Ending mandatory retirement not a benefit worry, experts say

HR should be worried about staff in their 50s
By Shannon Klie
|Canadian HR Reporter|Last Updated: 10/25/2005

The inevitable end of mandatory retirement in Ontario has employers worrying about the potential for skyrocketing benefit costs for employees over the age of 65.

However, the effect of Bill 211, which will make it illegal to discriminate against an employee because he’s 65 or older, will probably be much smaller than initially reported.

“The fear factor was more heightened than was warranted,” said Toronto-based labour lawyer Donna Walwyn, who pointed to Quebec and the United States where mandatory retirement laws were repealed years ago.

“We haven’t really seen a huge change in people’s retirement practices,” said Walwyn. “Early retirement is still the goal for most people.”

The bill will remove the upper age limit of 65 from the definition of a worker in the Human Rights Code. However, it only changes the clause of the Employment Standards Act that allows employers to terminate employees at age 65 without notice of termination or pay in lieu. It doesn’t amend the clause that allows employers and insurance companies to terminate benefits after age 65.

But since the new bill makes it illegal for an employer to discriminate against an employee based on age, the question arises as to whether an employer risks an age discrimination lawsuit if it offers fewer benefits to an older employee.

“I doubt that would withstand a charter challenge,” said Barrie, Ont.,-based labour lawyer Barbara Humphrey. “How can we selectively say you can’t discriminate in terms of offering employment but you can discriminate in terms of the terms and conditions of that employment, a key condition being benefits?”

The likelihood of these kinds of challenges are slim, according to a senior consultant with Morneau Sobeco, a human resource consulting firm. Jamie Farrell said the end of mandatory retirement has been a non-issue in Quebec and, as far as he knows, there haven’t been any major claims brought against employers for discrimination as it relates to age and benefits.

Many older Canadians qualify for public benefits that take the place of private group benefits. In Ontario every person over 65 is eligible for the Ontario Drug Benefits program, which pays for prescription drugs.

As for long-term disability income protection, Farrell said that most people who reach 65 and then become disabled would most likely turn to the Canada Pension program rather than an employer’s insurance company because the employee isn’t likely to return to work.

“Employers are still doing a wait and see,” said Farrell. “They’re slowly seeking advice from consultants about what they should do.”

The potential of people over the age of 65 being in the workplace is actually a minor issue, according to Humphrey. Studies show that the number of people who will choose to work after the age of 65 is negligible.

“The bigger benefit cost issue arises from the rapidly changing demographics in our workplace. The average age in the workplace is now about 48. But the representation of people in their mid-50s and 60s is increasing. That’s where the cost is going to go,” said Humphrey. “Everyone’s overreacting to the end of mandatory retirement and they’re underestimating the impact of just having a lot more people in their 50s and early 60s in the workplace.”

This is the age group that is traditionally more expensive to insure because they tend to get sick or injured more often. The smart move will be to start pursuing different work arrangements that are more consistent with this group’s desires and physical and psychological capacities, said Humphrey.

To make the most of the changing workforce, companies have to develop more objective recruitment and performance management criteria that include older workers since it will be difficult to terminate older employees based on performance.

Managers will have a duty to accommodate based on age and will need to focus on retraining and professional development for older workers, no matter how long they may stay with the company.

While an employer can’t unilaterally provide an alternative benefit plan for employees who reach a certain age, they can provide the option if workers agree to the plan. Pursuing alternative work arrangements with older employees will actually work to the employer’s favour, said Humphrey.

Employers can offer older employees a work arrangement that takes their physical and psychological needs into account. This could include a reduced work week or work day, a better pension program, a reduced benefits package or increased employee contribution. Employers can also set a limit to the work arrangement where the employee agrees to retire after so many years.

“This is a way to transition people to retirement,” said Humphrey. “Employers need to think beyond just the end of mandatory retirement and think more broadly and look at the demographics of the workplace that we will have in the next decade and beyond.”

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