Northern Exposure

Do Age-Based Early Retirement Programs Violate Human Rights Code?

By Ralph Nero and Ida Martin

Are pension plans that provide age-based early retirement programs discriminatory? In a decision that may be important across Canada, the Ontario Human Rights Tribunal has recently answered no.

In Kovacs v. Arcelor Mittal Montreal, Kovacs argued that he had been discriminated against on the basis of his age by not being able to participate in the early retirement program being offered by the employer, Arcelor.

As part of a plant closing, Arcelor and its union negotiated an early retirement package. To be eligible for this negotiated early retirement program, an employee had to satisfy one of the following requirements:

(a)    30 or more years of service;
(b)    At least 55 years old with 15 or more years of service; or
(c)    At least 52 years of age but less than 55 years of age with 25 or more years of service.

Kovacs didn’t satisfy any of the age-based eligibility requirements since he was 47 years old. But he did have 27 years of service.

Kovacs argued that he was subject to differential treatment on the basis of his age. Older employees with the same length of service were able to participate in the early retirement incentives, whereas he wasn’t. Furthermore, older employees with considerably less service than he had were also eligible to participate in the early retirement incentives.

Legal framework
The Ontario Human Rights Code (Code), like most human rights laws across Canada, prohibits discrimination in employment on the basis of age. However, there is a specific exemption in the Code for pension plans that comply with the Employment Standards Act, 2000 (ESA) and its regulations. The ESA contains a general prohibition on discrimination under a benefit plan on the basis of age. However, there is a regulation under the ESA that permits a differentiation on the basis of age in setting a normal pension date for voluntary retirees or an early voluntary retirement date or age. The age-based differentiation isn’t permitted, though, if the plan is subject to and contravenes Ontario’s Pension Benefits Act (PBA) provisions respecting normal retirement dates and early retirement pensions.

The Ontario Human Rights Tribunal reviewed the rationale for the negotiation of the early retirement plan – Arcelor sought to reduce the operating costs of an insolvent business that it had acquired, and the union sought to provide extra benefits to older and longer service employees since those employees might experience greater difficulty in locating another job.

The Tribunal also observed that not every age-based distinction contravened the Code and that it was relevant that Kovacs was not a member of a historically disadvantaged group. The Tribunal held that the plan in this case didn’t violate the PBA’s provisions regarding the normal retirement date. Accordingly, since the negotiated early retirement program complied with the requirements of the ESA and its regulations, there was no infringement of the Code. The application was dismissed.

This wasn’t a difficult case for the employer based on the facts. Nonetheless, the Kovacs decision should provide some comfort for employers in that early retirement plans that draw age-based distinctions won’t be found to be discriminatory if, in Ontario, they don’t contravene the PBA. This decision should also have persuasive value in other Canadian jurisdictions having similar statutes.