Considerations on Ending the Employment of Senior Workers

With the elimination of mandatory retirement (through amendments to the Human Rights Code in 2006), many older workers have made the choice to remain in the workforce longer.  Obviously, the increase in tenure that this change permits will lead to increased termination costs, as employees with longer service are entitled to heftier periods of reasonable notice at common law.  However, employers also need to be aware of other issues that may arise from employees’ decision to defer retirement and continue working.  When it comes time to end the employment of an older, more senior employee, employers should be aware of some of the risks, as illustrated in three recent decisions from Canadian courts.

The Older Worker's Duty to Mitigate:  Dodge v. Signature Automotive Group Ltd.

The plaintiff was approaching 60 years old when his employment was terminated without cause or notice due to his declining sales of 'add-ons' to new car buyers.  He had worked for the employer car dealership for just over 20 years, and was offered a package equivalent to less than 6 months' pay.   The employer argued that the plaintiff had made inadequate mitigation efforts and that any damages for lack of reasonable notice should be reduced.  In the first six months following his termination, the plaintiff did not even prepare a resume and over the course of the first year post-termination, he only applied for seven (7) positions.  Despite the fact that there were numerous other car dealerships in the area, including some that had advertised job openings, the plaintiff made little effort to contact other potential employers seeking work. 

The Court agreed with the employer that the plaintiff's rather "passive attitude" toward his job search did not reflect a reasonable mitigation effort on his part.  The Court found that the plaintiff would be entitled to 17 months' reasonable notice based on his age, length of service, level of responsibility and the availability of other work in the industry.  However, considering his insufficient mitigation, the Court reduced that figure to 14 months' notice.  In most cases, the reduction for lack of mitigation would have likely been greater than 3 months' notice, but the Court made the following observation:

...  I spoke earlier about the Plaintiff's age. As Brenner J. said, at para. 39 in Carlysle-Smith, above, "[i]f an employee has not taken reasonable steps, but if the court is satisfied that even if such steps were taken that it is unlikely that such alternative employment would have been achieved, then presumably little or no reduction in the notice period would be appropriate." In my view, the fact that Mr. Dodge is 60 means that it was less likely that alternative employment would have been achieved. It is only for that reason that I have not reduced more substantially the applicable notice period.

This case arguably stands for the proposition that although an older worker still bears responsibility to look for other work, lack of mitigation will not have the same adverse consequences as it would for a younger worker because of the likelihood that the terminated employee would not find another position anyway because of his/her age.

Loss of an Unreduced Pension:  Arnone v. Best Theratronics Ltd.

The plaintiff was 53 and had 31 years of service when he was terminated by the employer.  At the date of his dismissal, the plaintiff was less than 17 months from having earned an unreduced pension.  As a result of his termination, and the employer's refusal to bridge his service, he received a reduced pension.  In addition, because the plaintiff was terminated prior to his retirement, he was denied a 'retiring allowance' of 30 weeks' salary that would have otherwise been payable.  The employer offered the plaintiff only the termination pay required under the Canada Labour Code (about 14 1/2 weeks' salary continuance).  The plaintiff brought a motion for summary judgment, seeking payment of 24 months' reasonable notice, the difference between a reduced pension and the unreduced amount (based on actuarial calculations), as well as the retiring allowance.  The employer argued that there was a "genuine issue for trial", including a determination of the nature of his position (supervisory vs. managerial) and whether his mitigation efforts were adequate.

The Court found that the trial record did contain sufficient evidence to permit a fair resolution of the outstanding issues.  With respect to the amount of reasonable notice that the plaintiff was entitled to, the Court stated:

Of particular importance in the circumstances of this case is the fact that the plaintiff was 16.8 months from achieving full pension entitlement. This doesn’t mean that the plaintiff had to retire in 16.8 months but rather that upon the expiration of that period of time he would be entitled to receive an unreduced pension. Time to retirement is an obvious consideration when long-term employees are dismissed due to restructuring. In such circumstances it is also common that the employer does not have an expectation of mitigation because the bridging period ... may be less than the notice period that would otherwise be applicable.

...

There is no reasonable doubt that the plaintiff would be entitled to at least seventeen months’ notice (subject to mitigation considerations) regardless of the subtle distinctions urged by the defendant respecting the character of the plaintiff’s employment.

In the result, the Court awarded the plaintiff pay in lieu of the bridging period of 16.8 months' pay, $65,000 for the value of an actuarially  unreduced pension, 30 weeks' pay as a retiring allowance, pre- and post-judgment interest, and legal costs of almost $53,000.

Where an employer terminates the employment of a long-service employee who would become eligible for an unreduced pension within the reasonable notice period, the employer should seriously consider bridging the employee to retirement age, or risk becoming liable for the loss that flows from providing a reduced pension.

Effect of Employee's Decision to Retire:  Kimball v. Windsor Raceway Inc.

The plaintiff employee had worked for the Raceway for 42 years (with some brief interruptions due to medical leave or layoff), and was 70 years old when his employment was terminated as part of the fall-out from the OLG's decision to remove slot operations from Ontario's horse racing facilities.  Prior to his termination, the plaintiff had expressed an intention to retire, but had extended his retirement date several times.  Most recently, the plaintiff had told the employer that he intended to retire at the end of 2012.  However, his employment was terminated effective August 31, 2012, several months before his retirement was to occur.  The plaintiff brought a motion for summary judgment on his wrongful dismissal claim, arguing that there was "no genuine issue for trial" since there was no argument that his employment was terminated without cause and the employer had conceded that the plaintiff was at least entitled to statutory severance pay under the Employment Standards Act, 2000.  The employer defended the motion, arguing that a trial was necessary to weigh evidence of the plaintiff's potential retirement and how that would affect the reasonable notice to which he might be entitled.

The Court found that the plaintiff had a clear entitlement to his statutory severance, and there was no compelling reason to make him wait until after a trial to receive this money.  The Court therefore granted partial summary judgment in the amount of 26 weeks' pay.  However, with respect to the plaintiff's claim for reasonable notice, the Court held that there was a genuine issue for trial and that further evidence would be necessary to properly adjudicate various aspects of the case, including mitigation and the impact of the plaintiff's likely retirement.  After considering the rationale behind the concept of reasonable notice (i.e., to give the employee a fair opportunity to find other work), the Court observed:

If the dismissed employee has no intention to look for work, but has instead decided to retire, the very purpose for which reasonable notice is required to be given is absent. That is a factor that may well be relevant in assessing what constitutes reasonable notice in this case.

Accordingly, the motion for summary judgment on the common law claim was dismissed.  It remains to be seen how much an employee's stated intention to retire may affect his/her entitlement to damages for reasonable notice.

* * *

Do you have questions about an employee's entitlements upon termination?  Need guidance on the challenges of dismissing an older, long-service employee?  Contact Lance Ceaser for assistance.