Canada: An Update On Mandatory Retirement

Last Updated: December 21 2012
Article by Ian Breneman and Level Chan

Although blanket rules allowing mandatory retirement have been removed from human rights legislation for some time, there continue to be mandatory retirement cases. The recent Nova Scotia decision in CSAP v. CUPE, Local 2272, summarized on our blog, is the most recent case from Atlantic Canada.

Background – human rights legislation and mandatory retirement

Like other human rights legislation, Nova Scotia's Human Rights Act (the "Act") prohibits age-based discrimination in the workplace. As mandatory retirement treats employees differently based on their age, it is discriminatory. Until July 2009, there was an exception in the Nova Scotia Act for a "bona fide plan, scheme or practice of mandatory retirement" (Section 6(h)), but that Section of the Act was repealed at a time when other provinces made comparable changes to "eliminate" mandatory retirement.

The news of the total elimination of mandatory retirement was greatly exaggerated since other exceptions remained. First, employers can apply mandatory retirement (and have) if it is a bona fide occupational requirement. Second, there is another exception that may allow employers to continue the practice of mandatory retirement for the "operation of a bona fide retirement or pension plan or the terms or conditions of a bona fide group or employee insurance plan" (Section 6(g)). Section 6(g) allows a mandatory retirement policy if it is connected to "the operation" of a pension plan scheme. But, what sort of connection is required to invoke Section 6(g)? The answer to this question is relevant to Atlantic Canadian employers across the region as legislation in all four provinces have rules that are similar to Nova Scotia's Act.

Meanwhile, the federal human rights statute – the Canadian Human Rights Act – also had a provision similar to the now repealed Section 6(h) in the Nova Scotia Act. However, it has been challenged as being unconstitutional under the provisions of the Charter of Rights and Freedoms and, as part of the implementation of the 2011 budget, will be repealed on December 15, 2012.

What courts and tribunals have said

In 2008, the Supreme Court of Canada decided in New Brunswick (Human Rights Commission) v. Potash Corporation of Saskatchewan Inc. ("Potash") to allow a mandatory retirement policy based on provisions of the employer's pension plan. The New Brunswick Human Rights Act has a unique provision that allows termination of employment "because of the terms of any bona fide retirement or pension plan". In the potash case, the Supreme Court of Canada held that mandatory retirement was allowed so long as it was part of a legitimate or genuine retirement or pension plan (i.e., not a "sham").

The Nova Scotia Act poses a similar, yet different, conundrum as provincially regulated employers may arguably have a mandatory retirement practice related to the operation of a bona fide pension plan or group or insurance plan, which usually hinge on a defined "normal retirement age".

In Talbot v. Cape Breton Regional Municipality and Canadian Union of Public Employees (2009) ("Talbot"), an employee facing the operation of a mandatory retirement scheme brought a complaint to the Nova Scotia Human Rights Commission. At the time, the employer had a pension plan that was described as "in good shape." Following Potash, the Board of Inquiry held that, because the pension plan was "legitimate and genuine" and "not a sham" (i.e., bona fide), the employer was entitled to enforce its mandatory retirement scheme.

However, in Nilsson v. UPEI (2010), the Prince Edward Island Human Rights panel held that more was required because of the term "operation" in its Human Rights Act (similar wording as Nova Scotia's Section 6(g)). The panel determined that a mandatory retirement age of 65 was not an integral part of the operation of UPEI's pension plan. Therefore, the University's mandatory retirement policy could not be exempted from that province's Human Rights Act.

The recent decision of a Nova Scotia labour arbitrator followed the approach taken in the Nilsson decision rather than Talbot. In Conseil Scolaire Acadien Provincial v. Canadian Union of Public Employees, Local 2272 (2012), the employer, CSAP, allowed its employees to work past the age of 65, in part based on an earlier human rights case (Theriault (2008). In a somewhat bizarre reversal of roles, the union alleged that CSAP violated a mandatory retirement provision in the collective agreement by allowing employees to work past age 65, arguing in favour of mandatory retirement.

CSAP argued that the mandatory provision in the collective agreement may have been exempt from the Act before Section 6(h) was repealed. CSAP further argued that, as there was no link between the mandatory retirement clause and CSAP's pension plan, the Section 6(g) exemption could not apply. The union argued that the mandatory retirement clause was directly related to CSAP's pension plan, meaning that Section 6(g) applied.

The arbitrator concluded that there was no link between the mandatory retirement clause and the pension plan that would engage Section 6(g) and save the mandatory retirement clause. In coming to that conclusion, the arbitrator took the following factors into consideration:

  • The mandatory retirement clause did not reference the pension plan;
  • The pension plan did not make a reference to a retirement age of 65;
  • The pension plan was drafted when the collective agreement (and its mandatory retirement clause) was already in place; and
  • Pension plan participation was not mandatory, but retirement at 65 was mandatory.

This decision suggests that meeting more than the "no sham" test may be required in Nova Scotia.

Federally-regulated employers

For federally-regulated employers, there is no "bona fide pension plan" exception. Specific regulations have been established for pension and benefit plans that do not allow for broader interpretation so as to apply to mandatory retirement. However, Section 15(1)(c) of the Canadian Human Rights Act ("CHRA") provides (until after December 15, 2012) that it is not a discriminatory practice to terminate an individual's employment where that individual "has reached the normal age of retirement for employees working in positions similar to the position of that individual".

In Air Canada Pilots Association v. Kelly, 2012 FCA 209 ("Air Canada"), two pilots formerly employed by Air Canada were required to retire at age 60 based on provisions in their collective agreement and pension plan. The pilots filed a complaint with the Canada Human Rights Commission alleging that Section 15(1)(c) of the CHRA violates the Charter of Rights and Freedoms.

Mandatory retirement has previously been held by the Supreme Court of Canada as not violating the Charter. In 1990, the Supreme Court held that provisions of the Ontario Human Rights Code, 1981 that exempted mandatory retirement schemes were constitutional (McKinney v. University of Guelph, [1990] 3 SCR 229 ("McKinney")).

In the latest of a series of decisions, the Canadian Human Rights Tribunal and the Federal Court both determined that Section 15(1)(c) of the CHRA was contrary to the Charter. The Federal Court of Appeal, however, held that it was bound by the Supreme Court's decision in McKinney, meaning that the provision was upheld as constitutional. Leave to appeal that decision to the Supreme Court of Canada has been sought.

What this means for you

Mandatory retirement has not been eliminated. It still causes controversy even though human rights legislation has been amended to make it more difficult to defend. While a mandatory retirement requirement is not valid on its own without justification, employers (or unions) may still seek to justify it based on a bona fide occupational requirement or, in some provinces, as part of the operation of a pension plan or other retirement benefit program. In the latter case, the employer must do more than show a link between mandatory retirement and the pension plan – it must be able to demonstrate that mandatory retirement is necessary in order to make the pension plan work.

Note – Some key issues for employers in the post-mandatory retirement world include the provision of employee benefits after age 65 and the need to change benefits plans. For some comments on the legal issues, see our blog.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Ian Breneman
Level Chan
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