Feds do away with mandatory retirement

February 6, 2012

Author: Erik Marshall

Mandatory retirement will be outlawed in the federal sector (except where an employer can establish that the rule is a bona fide occupational requirement) as of December 15, 2012. The federal government recently passed legislation which will repeal a section of the Canadian Human Rights Act that permits employers to terminate employees because they have reached the normal age of retirement and a section of the Canada Labour Code that provides that employees are not entitled to severance pay if they are entitled, immediately upon termination, to a pension contributed to by their employer. Both amendments come into force on December 15, 2012.

The amendments bring the federal government in line with the majority of Canadian provinces, where mandatory retirement has been abolished in all provincial jurisdictions except New Brunswick. The new law also follows on the heels of litigation before the Canadian Human Rights Tribunal and the Federal Court concerning Air Canada’s mandatory retirement policy for airline pilots at age 60. The constitutional validity of section 15(1)(c) of the Canadian Human Rights Act was challenged in that litigation and the subsection was found to be invalid as contrary to the Canadian Charter of Rights and Freedoms. The most recent decision of the Canadian Human Rights Tribunal in that prolonged Air Canada litigation found that post 2006, the mandatory retirement of pilots at age 60 was based solely on a bona fide occupational requirement and therefore is not a discriminatory practice. In 2006, the rules of the International Civil Aviation Organization (ICAO), an UN organization charged with fostering civil aviation safety to which Canada is a signatory, made it mandatory for pilots-in-command between the ages of 60 and 65 to fly with at least one co-pilot under the age of 60 on international flights. The Tribunal ultimately found that accommodating the needs of pilots over the age of 60 would impose undue hardship on Air Canada, considering factors of health, safety and cost.

The amendments are receiving mixed reviews from stakeholders in the community. Organizations such as the Canadian Human Rights Tribunal and the Canadian Association of Retired Persons are hailing the amendments as an end to age discrimination and a great success following years of lobbying. The government is also pleased with itself for bringing an end to a key aspect of age discrimination and is describing the change in the law as a move which provides Canadian workers with greater choice with respect to the timing of their retirement.

A beneficial consequence of the government’s decision to end mandatory retirement is the fact that the longer Canadians work the more funds the government is able to collect due to income taxes, EI and CPP deductions; a fact which is likely not lost on the government as it contemplates Old Age Security reform. Statistics Canada is forecasting that it may soon be difficult to find sufficient younger workers to replace those ready to retire.

Unions on the other hand fear that ending mandatory retirement will result in fewer job opportunities for unemployed young workers and warn that the government and employers will simply expect workers to work longer instead of providing for adequate pension plans.

In many respects the change in the law may simply reflect the reality that people are living longer, the Baby Boomer generation is hitting the age of retirement and it may soon be difficult to find sufficient younger workers to replace those ready to retire. Perhaps the government felt that this barrier to people working longer had to be removed because, as financial advisors have been warning us for years, Canadians have not saved enough money for retirement and/or their savings have not generated the returns expected prior to the downturn in the economy. That being said, a great number of persons over the age of 60 likely wish to stay in the workplace simply because they enjoy what they do and see no reason why they should be forced to leave before they are ready. One positive thing which employers can count on as a result of these amendments is a larger number of experienced workers remaining in the workforce at a time when statisticians are predicting Canada will be confronted with a shortage of young workers.

However, the end of mandatory retirement presents significant challenges for employers. For years mandatory retirement was one of the key tools in an employer’s toolbox for the purpose of transitioning the workforce. More than ever, employers will need to ensure that they are accommodating the needs of employees with disabilities up to the point of undue hardship despite the fact that many of these employees’ disabilities may be attributed to the common and generally accepted effects of aging on the human body. Where the continued employment of persons beyond the normal age of retirement carries with it serious concerns with respect to health, safety and cost, employers may wish to consider whether a rule that employees retire at a certain age is likely to qualify as a bona fide occupational requirement for any positions within their organization as was the case with the pilots involved in the Air Canada case. In situations where an employee near the normal age of retirement experiences a drop in performance, employers may have to resort to performance management rather than simply tolerating the situation, knowing it is temporary and will end on a fixed date. Employers will also want to be diligent in ensuring that all employment contracts, collective agreements and policies are reviewed for compliance with the elimination of mandatory retirement in the federal sector prior to December 15, 2012.

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