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Terminating an Employee Approaching Retirement Age

Terminating an Employee Approaching Retirement Age

It often comes as a bit of a surprise to employees that their employment can be terminated at any time, without cause, regardless of their length of service, age or position, provided that the employer provides reasonable notice of the termination with either working notice or pay in lieu of notice.  What is reasonable notice varies from case to case and depends on a number of factors, including, but not limited to: age, remuneration, availability of reasonable alternative work, and whether the employee was a manager. However the Court has recently started a trend of considering whether the termination of an older employee is tantamount to forced retirement and accordingly requiring increased notice to the terminated employee.

Consider a hypothetical situation.  An employee, Joe, age 62, is a senior manager supervising 12 employees.  Joe has worked for ABC Company for 18 years and is currently earning $100,000.00 per year and is provided extended health and dental benefit coverage.  Through restructuring due to a down-turn in the economy, Joe’s position is being eliminated.  Based on a traditional approach to determining a reasonable notice period or pay in lieu of notice, one would look at Joe’s age, length of employment, remuneration and the fact that he was a manager and likely calculate notice at approximately 16 – 18 months’ of pay or working notice.

However, the courts have become more cognizant of the fact that the termination of employees approaching the age of 65 is essentially forcing early retirement upon them.  In these cases, the courts have started a trend of increasing the reasonable notice period to beyond the perceived 24 month upper limit, particularly in cases where the terminated employee is older and there is no comparable employment available for the employee’s skillset and experience.

In our hypothetical example, Joe would likely be entitled to reasonable notice of approximately 24 – 28 months using the recent case law trends as a benchmark.

Although mandatory retirement is not legal in Canada due to the various Human Rights legislation, it is clear that terminating an employee who is approaching the age of 65 could result in a requirement to pay a significantly enhanced severance package.  Furthermore, while the law in British Columbia does not require the continuation of extended health and dental benefits throughout the reasonable notice period, the legislation and court decisions in Ontario are requiring continuation of all employment benefits throughout the entire notice period.  With an older employee, extended health and dental benefits are significantly more important, and more expensive and difficult to acquire independently.  As such, in my opinion, case law will shift to require such extended benefits for terminated employees in British Columbia, particularly for older terminated employees.

The traditional Bardal Factors as coined in the often cited employment law decision, Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), were always open to expansion and interpretation.  The general principal of Bardal is as follows:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases.  The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

As such, the expansion by the courts to now include consideration of how close the terminated employee is to retirement is a logical progression.  According to the Court in one of these recent cases, Dawe v. Equitable Life Insurance Company, 2018, ONSC 3130,

whether it is exceptional circumstances or recognizing a change in society’s attitude regarding retirement, the particular circumstances of the employee must be considered

and if an employee had not yet considered retirement, their termination may be forced early retirement if no other suitable work is available.

Scott Chambers is an Employment and Human Resources lawyer at Doak Shirreff Lawyers LLP.  Scott can be reached at [email protected] or 250-979-2527.  You can also follow Scott on twitter at @DSEmploymentLaw and on LinkedIn at www.linkedin.com/in/scottdchambers.