Canada: Higher Costs Associated with Terminating Older Employees

By now, all of us recognize that, for the most part, there is no mandatory retirement age in Ontario or BC.

However, for a myriad of reasons, by and large, related to the sky-rocketing cost of living, there are often shortfalls in retirement savings, and/or job satisfaction, so many of us are working well beyond the traditional retirement age, which leads to an ever-growing number of older employees in the workforce.

In recent years, Ontario courts have moved toward awarding older employees higher damage awards for wrongful dismissals. Courts have additionally held older employees to a lower standard in terms of the efforts required to mitigate wrongful dismissal damages through finding replacement employment. The upshot is that employers are faced with the significantly increased threat of legal responsibility when terminating older employees.

In a recent Ontario, Superior Court of Justice case, the court determined in favor of a 60-year-old non-executive level employee with 30 years’ service for wrongful termination concerning an enterprise undergoing reorganizing because of operational deficits, etc.

The court awarded this ex-employee 2 years’ pay in lieu of notice of termination for her wrongful termination case. To support its findings, the court highlighted a number of recent decisions where older, long-serving, non-executive employees were also awarded 24 months’ notice.

It is significant to note here that this award was based largely on her age, and on the resulting “competitive disadvantage” she would face against younger, more recently trained employees.

So how can employers help reduce the potential liability involved with terminating their older employees?

  • A nicely crafted employment agreement can effectively restrict employees’ entitlements upon termination. Employers should make certain that all personnel execute written employment agreements with enforceable termination provisions;
  • Employers are within their rights to provide employees with working notice of termination instead of termination pay. By providing working notice, employers can significantly lessen or eliminate liability altogether. During the working notice period, employees are required to continue to carry out their duties at the same level of performance. In this case, had the company provided the ex-employee with 18 months’ advance notice of termination, there would have been no liability at the end of the notice period, other than for statutory severance pay of twenty-six (26) weeks’, which cannot be provided through working notice;
  • Wherever possible, employers would be prudent to offer the terminated employee a reference letter. Reference letters increase an employee’s chances of finding replacement employment, which, in turn, reduces the employer liability. In this case, the Court also considered that this enterprise did not offer a reference letter; and
  • Outplacement Counseling can be a powerful tool to aid a terminated employee in finding replacement employment. Employers should consider offering employee Outplacement Counseling upon termination. This is especially so in instances such as in this Ontario case where the employee was long-serving, with little to no work experience outside of the employer’s organization.


Supporting Article Research Sources: Mondaq, CCPartners