Following the earlier lead of many provinces, the Federal Government has now outlawed mandatory retirement for federally regulated employers, such as the banks, telecommunications companies, airlines and railways. Like many Provincial Governments have done, it has repealed provisions under the Canadian Human Rights Act which have permitted federally regulated employers to enforce mandatory retirement policies. This amendment is a somewhat delayed response that follows a country-wide trend to end mandatory retirement.
The Federal Legislative Amendments
Bill C-13, Keeping Canada's Economy and Jobs Growing Act, received Royal Assent on December 15, 2011. Part 12 of the Bill repeals provisions under the Canadian Human Rights Act and the Canada Labour Code that allow for mandatory retirement. The amendments will come into force on December 15, 2012.
These amendments mean that federally regulated employers will no longer be able to rely on a pre-determined point in time when employees will leave employment in order to manage their staff planning. Similarly, employers cannot "wait out" employees with performance problems.
In some circumstances, an employer may still be able to justify a mandatory retirement policy if it can establish a bona fide occupational requirement ("BFOR") requiring an employee to retire at age 65 or earlier. However, this sort of exception has traditionally been narrowly interpreted, and is difficult to establish.
Take Away for Employers
Absent a mandatory retirement policy enacted pursuant to a BFOR, an employee who is older than 65 years of age and whose employment is terminated without just cause may have significant termination entitlements under statute or at common law. Similarly, the employee may also have human rights remedies if he or she can establish that the termination is related to age.
Rather than relying on a pre-determined end date, employers must implement succession planning to ensure that institutional knowledge is passed to younger workers. Performance issues for older workers should not be ignored, but documented and addressed.
These developments also increase the need for tightly worded employment agreements and offer letters that clearly address an employee's termination entitlements. Policies and procedures for lay-off or terminations in workforce reduction situations must be carefully established and implemented to avoid discrimination claims.
Employers in the federal sector will likely still be permitted to implement retirement programs based on age, provided that these programs are not mandatory. Employers could still provide incentives to aging employees to leave the workplace, as long as an employee's decision to leave is voluntary.
Developing a comprehensive incentive plan that encourages early retirement or a reduced workload may be one way to ensure a steady rejuvenation of the workforce. It may also shield employers from costly wrongful dismissal or human rights claims. Employers should examine their employment contracts, collective agreements, benefit plans, and retirement policies to ensure that they will be in compliance with this new legislation.