By Graeme McFarlane

As the baby boomers age, the make up of the Canadian workforce is changing.  Economic uncertainties combined with longer life spans have prompted employees to work longer than in previous times.

Historically, employers could reasonably expect employees to work approximately until they were 65 years old.  They could also implement mandatory retirement programs that would require that an employee cease work.  In theory, such a program would provide opportunities for younger workers as they move through the workforce.  However, mandatory retirement policies discriminate against workers on the basis of their age; they were only permitted to operate through an exemption created by the age definitions within Human Rights legislation.

In response to a number of influences, many provinces across Canada, including British Columbia moved to eliminate mandatory retirement.  The British Columbia Human Rights Code was subsequently amended to eliminate the exemptions for workers past the age of 65. However, removing these exemptions has created a number of challenges for employers.

Workforce planning has become more difficult.  When retirement dates are uncertain, succession plans can be disrupted.  When this occurs employers may face increased training costs.  More concerning in this type of situation is the risk that an employer may lose a promising junior employee because they are not willing to wait indefinitely for promotion opportunities.

Moreover, productivity may decrease.  Everyone suffers from decreased performance with age.  For some the decrease is slow; in others it can be rapid.  However, when managing performance, employers must be careful when performance decreases are linked to aging.  Because age is a protected ground under the Human Rights Code, if an employer sanctions an employee because of his or her decreased performance in an age related situation, it may face a Human Rights complaint.  As a result, an employer may be required to accommodate age related performance decreases to the point of undue hardship.

The right to terminate may be restricted and/or more expensive.  As per common law, an employer may terminate any employee at any time for any reason provided that reason is not restricted by legislation or any other legal construct.  As long as the employer provides reasonable notice (or pay in lieu of that notice), it can design its workforce as it pleases.  One source of restriction comes from the Human Rights Code.  Therefore, if an employer decides that it would like to terminate an employee past the age of 65, it must be very careful about the reasons for that termination.  It is illegal to terminate someone in whole or in part because of their age.

The employer faces a challenge when trying to address any decreased performance issue.  Usually, an employer is free to dismiss an employee for performance reasons on a without cause basis by providing notice or pay in lieu.  However, when faced with an older worker with performance issues it faces the risk of a Human Rights complaint if the decrease in performance is linked to the person’s age.  This can become especially problematic when the employee refuses to accept that they may no longer be capable of performing their job and refuse to retire.

Even if the termination decision is not linked to age, separation costs could be higher for older workers.  The prevailing wisdom as expressed in the court authorities is that as workers get older employers are less likely to hire them.  As a result, courts have increased notice periods for older employees.  As one judge put it, “with the exception perhaps of a few professions, society considers that persons over 65 years of age are in the twilight of their careers.”  The courts’ assumption is that because of this belief, employers are less willing to invest in hiring older workers if their commitment to the company may be short lived.

Interestingly, the opposite argument may also be made, namely that a terminated employee over the age of 65 should receive less notice.  If an older employee is in the twilight of their career and retirement is imminent, why should a court award a notice period that would provide full remuneration past the date of intended retirement?  The answer is that it should not.  Therefore, arguably, if an employer can provide evidence that a certain employee intends to retire at a certain age, the court should not award a notice period that goes beyond that date.

No court has reconciled the above propositions, and it will be interesting to see how they balance these competing propositions.  Until the courts have spoken, the best advice is to be very careful when addressing termination decisions involving older workers as the traditional rules may not apply.

Graeme McFarlane is a partner at Roper Greyell LLP, a firm focused on partnering with companies to find solutions to workplace legal issues.

(PeopleTalk: Spring 2012)