Proposed Ontario law could impact reasonable notice, benefits
Mandatory retirement is coming to an end in Ontario. Bill 211, which is almost guaranteed to be enacted in the not-too-distant future, will strip an employer’s ability to force workers out the door at the age of 65.
This has a number of important ramifications for the payroll department and human resources as a whole.
Organizations will have to take a close look at pension and benefit plans. Employees will almost certainly want to continue membership in pension plans and continue to accrue benefits past the age of 65. Many benefit plans typically have an age cap of 65.
For example, long-term disability plans are typically payable for either the duration of the disability or until the employee reaches the age of 65. Life insurance plans naturally increase in cost as the employee ages. Therefore, some employers terminate life insurance coverage at age 65 or provide coverage at a lower level.
If such practices continue, however, the employer may be faced with an argument that the employee is being discriminated against because he is not being provided with suitable coverage.
It will be difficult, if not impossible, for the employer to deny the employee is being adversely affected due to the lower benefits. Accordingly, the employer would have to prove that it would suffer undue hardship in the event it faced such a challenge.
Organizations will have to re-examine the effects such amendments will have on insurance plans, both with respect to long-term disability and life insurance.
Pension plans will also have to be reviewed to establish whether or not there are any references within the plan to indicate where payments are stopped due to an age requirement. If the effect is that a worker is penalized for being over 65, the employer could be slapped with an age discrimination suit.
It seems obvious that eventually both Ontario and federal legislation will have to be reviewed to ensure compliance. The way Bill 211 is currently set up, it should not affect eligibility for the employee to receive Canada Pension Plan (CPP) at age 65, nor should it affect access to CPP since it is administered by the federal government.
Additionally, Ontario’s Employment Standards Act, 2000, currently provides that an individual whose employment is terminated at 65 due to a mandatory retirement policy or practice is not entitled to notice of termination or pay in lieu thereof. But with the elimination of mandatory retirement, any eligible employee regardless of age will be entitled to receive notice of termination or pay in lieu of notice when employment is over.
Not only will this mean employers will not be able to rely on mandatory retirement policies as a cost-effective way of terminating older employees, but they will have to re-examine what kind of notice periods can be provided to employees and whether or not to provide working notice as opposed to compensation in lieu thereof.
This will likely have an impact on the traditional analysis of reasonable notice under common law. As age and availability of similar employment are two of the four factors considered by the courts in determining reasonable notice, the question remains as to whether the courts will be extending the notice periods for employees who have worked for a company for more than 30 years and are over the age of 65.
Employers could still justify age discrimination
If Bill 211 is passed, the only way an employer would be able to justify age discrimination would be to demonstrate that it is a legitimate occupational requirement.
To establish this, an employer must meet a three-part test that was established by the Supreme Court of Canada in British Columbia (Public Service Employee Relations Commission) v. B.C.G.S.E.U., more commonly referred to as the Meorin decision:
•Was the policy which imposes an age limitation adopted to address a purpose rationally connected with the job function?
•Was the policy adopted in good faith with the need that it was to accomplish the stated purpose?
•Was there any other means by which the purpose could have been accomplished and the employee accommodated without undue hardship?
If the employer is able to satisfy this three-pronged test, it may be able to justify the discriminatory policy or procedure. For example, if a police board terminates an older police officer for not being fit for work, and can establish that a police officer is required to be physically fit for the job, it will likely succeed in establishing that it is a bona fide occupational requirement.
But, more likely than not, Ontario employers will find themselves faced with situations where their current policies and procedures are no longer consistent with the new law. That means organizations need to step back and assess processes and procedures and determine whether there could be potential issues. Payroll will inevitably have to work with HR to ensure the administrative aspects of the business are also in compliance with the new law.
Natalie MacDonald is an associate with Grosman, Grosman & Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected].
This has a number of important ramifications for the payroll department and human resources as a whole.
Organizations will have to take a close look at pension and benefit plans. Employees will almost certainly want to continue membership in pension plans and continue to accrue benefits past the age of 65. Many benefit plans typically have an age cap of 65.
For example, long-term disability plans are typically payable for either the duration of the disability or until the employee reaches the age of 65. Life insurance plans naturally increase in cost as the employee ages. Therefore, some employers terminate life insurance coverage at age 65 or provide coverage at a lower level.
If such practices continue, however, the employer may be faced with an argument that the employee is being discriminated against because he is not being provided with suitable coverage.
It will be difficult, if not impossible, for the employer to deny the employee is being adversely affected due to the lower benefits. Accordingly, the employer would have to prove that it would suffer undue hardship in the event it faced such a challenge.
Organizations will have to re-examine the effects such amendments will have on insurance plans, both with respect to long-term disability and life insurance.
Pension plans will also have to be reviewed to establish whether or not there are any references within the plan to indicate where payments are stopped due to an age requirement. If the effect is that a worker is penalized for being over 65, the employer could be slapped with an age discrimination suit.
It seems obvious that eventually both Ontario and federal legislation will have to be reviewed to ensure compliance. The way Bill 211 is currently set up, it should not affect eligibility for the employee to receive Canada Pension Plan (CPP) at age 65, nor should it affect access to CPP since it is administered by the federal government.
Additionally, Ontario’s Employment Standards Act, 2000, currently provides that an individual whose employment is terminated at 65 due to a mandatory retirement policy or practice is not entitled to notice of termination or pay in lieu thereof. But with the elimination of mandatory retirement, any eligible employee regardless of age will be entitled to receive notice of termination or pay in lieu of notice when employment is over.
Not only will this mean employers will not be able to rely on mandatory retirement policies as a cost-effective way of terminating older employees, but they will have to re-examine what kind of notice periods can be provided to employees and whether or not to provide working notice as opposed to compensation in lieu thereof.
This will likely have an impact on the traditional analysis of reasonable notice under common law. As age and availability of similar employment are two of the four factors considered by the courts in determining reasonable notice, the question remains as to whether the courts will be extending the notice periods for employees who have worked for a company for more than 30 years and are over the age of 65.
Employers could still justify age discrimination
If Bill 211 is passed, the only way an employer would be able to justify age discrimination would be to demonstrate that it is a legitimate occupational requirement.
To establish this, an employer must meet a three-part test that was established by the Supreme Court of Canada in British Columbia (Public Service Employee Relations Commission) v. B.C.G.S.E.U., more commonly referred to as the Meorin decision:
•Was the policy which imposes an age limitation adopted to address a purpose rationally connected with the job function?
•Was the policy adopted in good faith with the need that it was to accomplish the stated purpose?
•Was there any other means by which the purpose could have been accomplished and the employee accommodated without undue hardship?
If the employer is able to satisfy this three-pronged test, it may be able to justify the discriminatory policy or procedure. For example, if a police board terminates an older police officer for not being fit for work, and can establish that a police officer is required to be physically fit for the job, it will likely succeed in establishing that it is a bona fide occupational requirement.
But, more likely than not, Ontario employers will find themselves faced with situations where their current policies and procedures are no longer consistent with the new law. That means organizations need to step back and assess processes and procedures and determine whether there could be potential issues. Payroll will inevitably have to work with HR to ensure the administrative aspects of the business are also in compliance with the new law.
Natalie MacDonald is an associate with Grosman, Grosman & Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected].
