older a person becomes. However, quite often employers have not been able to justify age-based policies. For instance, in one case, an employer’s decision requiring a bank receptionist to retire once she turned 65 was not a legitimate job requirement, while in another case an employer was unable to justify its policy refusing to hire bus drivers over age 35. In such situations where an employer cannot justify age-based distinctions in decisions/policies, the court (or tribunal) will conclude there was discrimination and award remedies in favour of the employee.

(The general information above involving the Ontario Human Rights Code relates to employees working for employers who are governed by provincial legislation. For employees who work for employers regulated by federal law (e.g., banks, airlines, railways or telecommunications companies), the equivalent federal human rights legislation is the Canadian Human Rights Act.)

Severance Packages

When an employee’s job is terminated “without cause” (i.e., no specific reason), they must be provided with prior notice of the last day of work, or a fair and appropriate severance package. How much prior notice or severance pay the employee must receive depends on whether they signed an employment contract or, if not, their entitlement under “common law” reasonable notice of termination, which will vary depending on many factors, such as:

employee’s age
position
years of service/seniority
availability of similar employment

As discussed previously, an employee’s age is one of the most important factors a court will consider when determining the value of an employee’s severance package in a wrongful dismissal claim. Why? Because it is commonly understood that the older an employee, the more difficult it generally becomes to find new employment (regardless of their skills and experience).

More importantly, the general purpose of a severance package is to provide a dismissed employee with assistance to “cushion” the financial impact of losing their job while they look for re-employment. Therefore, if the employer/employee have not otherwise negotiated in an enforceable employment contract exactly how much financial assistance (severance pay) the employee will receive if their job is terminated, the court will determine the financial severance package based on the above factors.

Can an employer limit an employee’s severance package in the event of termination of employment? Yes, and this is generally achieved by negotiating the employee’s severance compensation upon termination in a valid and enforceable termination clause in the employment contract (as long as it meets the base minimum standards until Ontario’s Employment Standards Act, 2000).

If there is no employment contract, what is the impact of an employee’s decision to announce plans to retire on their right to receive a severance package? This question was answered in a recent case, where the court ruled that if an employee has an intention to retire early, it will be a factor that may reduce the amount of damages for wrongful dismissal (severance package) he/she should receive upon termination. Why? Because if an employee enters retirement, it means they are no longer in the job market, which defeats the purpose of a severance package – providing a temporary financial “bridge” while they look for new employment. As the court noted:

“If the dismissed employee has no intention to look for work, but has instead decided to retire, the very purpose for which reasonable notice is required to be given is absent. That is a factor that may well be relevant in assessing what constitutes reasonable notice in this case.“

Contact

Whether you are an employee or an employer going through a termination of employment involving a severance package, it is prudent to speak with our employment lawyer to determine your legal rights and options.

It is important for both employers and employees to negotiate the terms of a termination of employment and severance package with the assistance of an employment lawyer, and to comply with negotiated terms of settlement. If you would like legal advice on your own situation as an employee (or an employer), please contact (647) 822-5492, or book a consultation today.

Disclaimer: The content on this website and blog is not legal advice or legal opinion of any kind. It is intended for general information and educational information purposes only. It is in no way particular to your individual case and should not be relied upon in any way. The outcome of a legal matter depends on its unique circumstances, and prior successes are not indicative of future results. No portion or use of this website or blog will establish a lawyer-client relationship with the author, this law firm or any related party. Should you require legal advice for your particular situation, please fill out the form below, or call 647-822-5492, to request an initial consultation.