Northern Exposure

Benefits beyond age 65?

By Marc Rodrigue

The laws that generally provided for mandatory retirement in Canada have been eliminated. Across Canada, with very few exceptions, employees generally cannot be forced to retire at age 65. But can their benefits be cut off at age 65?

Even if employers are permitted to cut off benefits to workers 65 and older under human rights antidiscrimination laws, are they contractually entitled to do so? Recent labor arbitration decisions indicate that if employers don’t properly contract to cut off benefits, they may not be entitled to cut off benefits at all.

End of mandatory retirement

The end of mandatory retirement in Canada began in Quebec in 1982 and ended with the federal sector in 2012. Ontario was one of the provinces that put an end to mandatory retirement in the mid-2000s, with amendments to the Ontario Human Rights Code in 2006.

Prior to 2006, the Ontario Human Rights Code provided age-related nondiscrimination protections only for those between the ages of 18 and 64. Once an employee hit age 65, he or she could be subject to an employer’s mandatory retirement regime and was no longer afforded age-based protection.

In 2006, Ontario’s Human Rights Code changed, and age-related protection was granted to all 18 years of age or older, in line generally with many other provinces at the time, such as Alberta and Manitoba. As a result, age-based programs, such as mandatory retirement, became generally unavailable to employers.

Differentiation in benefits

Though the system changed dramatically as a result of the amended Human Rights Code, one aspect of the legislation was left unchanged: Employers were still entitled to differentiate in benefits provisions based on an employee’s age. More specifically, employers remained entitled under the Human Rights Code to discontinue an employee’s benefits at age 65.

Ten years have now passed since the new legislative regime took hold, and the legacy of those changes continues to unfold. Canada’s workforce is maturing, with increasing numbers of employees choosing to work past 65. Benefit cutoffs come as an unanticipated impact to some.

With the potential to affect a growing number of employees as the baby boomer generation continues to mature, the aspect of the law that permits benefit cutoffs has come under various forms of scrutiny. It has been challenged, without success, as being contrary to the Human Rights Code itself (though the legislation expressly permits this). The benefits cutoff provisions of the Human Rights Code have themselves been challenged as unconstitutional under the Canadian Charter of Rights and Freedoms. In challenges under the Charter, the provisions have been found acceptable despite being found to be discriminatory.

Challenges in unionized workforces

Having found no foothold to challenge the benefit cutoff practice on a statutory or constitutional basis, several unions have brought contractually based challenges to the practice. More specifically, unions have challenged an employer practice of cutting off benefits at age 65 as being contrary to a governing collective agreement. As the unions’ argument goes, if the employer has not bargained to cut off benefits at age 65, notwithstanding the ability to do so under the Human Rights Code, the employer is contractually obliged to continue benefits after age 65.

Labor unions have found some success in this contractual argument. By way of example, in the recent case of Brockville Mental Health Centre v Ontario Public Service Employees Union, Local 439, Arbitrator Paula Knopf was called upon to interpret the language of a collective agreement with respect to long-term disability, life, accidental death and dismemberment, and optional life insurance benefits. In the language of the collective agreement at issue, only one of those benefitslong-term disability benefitsreferenced that the benefit would be subject to the terms and conditions of an applicable long-term disability plan.

The applicable long-term disability plan had an age cutoff of 65. The remaining benefits, being life, accidental death and dismemberment, and optional life insurance benefits, had no such reference and no other language in the collective agreement, which expressly said that the benefits could be discontinued or decreased at age 65.

As a result of this, the employer was found to be responsible for continuing the life, accidental death and dismemberment, and optional life insurance benefits for employees after age 65.

Next steps for Canadian employers

The contractual basis on which labor unions have been able to secure ongoing benefits coverage might equally find its way into nonunion environments. In order for Canadian employers to ensure that they are contractually entitled to discontinue benefit coverage at age 65 or above, careful consideration should go into the formation and drafting of written employment contracts.

Verbal contracts, or contracts that fail to provide some level of protection for benefit cutoffs (whether expressly written into the contract or at the very least inferred by way of a reference to the terms and conditions of any applicable plan and plan document(s) that themselves indicate an age cutoff) may be subject to significant scrutiny in the event an employer proceeds to cut off benefits at age 65.

As with unionized environments, employers who fail to properly contract for benefit cutoffs may be responsible to continue benefits well past 65, facing the potential of increased premiums or even the potential that the employer will be required to step into the place of an insurer if a third-party insurer refuses to continue coverage for a Canadian employee over age 65.