Ontario Government announces public consultations on eliminating mandatory retirement

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On August 18, 2004, the Ontario government issued Providing Choice, an on-line discussion paper on the issue of eliminating mandatory retirement (at www.gov.on.ca/LAB/english/news/2004/04-92cp.html). The government is seeking the public’s views about the impact of ending mandatory retirement on

  • the economy, including the competitiveness of the provincial economy as a whole and the personal finances of individuals and families;
  • labour market issues, such as skills shortages and career advancement opportunities;
  • terms and conditions of employment, including the negotiation and operation of collective agreements in unionized workplaces;
  • pension and benefits plans and the workplace insurance system;
  • social and human rights issues, including the structure of the workplace, quality of life and the rights of individuals to benefits provided by the three levels of government;
  • specific occupations, such as firefighters and tenured university faculty.

The government has previously announced its intention to end mandatory retirement. This followed the introduction by the previous government of Bill 68, which did not become law (see “Bill 68 ends mandatory retirement in Ontario” on our What’s New page). The increased interest in reviewing Ontario’s approach to mandatory retirement is part of a national and international trend towards the abolition of mandatory retirement – a trend that has seen the United States, Australia, New Zealand, Alberta, Quebec and Manitoba do away with the practice.

The drive to re-examine mandatory retirement is fuelled by a number of demographic, social and economic factors, including

  • a steady increase in the percentage of persons over age 65 in the Canadian population;
  • rising support among Canadians for the right to work past age 65;
  • the fact that women and recent immigrants, who typically enter the work force at a later point in life, disproportionately suffer financial hardship when they are required to take mandatory retirement;
  • increased life expectancy, resulting in fewer working people paying for social programs to support retirees;
  • greater employment in the information and service sectors and declining employment in sectors in which physical strength is a key job requirement.

The initiatives by both the Eves and McGuinty governments came in the wake of the release by the Ontario Human Rights Commission of Time for Action: Advancing Human Rights for Older Ontarians in 2001. This report noted many of the factors set out above and recommended legislative changes to bar all mandatory retirement policies other than those that can be justified on a case by case basis.

IMPLICATIONS OF ENDING MANDATORY RETIREMENT

Despite the fact that mandatory retirement has been eliminated in several key jurisdictions in Canada and elsewhere, the prospect of life after its elimination is unsettling to both employers and employees. Employees fear that they may have to work longer and that their entitlement to retirement benefits may be deferred. Employers are concerned about having to absorb the costs of managing an older work force.

The rest of this article will focus on the issues likely to be raised by ending mandatory retirement and some suggestions for dealing with them.

Accommodation

Employers may be faced with increasing requests for accommodation. Accommodation would likely be required for three main reasons: disability, declining capacity due to age, and family obligations (e.g., the need for workers to be absent to care for a spouse or other family member). Forms of accommodation could include measures such as flex-time, reduced hours and modified responsibilities.

Health-related costs

Pressure may be placed on benefits plans, as older workers would likely require more prescription medicines and health care services, and make greater use of short- and long- term disability plans. Although much would depend on the legislation that implemented a post-mandatory retirement regime (e.g., age-based discrimination might be permitted in relation to benefits coverage beyond a certain age), it is likely that health premiums for an aging work force would increase. The presence of greater numbers of older workers might also lead to higher rates of health-related absenteeism, which would also affect employers’ costs.

Termination

Under the mandatory retirement regime, employers are entitled to terminate employees at age 65 without having to pay termination costs. Without mandatory retirement, the decision to leave employment would rest with the aging worker. Unless there were cause for dismissal, employers in the non-union sector would likely have to provide reasonable notice damages to terminated employees regardless of their age. In this connection, commentators have pointed out that innocent absenteeism and performance difficulties (two employment issues that may become more salient as workers age) are generally not seen as constituting cause for dismissal. Moreover, an older employee’s typically greater length of service, combined with their relatively bleak prospects of mitigating their damages by finding new employment, might result in substantial awards of damages.

Performance management

An older work force might also require enhanced measures to manage employee performance, particularly if employers were no longer able to compel employees to retire at a fixed date. Performance management systems would have to be upgraded for employees of all ages, as any over-emphasis on older workers could be seen as discriminatory. When terminating an older worker, it would be necessary to retain thorough documentation of performance management measures taken, in order to rebut an inference that age was a factor in the decision. Performance management programs would also have to include accommodation measures if employee performance was hindered for reasons relating to aging or health.

Avoiding discrimination

With or without mandatory retirement, the aging work force will require a heightened consciousness on the part of employers of age-based discrimination. In its recently released Policy on Discrimination against Older Persons because of Age (at www.ohrc.on.ca/english/publications/age-policy.shtml), the Ontario Human Rights Commission has served notice that age discrimination is attracting greater scrutiny than ever before. The Policy calls on employers to eliminate ageism (the tendency to stereotype older persons and to structure society as though everyone was young) and to encourage the inclusion of older workers in the work place. The Policy discusses how to eliminate age discrimination in various aspects of employment, including

  • Hiring – Reference to candidates’ age in recruitment advertising, job applications and job interviews should be avoided. If a candidate’s age is relevant for pension and benefits purposes, this information should be collected only after a job offer is made. If a complaint is made about a hiring decision, the Commission may scrutinize the decision for indications that the complainant’s age was a factor.
  • On-the-job issues – Employers should be careful to avoid unequal treatment of older workers, such as limiting job opportunities, subjecting older workers to more rigorous performance management measures than other workers, or failing to recall older workers from layoff. Employers should also be vigilant for signs that older workers are being subjected to harassment, including disparaging remarks about their age.
  • Accommodation – The Commission suggests that employers consider altering the workplace to accommodate the needs of older workers. These suggestions will be discussed in greater detail below. As noted above, the accommodation of older workers relates principally to older workers’ health issues, decrease in work capacity, and increased family obligations.
  • Retirement incentives – Retirement incentives must be carefully structured to avoid pressuring targeted employees. The programs must be truly voluntary and must not be a veiled means of achieving downsizing objectives.

STRATEGIES FOR MANAGING THE WORKPLACE AFTER THE ELIMINATION OF MANDATORY RETIREMENT

The end of mandatory retirement would likely mean that more workers stay on the job when their ability to contribute to the workplace is diminishing for age- or disability-related reasons. Employers may be concerned about their ability to free up resources to hire new staff and the costs associated with keeping larger numbers of older workers on the job.

The concerns of both parties might be met if employers implemented measures to accommodate the needs of older workers. Adjustments to employees’ hours and responsibilities would be among the most common means of accommodating aging workers. If they were implemented with care and awareness of employers’ human rights obligations, such measures would have the dual benefit of easing older workers towards retirement in a supportive environment, while ensuring that they were paid in accordance with their actual capabilities.

These accommodation measures could be made part of voluntary exit programs. These could provide for an extended period of alternative work arrangements ending with an agreed-upon date of departure. By adopting a phased approach towards retirement, the older worker would be permitted to retain a reduced connection to the workplace for a certain length of time, and the employer would be provided with a date at which the employment relationship would be terminated. This would reduce the need for performance management and the risk of a dispute over termination. As noted above, care would have to be taken to ensure that the voluntary exit was not in fact coerced, and was carried out in a manner consistent with the employer’s human rights obligations.

In Our View

While it is clear that the primary legislative change required to eliminate mandatory retirement is the removal of the upper limit of age 65 in the definition of “age” for employment purposes in the Ontario Human Rights Code, it is not clear what other legislative changes will be made if the government proceeds with this initiative. A more detailed analysis of the implications of ending mandatory retirement will have to await the introduction of draft legislation.

Public consultations on ending mandatory retirement have been scheduled in Ottawa for September 23, 2004. Sophie Gagnier of our firm will be presenting a submission at that time.

Readers who wish to pass on concerns or comments for consideration at the public consultation are encouraged to contact Sophie Gagnier at (613) 940-2756.