20 Jan Voluntary Retirement in Canada
When Old Age Social Security (OAS) was first introduced in 1952, it was available for people ages 70 and older. At the time, the average life expectancy for Canadians was about 75 years.
Today, Canadians are eligible for Old Age Security at 65. Thanks to advances in modern medicine, healthy diets and good physical health, Canadians are living longer than ever and the average life expectancy is now 82 years.
Given this information and compound it with the fact that an OAS pension is less than $1,000 a month, the economic squeeze many have felt since the Great Recession of 2008 and the abolition of mandatory retirement in 2006 and it is probably little surprise that many Canadians are choosing to work past the age of 65.
However, older workers choosing to work past their ‘normal’ retirement age can present a dilemma for employers who may wish to make room for new talent, reduce costs, downsize or restructure their operations.
Employers may wonder what their options are if they are hoping to encourage an older worker to retire early.
Most importantly – for both moral and legal reasons – for any employer in such a situation is to avoid discriminating on the basis of age. Age is a protected ground under the Canadian Human Rights Code.
The Human Rights Tribunal (HRT) has weighed in on whether or not offering an older employee an incentive to retire early is, in and of itself, age discrimination. On this point, the HRT has said that simply making an early retirement incentive available to older workers does not constitute age discrimination. However, exerting any pressure, however subtle or positively-framed, on an older employee to accept such an offer is considered age discrimination and can be particularly costly to employers if litigated.
The 2018 case of Dawe v. Equitable Life Insurance Company illustrates just how much can be at stake for employers who pressure older workers to retire. In this case, Mr. Dawe was 62 and had been terminated, despite his wishes to continue working, from his position with the company as Senior Vice President. At trial, Mr. Dawe was awarded an astounding 30 months notice. The judge explained that the termination essentially amounted to a forced retirement since Mr. Dawe, given his age and seniority, could not reasonably expect to find a comparable job opportunity. Furthermore, the judge emphasized that Mr. Dawe should have been allowed to retire from Equitable Life on his own terms.
Best Practices when offering an early retirement incentive
First and foremost, retirement must be voluntary. This means that, as an employer, you can offer an older employee something like a severance package with the hope that they will take it. However, you cannot under any circumstances encourage, coerce or pressure them to accept it. This includes doing things such as talking about the merits of retirement, your desire to give younger employees a chance to grow or suggesting that the older employee is in any way unvalued. You must be mindful to communicate your offer as neutrally as possible. This means limiting your discussion to the details of the offer and the employee’s eligibility for it. Anything more could be construed as age discrimination.
Everyone wants to retire with dignity and grace and your desire to transition an older employee out of your workplace should not impede them from doing just that. The employment law team at KCY at LAW can help you navigate the delicate process of offering an employee an early retirement incentive in a way that is respectful and legal.