Mandatory retirement banned in Ontario (Legal view)

What employers with workers in Ontario need to know about the changes

Mandatory retirement is now illegal in Ontario. On Dec. 12, Bill 211, the Ending Mandatory Retirement Statute Law Amendment Act, 2005, came into force, effectively putting an end to the practice of requiring employees to retire at age 65.

Ontario’s Human Rights Code previously permitted age-based discrimination in employment with respect to employees who are younger than 18 or older than 65. Bill 211, which was introduced in the summer of 2005, was proposed to end the practice of mandatory retirement in Ontario “while not undermining existing pension, benefit and early retirement rights.”

Bill 211 amended the definition of “age” for the purposes of age discrimination by removing the upper limit of age 65 in the code; however, it did not remove this upper age limit with respect to benefit and pension plans under the Employment Standards Act, 2000 (ESA) and regulations.

The code now protects employees who are 65 or older from being forced to retire, unless an employer can justify the decision to require an employee to retire at a certain age based upon a bona fide occupational requirement (BFOR) of the employee’s job.

Therefore, individual employment contracts, collective agreements and corporate policies with mandatory requirement provisions are no longer enforceable as of Dec. 12 unless such an age-based requirement is necessary for employees to meet the bona fide requirements of their job and the accommodation of employees over 65 would cause the employer undue hardship.

While employers cannot force employees to retire at 65, an employer’s pension and benefits plans may still contain certain age-based restrictions for employees 65 and older.

So what do employers with workers in Ontario need to keep in mind?

Termination of employment

Prior to the passage of Bill 211, under the ESA, an employee whose employment was terminated at 65 as a result of a mandatory retirement policy or practice was not entitled to notice of termination or termination pay. Now, however, all eligible employees, regardless of age, will be entitled to receive notice of termination or pay in lieu of notice if their employment is terminated without cause.

Further, certain employees over 65 may also be entitled to severance packages in excess of ESA requirements where so required either by the common law or an employment contract.

In a unionized workplace, where existing collective agreements contain mandatory retirement provisions, such provisions will no longer be enforceable.

Employment benefits

The amendments in Bill 211 were intended not to impact on employers’ benefit plans. Employers are not required to extend benefits coverage, including life insurance, disability benefits, health and dental benefits plans to employees 65 or older.

However, an employer may still opt to continue such benefits coverage for workers 65 and older should its insurance carrier offer such an option, although they are not required to do so.

The ESA and regulations already prohibit employers from discriminating on the basis of age in providing benefits to employees aged 18 to 64, with certain exceptions. This remains unchanged by Bill 211, so employers are still prohibited from age-based discrimination in the provision of benefits plans for employees aged 18 to 64 only.

Pension benefits

The amendments in Bill 211 do not significantly impact employers’ pension plans. Bill 211 did not amend the Pension Benefits Act, which provides that employees over 65 may continue membership in pension plans and accrue pension benefits subject to service or contribution caps of the pension plan. The Income Tax Act, however, does not permit an employee to defer her retirement income attributable to pension plans beyond age 69.

Therefore, although pensions can be postponed beyond age 65 for those who do not retire, they must be paid out at 69 and those who continue to be employed past age 69 would collect both a salary and a pension at the same time.

Workers’ compensation

The age-based provisions in the Workplace Safety and Insurance Act and its regulations and policies will continue to apply. Employees who are 63 or younger at the time of their injury would still be entitled to loss of earnings (LOE) benefits until age 65. Employees 63 or older at the time of injury will also continue to be eligible to receive LOE benefits for a maximum of two years. The issue of coverage for workers beyond these limits is a practical issue which Bill 211 simply did not address.

What employers should do

To ensure compliance with the new law, employers must, at a minimum, discontinue mandatory retirement practices and policies. Employers should also review existing pension and benefits plans to determine what options they have in continuing coverage for employees who may now decide not to retire at age 65, as previously planned.

Employers are no longer able to rely on mandatory retirement policies to gracefully avoid having to address age-related productivity issues, illnesses and disabilities. Human resources advisors are now left to resolve these challenging issues in ways that are respectful of employees’ legal rights and effective from a business perspective.

Joe Morrison is an associate specializing in management-side labour and employment law with Goodmans LLP in Toronto. He can be reached at (416) 597-4203, [email protected] or visit www.goodmans.ca.

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