Older employees deserve more

Ontario case serves as reminder of need for proper severance
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 11/28/2016

Employers beware: Older employees can have a tough time finding re-employment so it doesn’t pay to be tight-fisted with severance. That was the message recently when the Ontario Superior Court of Justice ruled a long-term employee was owed her base salary plus benefits and RRSP contributions for the notice period of 24 months.

The case concerned Stephanie Ozorio, a 60-year-old woman who worked for 30 years at the Canadian Hearing Society (CHS), most recently as regional director for the Toronto region. She was dismissed without cause in 2015 as part of a restructuring process.

Ozorio was offered $93,000 — less than her annual salary of $97,309 — so she declined the offer, seeing it as unfair.

The CHS then offered 12 months’ pay and limited contribution of benefits for two months. In lieu of acceptance, the organization chose to pay Ozorio her regular salary for the minimal 34-week period for statutory notice and severance pay compliance under the Employment Standards Act.

Ozorio started an action for wrongful dismissal, believing the reasonable notice period should be 24 months — and, ultimately, the judge agreed.

‘Age an impediment’

In looking at the judge’s comments, a big factor in the decision was Ozorio’s age. Quoting the 2015 case of Drysdale v. Panasonic Canada Inc., judge Brian O’Marra said, “Generally, a longer notice period will be justified for older long-term employees who may be in a competitive disadvantage securing new employment because of their age.”

Ozorio had also applied for a variety of positions since her dismissal, without gaining an interview. And while she possessed certain skills, “having served one employer for such a lengthy period of time, a potential new employer may view that individual as rather set in his ways and not adaptable to change,” said O’Marra, citing Drysdale.

Further, “age is an impediment,” said O’Marra, citing the 2015 case of Leeming v. IBM Canada Ltd. in which that judge noted the 60-year-old plaintiff did not have particularly bright prospects for re-employment “competing with younger, more recently trained and less likely expensive talent.”

Given the age of Ozorio, the length of her employment, her seniority, the limited availability of similar employment, her training and qualifications, “she is entitled to 24 months’ payment of salary benefits in lieu of notice less compensation and benefits received under the ESA,” said O’Marra.

‘Part of trend’

The comments about older workers were noteworthy and part of a trend, said Douglas MacLeod, principal at MacLeod Law Firm in Toronto.

“It basically goes to the job prospect of re-employment for people who are older workers… people of this age find it extremely stiff competition with much younger applicants for the same kind of jobs.”

A couple of trends are going to make this a bigger issue, such as the end of mandatory retirement, said MacLeod.

“In the past, employers may be inclined to start turning a blind eye to deteriorating performance knowing that the person’s going to be gone at 65. So now with the prospect of people staying into their 70s, maybe even 80s, different considerations come to bear on performance.”

The other factor is pensions, which are not as big a part of compensation as in the past, he said .

“You don’t see defined benefit pension plans very much anymore... so people do not have great indexed pensions and some people have still been hammered by the 2008 market meltdown, and so they need to work longer, and so they don’t voluntarily resign or retire anymore.”

And a lot of people did not sign employment contracts, he said.

“Thirty years ago, people weren’t signing employment contracts with a termination clause that limited rights to employment standard minimums…. so this is a big financial issue terminating a long-term employee in their 60s.”

In looking at the notice period, the number of Bardal factors (used when calculating a dismissed employee’s reasonable notice period) have no limit, said said Paul Willetts, a partner at Vey Willetts in Ottawa.

“The main ones that we look at, however, are the person’s age, the length of service, the type of job they had, and how hard or how difficult it would be for them to find comparable employment.”

Notwithstanding the fact that employers cannot discriminate against employees either in the hiring or the firing process on the basis of their age, the courts do recognize age is a factor in the notice periods awarded, said Barry Kwasniewsky, a partner at law firm Carters in Ottawa.

The judge also mentioned Ozorio had a young son with health issues and an elderly parent who required care, he said, “so that might have factored into the court’s notice period decision because if new employers became aware of these obligations, which might affect her ability to be at work at certain times, or affect her working schedule… That might put her at a competitive disadvantage with younger employees who don’t have those familial obligations.”

Tips for employers

Employers should have a written employment agreement with a binding termination clause so there’s clarity and certainty for both parties, said Willetts.

“If you’re in a situation where the person doesn’t have a written employment contract and will be entitled to common law reasonable notice, it’s probably worthwhile knowing upfront as an employer that that individual may potentially have a greater claim to notice, they may be
entitled to a longer notice period than a younger individual in the same position.”

“Age as an impediment” should definitely be considered by employers when it comes to reasonable notice, said Kwasniewsky.

“Employers are going to have to consider that a common law entitlement to compensation in lieu of notice is likely to be higher for an older employee versus a younger employee.”

It’s about making a fair and reasonable offer, to start, he said.

“They might think they’re providing that to the employee, but when it’s viewed objectively by a third party like a judge, they might not have the same opinion. So if employers are in doubt as to whether their offer falls within the ballpark of being fair, they should get professional advice on it before they pull the trigger and do the termination.”

The hearing society also didn’t offer Ozorio career counselling or a reference letter, which employers should consider, said Willetts.

“It just helps the employer look reasonable, look like they’ve acted in good faith, and if there is a dispute at a later point about whether an individual made reasonable efforts to try to mitigate loss of their employment, it allows (the employer) to take a stronger position on that by having made efforts to assist the person.”

And while there was no human rights plea in this case around age discrimination, if an employer is letting older workers go, it wants to make sure it’s purely a business decision and in no way tainted by the fact of their age, he said.

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