How to avoid claims of ageism amid restructuring

When an Ontario manufacturer decided to close one plant and move operations just over 100 kilometres away, it did not simply change addresses.  

In Dunlop v. Interspec Systems Ltd., the Ontario Superior Court found the move amounted to termination for an older, long‑service workforce – so the court added on damages for unpaid entitlements, age discrimination and “reprehensible” conduct.  

The judgment leaves the employer and its owner facing close to a seven‑figure bill. For Canadian HR leaders, it is a sharp warning about how restructuring decisions can morph into costly ageism and discrimination claims. 

Keeping older workers out of the legal firing line 

The plaintiffs, a group of formerly full-time employees with tenure ranging from twp to 32 years and an average age of 54, worked at Interspec Systems's Rosemount, Ont., facility until the employer shut it down in September 2023, shifting production to Scarborough.  

The court treated that relocation as effectively terminating the Rosemount employees, then turned to what they were owed and how they were treated. 

The decision was made in default because the employer didn’t respond to the claims – but the judge, S.E. Fraser, detailed the reasons for the decision, stating that the former employees “pleaded sufficient facts and provided evidence that allows me to find Mr. Vahramian personally liable because he personally discriminated against this senior workforce.” 

Frank Molnar, employment lawyer at Field Law, says the case is a good reminder for employers who are going through downsizing, closures or relocations that decisions made without proper consideration to human rights regulations in Canada could easily slip into risky territory. 

“Check the protected grounds,” he says, “and just make sure that there is no group that's over-represented. And if they are, then go through your reasoning and make sure that you've got valid reasons for why those individuals were selected.” 

Common law, discrimination, aggravated damages add up 

The Dunlop v. Interspec Systems Ltd. decision ordered multiple layers of monetary awards flowing from both employment standards and common law, and payable by multiple employers and the owner, personally. 

First, the court found the company had failed to pay wages, vacation pay, statutory termination and severance pay under the Ontario Employment Standards Act. It awarded all of those amounts plus common law severance, to each plaintiff based on their individual earnings and service.  

Then, the court layered on significant extra damages because of how the employer treated this older workforce, concluding that age was a factor in the termination of the group.  

“The [employer] terminated an older workforce without notice based on age. The effect of the conduct was to terminate benefits, including health benefits,” the justice wrote.  

“I do not have sufficient evidence to particularize the claims with respect to each plaintiff. In my view, damages in the medium range of $25,000 per plaintiff are warranted to remedy the impact of the defendants’ discriminatory conduct. 

Eight employees were each awarded $25,000 in human rights damages for age discrimination, plus another $25,000 each for aggravated damages for “reprehensible conduct”. 

Finally, the owner, Gregor Vahramian, was held personally liable because he “had personally discriminated against the senior workforce,” meaning these monetary consequences attached not only to the corporate employer, but also directly to him. 

In total, the overall total owing to the plaintiffs was $951,293.07 

Employers must justify business decisions 

Molnar notes that not every age‑related impact amounts to unlawful age discrimination.  

What matters is whether the employer can justify why particular employees were selected, and whether those reasons hold up when compared across the workforce, such as “We need certain types of experience in our remaining workforce, and that's why these people were selected.” 

For HR, the message is that selection criteria must be tied to legitimate business needs – such as specialized skills needs – and applied fairly across the workforce. Older employees are especially risky, he says, because of seniority and fewer opportunities for rehire.  

Plus, documentation of this process can turn out to be critical if a decision is challenged later before a court, labour arbitrator or human rights tribunal. 

“You can justify termination of younger workers, which is also based on age, but that can be justified on the basis of, they’ve been here a shorter amount of time,” Molnar says, stressing that employers “would have to justify why the older members of its workforce were over-represented.” 

Paying entitlements and avoiding aggravated damages 

The Dunlop ruling also serves as a reminder that how employers handle the financial side of a closure or relocation can make a bad situation worse.  

Molnar’s emphasis is on looking at the composition of the workforce and checking protected grounds under human rights legislation before any major staff changes; for HR and finance teams, this highlights the need to ensure that, at a minimum, all Employment Standards Act obligations – wages, vacation pay, statutory termination pay and any severance – are calculated correctly and paid on time.  

Even where the business rationale for a move was not at issue, the court focused heavily on whether basic legal obligations to the departing workforce were met. He emphasizes that catching and correcting these issues before notices go out is far less costly than trying to justify patterns later in front of a court or tribunal. 

"The judge also awarded moral and aggravated damages of an additional $25,000 for the employer's reprehensible conduct, and not paying wages, not paying vacation pay, not paying statutory termination pay and severance pay,” Molnar notes.  

“He punished the employer for that.”