Employees are now remaining in the workforce longer than ever before. The prohibition on mandatory retirement in most Canadian provinces in recent years, combined with a period of economic decline has resulted in a swift drop in the trend of employees retiring by age 65. Currently, only 27% of Canadians aged 30-65 believe that they will be fully retired by age 66. Among those who plan to be working at age 66, it is based on necessity rather than a desire to remain in the workforce.
The prohibition on mandatory retirement means that an employer cannot force an employee to retire at age 65 (or some other stipulated age). This does not mean that aging employees cannot have their employment terminated; an employer is not allowed to impose a contractual term or workplace policy requiring an employee to leave the workplace at a certain age.
An employer remains entitled to terminate the employment of an older employee for just cause, or with notice (or pay in lieu of notice) when there is no cause for termination. Demonstrating that the termination of employment is not based upon the employee’s age is required, particularly if done with notice and without cause. Employers are able to use performance management criteria as they would for any other employees where there are legitimate concerns based on objective facts about the employee’s ability to perform the duties of the job.
In the past, an employee approaching what was considered retirement age would often receive shorter notice periods, as the underlying assumption was that they would not be remaining in the workforce for much longer. However, the current reality is that employees are staying in the workforce longer than ever before out of necessity and it is very difficult for someone over the age of 65 to obtain new employment.
The judicial system has taken notice of this changing employment landscape and it has resulted in important implications for both employers and employees, particularly in the area of notice.
How is Reasonable Notice Calculated?
In Manitoba, The Employment Standards Code, C.C.S.M. c. E110 (the “ESC”), establishes a minimum amount of notice, or wages in lieu of notice, that an employee will be entitled to depending on his or her length of service.
Although the ESC establishes minimum standards for notice, it is rarely sufficient notice unless the employer has an enforceable employment contract that limits employees to the statutory amounts. In most cases, the common law holds that employees are entitled to “reasonable notice” if the employer and employee have not agreed upon a specific amount of notice of termination, or where the agreed upon amount is for some reason not enforceable. The concept of “reasonable notice” is then considered to be an implied term of the employment relationship. Determining an appropriate range of notice in any given situation is an imprecise exercise. However, there are a number of factors that a court will take into account in assessing an appropriate period of notice for an employee who has been terminated without cause.
When determining what constitutes a reasonable notice period, the courts will generally consider the character of the employment, the length of service of the employee, the age of the employee, and the availability of similar employment, taking into consideration the experience, training and qualifications of the employee.
It is important to note that these factors are not exhaustive, and depending on the particular situation many other factors can and will be considered. For example, the courts will consider whether or not an employee was induced by an employer to leave secure employment, or whether the employee has taken steps to mitigate his or her damages by seeking new employment.
Although there is no definitive case establishing an official maximum period of notice, in the past there has been a general “cap” on notice awards at somewhere between 18 and 24 months.
Recent Developments Affecting Aging Employees
The changing employment landscape has led to a reconsideration of the common law surrounding reasonable notice, challenging two long-standing assumptions.
Historically, there has been an assumption that employees in lower level positions (for example, unskilled and clerical work) should have an easier time finding new similar employment, as there should be more positions available, which has resulted in shorter notice periods. Recent case law has called this assumption into question. In DiTomaso v. Crown Metal Packaging Canada LP, the Ontario Court of Appeal commented on the declining importance of character of employment while considering the reasonable notice entitlement of a 62 year old employee:
…there is recent jurisprudence suggesting that, if anything, [character of employment] is today a factor of declining relative importance.
Kotecha v. Affinia Canada ULC provides authority to the proposition that character of employment is declining in importance. Kotecha worked as an unskilled machine operator for 20 years at auto parts company Affinia Canada ULC before he was dismissed without cause at age 70. Kotecha subsequently applied to over 225 companies for work, but did not receive a single interview. The Ontario Superior Court of Justice held that a notice period of 22 months was reasonable in the circumstances.
Similarly, in past jurisprudence, aging employees approaching what was considered to be retirement age tended to receive shorter notice periods. However, in Filiatrault v. Tri-County Welding Supplies Ltd., the Ontario Superior Court of Justice considered the situation of two plaintiffs in their 80’s who filed wrongful dismissal claims after more than 40 years’ employment. The court suggested that reasonable notice should evolve, given the elimination of mandatory retirement and with employees remaining in the workforce:
…There are few, if any, cases where the courts have awarded notice periods of more than 24 months. The higher notice periods have normally been awarded to persons of senior age, usually persons in their 60s and less often in their 70s, not normally to persons in their 80s. The durations of employment that have attracted higher notice periods have rarely if at all been as great as 40 years. This will likely be an increasing trend with the statutory end to retirement at age 65, a point I will return to later. There is no suggestion here with the current reality of employees working to more senior ages that the upper limit on notice periods should be infinite. However, the fact of the matter is courts will have to increasingly grapple with adjusting what a reasonable notice period is in this new reality.
The law of reasonable notice in relation to aging employees is evolving. There is a suggestion that character of employment is declining in importance, while age and availability of similar employment are arguably increasing in importance. These decisions reflect an increasing willingness to take notice of current age and economic realities: older employees are staying in the workforce and often need to continue to work; and that replacement work is difficult to find.
In Manitoba, mandatory retirement has not been permitted for many years. As a result, it will remain to be seen whether these principles being developed by courts in other provinces adjusting to a new era without mandatory retirement will be adopted by Manitoba courts.
These above-referenced cases demonstrate that employees over age 65, especially those with long service records, who are terminated without cause may be eligible to receive larger notice awards in recognition of the specific difficulties that aging employees will likely face in finding new employment. Given the suggestion that the unofficial maximum of 24 months of reasonable notice might also be reconsidered by courts as a result, this may become even more important in the future for employers.
In such circumstances, an employer must also ensure that a decision to terminate an older employee is not related to the age of the employee. If termination is based on the age of an employee, or even appears to be based on the age of an employee, the decision to terminate an aging employee may be determined to be in violation of The Human Rights Code, C.C.S.M. c. H175, and could result in remedies and damage awards above and beyond what would be owing during the reasonable notice period.
As noted above, the question of reasonable notice only comes into play when an employment contract is silent or for some reason unenforceable on the issue of notice upon termination without cause. If the parties use an employment agreement to clarify exactly what their rights and obligations will be in the event of termination without cause, this uncertainty can be avoided entirely.
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