Original article by Howard Levitt published in the Financial Post, January 16, 2019.
Is $800,000 a fair price for being forced into retirement?
In a recent decision, Justice Gordon of the Ontario Superior Court of Justice stated that he would have ordered at least 36 months’ reasonable notice, if requested. This decision flies in the face of the previous general principle that the reasonable notice period maximum of 24 months should only be exceeded in “exceptional circumstances.”
Rather than exceptional circumstances, the employee in this case faced circumstances that are rather common in Canada’s aging workforce.
Michael Dawe’s employment with Equitable Life Insurance Co. was terminated, without cause, after 37 years of service. Dawe was 62 years of age and, as a senior vice-president, earned a base salary of $249,000.
During his assessment of the appropriate notice period, Justice D.J. Gordon considered the circumstances of an older employee in the post-mandatory retirement era. The court acknowledged that, given his age and the nature of the life insurance industry, Dawe had commenced the process of retirement planning. It found that Dawe would have likely worked beyond age 65.
He also accepted Dawe’s evidence that there were no comparable employment opportunities available and that age was a significant factor in that. Reasonable notice is often referred to as the period of time it should reasonably take the terminated employee to find comparable employment. When there is no comparable employment available, as in Dawe’s situation, termination is tantamount to a forced retirement, thus barring Dawe from retiring “on his own terms.”
When there is no comparable employment available, termination is tantamount to a forced retirement
Nearly 10 years after much of Canada gave mandatory retirement the pink slip, individuals aged 55 and over account for 36 percent of the working-age population, the highest proportion on record. By 2026, that proportion could reach 40 percent. From 1996 to 2016, the labour force participation rate of individuals aged 55 and over increased to 38 percent from 24 percent, reaching a record high in 2016.
Supporters of mandatory retirement hold that the practice is not discriminatory because everyone is subject to the same law. Employers tended to like it because it allows for more effective workplace planning and eliminates the need to continually test older workers to ensure their competence. Opponents, however, argue that such a provision unfairly robs society of valuable human capital.
In this era, is it fair, then, for employers to bear such a significant cost ($800,000 in this case) for terminating a long-serving 60+ employee without cause?
In awarding damages equal to 30 months’ reasonable notice, Justice Gordon emphasized the lack of comparable employment opportunities available to Dawe and stated that he “felt this case warranted a minimum of 36-month notice period.” Given the wording of that comment and the greying workforce, we can expect to see awards of 36 months and more going forward.