Retirement plans may impact notice entitlements

Employee planning on retiring may not be looking to mitigate damages from dismissal by looking for work

An Ontario court has determined that an employee who is considering retirement may not be entitled to as much notice of dismissal as an employee who will look for other work.

As is commonly known, an employee that is terminated without cause is entitled to notice of termination or pay in lieu of such notice. As summarized in the Ontario decision of McKay v. Camco, Inc., the purpose of notice “is to give the dismissed employee an opportunity to find other employment.” However, what happens to an employee’s entitlement to notice in the event the employee plans to retire and therefore does not intend to obtain new employment? This question was considered in the recent Ontario Superior Court of Justice decision of Kimball v. Windsor Raceway Inc.

In February of 2007, the employer inquired whether the employee had any plans with respect to retiring. The employee sent an email to the employer in response stating, “I am anticipating continuing to work for a year after I reach my 65th birthday in Dec. of 2007. I trust that this is what you need to work on your future projections.” Despite this response, the employee did not retire at this anticipated time and continued working.

On July 29, 2010, the employer again inquired whether the employee had any plans to retire, to which the employee responded by indicating that he would like to retire at the end of 2012. However, on July 9, 2012, prior to the employee’s anticipated retirement date, the employer notified the employee that as a result of economic circumstances he was being placed on an indefinite layoff effective Aug. 31, 2012. Thereafter, the employer provided the employee with a portion of his statutory notice entitlements demonstrating that the employee had been terminated. As a result, the employee initiated legal proceedings against the employer seeking 24 months notice and brought a motion for summary judgment seeking an expedited determination of this issue.

Despite granting the employee partial summary judgment with respect to the balance of his statutory notice entitlements, the court dismissed the rest of the employee’s motion — the issue of whether the employee was entitled to 24 months notice — on the grounds that a trial was required to decide this issue. One of the reasons why the court reached this decision was the the employee’s intention to retire.

“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,” said the court. “That is a factor that may well be relevant in assessing what constitutes reasonable notice in this case.”

Lesson for employees

The above decision, as well as the trial decision to be decided in the future, will likely be of great importance for retirement-age employees. Given an employer’s need to receive a reasonable amount of advance notice of an employee’s anticipated retirement date so plans can be made to replace the retiring employee, Kimball suggests that such advance notice can expose the employee to a reduction in her notice entitlement in the event her employer terminates her employment prior to the anticipated retirement date. As a result, depending on the decision at trial, employees may wish to think twice prior to providing their employer with too much notice of their anticipated retirement.

Lesson for employers

Should the trial decision find that the employee’s notice upon termination is to be reduced as a result of his intentions to retire, there may be a negative ripple effect for employers. Specifically, employees may become hesitant to provide their employers with as much advance notice of their intention to retire as they currently do, fearing that such information will be used by the employer to limit the employee’s notice entitlements should they be terminated prior to their retirement date. As a result, employers may be caught off guard by employees providing only minimal amounts of notice of their intention to retire, thereby causing employers to be unable to fill the soon-to-be vacant position at the workplace and suffer a possible loss of business.

For more information see:

Kimball v. Windsor Raceway Inc., 2014 CarswellOnt 7936 (Ont. S.C.J.).
• McKay v. Camco, Inc., 1986 CarswellOnt 839 (Ont. C.A.).

Ronald S. Minken is a senior lawyer and mediator at Minken Employment Lawyers, an employment law boutique in Markham, Ont. He can be reached at Ron gratefully acknowledges Sara Kauder and Kyle Burgis for their assistance in preparation of this article.

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