Take Steps to Ensure Unbiased Retirements

Promote Flexibility and Choice

As the baby boom generation continues aging, retirement is becoming an increasingly complex economic, employment and human rights issue that can trigger age-discrimination concerns.

Defending Bona Fide Requirements Discrimination or exclusion from a job is allowed in certain situations if the company shows that the position requires specific qualifications, which are known as bona fide occupational requirements (BFOR). In a landmark ruling, the Supreme Court of Canada set a three-pronged test for a BFOR, determining that it must be: 1. Adopted for a purpose or goal that is rationally connected to the functions of the position. 2. Adopted in good faith, in the belief that it is necessary to fulfill the purpose or goal. 3. Is reasonably necessary to accomplish the purpose or goal in the sense that the employer cannot accommodate without undue hardship persons who don’t have the qualification. (Meiorin v. The Government of British Columbia). The test requires that employers take into account the capabilities of different members of society before it adopts a BFOR and standards and tests to evaluate a person against the requirement. The standards must only reflect the true requirements of the job. The physical demands of certain jobs may allow employers to restrict jobs to those over a certain age and those who don’t have certain chronic physical conditions and disabilities. This is allowed because employers have a duty to provide a reasonable level of safety in the workplace, which includes ensuring that employees performing their jobs aren’t a danger to themselves or others.

Mandatory retirement is no longer a universal practice in Canada. At the federal level, it is still permitted under the Human Rights Act when an individual reaches the normal age of retirement for employees working in similar positions. And Canadian case law suggests that in some circumstances, laws or government policies permitting mandatory retirement are justified under Section 1 of the Charter of Rights and Freedoms.

However, several provinces and territories have now banned mandatory retirement at the age of 65 unless:

• There are bona fide and reasonable requirements for essential job duties.
• Accommodation would cause undue hardship to the business. (See right-hand box for the legal test of bona fide occupational requirements.)

Confronted with a decline in the number of employees retiring or a need to reduce the work force, some companies also offer voluntary early retirement packages. These can certainly benefit all staff members to the degree that the plans offer older employees a chance to pursue other interests or ambitions, ensure that fewer people will involuntarily lose their jobs and help retain promising young employees by offering more chances for them to advance in the company.

But early retirement plans by their nature target older employees and should be used carefully to avoid discrimination concerns.

First and foremost, early retirement plans should be truly voluntary and not contain any coercive element, according to the Ontario Human Rights Commission. For example, if faced with the possibility of losing their jobs altogether, many employees may feel compelled to accept early retirement. Packages can also be presented in a way that suggest older employees are being targeted or that refusal to accept the offers will result in some retaliation.

Some employees may even accept an offer as an alternative to facing negative workplace attitudes toward older staff members, which could suggest that they feel compelled to accept retirement.

So if your company is considering offering early retirement to its employees, consult with a lawyer to ensure that the offer is properly designed and doesn’t raise red flags of age-discrimination.

Here are some other prudent considerations form the Ontario Human Rights Commission when providing incentives for an early retirement:

• Offer a plan that does not pressure employees to accept it or penalize those who reject it. Regardless of how generous a package is, companies could be subject to claims of age discrimination if their plans aren’t truly voluntary.
• Define the eligibility criteria and share it with all employees. Some companies even offer similar voluntary exit packages to individuals who are not near retirement.
• Do not link acceptance of an early retirement package to job loss. If downsizing, indicate the criteria your company is using to select the jobs that will be eliminated. Assure staff members that eligibility for a voluntary exit program in no way influences decisions about job loss. Choose positions to terminate, rather than people, and don’t re-establish a position after it’s been eliminated.
• Structure pensions and benefits so that the actuarial value of reduced pensions for early retirees is at least equal to the current value of the deferred pensions for those electing to stay until they are eligible for full benefits.

Ease the transition: When your employees retire or accept an early retirement package, consider accommodating them with programs that help them ease out of the daily work routine. Programs could include flexible hours and working conditions, part-time positions, job sharing arrangements, and hiring retired workers for short-term contracts and consultant positions.

(For more information on how to avoid claims of age discrimination, click here to read our previous article, “Guarding Against Age Bias.”)