Mandatory Retirement

A non-union employer is free to dismiss an employee at any time, with cause, or by giving notice or paying damages for a notice period, if the employer had no cause to dismiss the employee.  Does a non-union employer have just cause to dismiss an employee because the employee reaches the usual retirement age?

This interesting point was dealt by the B.C. Court of Appeal in a case called McLaren v. Pacific Coast Savings Credit Union. McLaren was a branch manager with Pacific Coast Savings Credit Union.  In late 1996, McLaren raised the issue of retirement with his employer.  McLaren was to be 65 in November of 1997.  He was told that the employer would not retain him as a branch manager after he turned 65, but could stay on as an account manager.   While McLaren intended originally to retire when he hit 65, he changed his mind, by late 1996.  He was concerned about financial matters.  In June of 1997, the employer wrote to McLaren and advised him that he would not be able to stay on, at all, after he turned 65. The employer did have a retirement policy.  It was a policy that had some discretion given to management to decide whether or not to retain the employee who hit the usual retirement age.  The policy also came into effect after Mr. McLaren started his employment. When Mr. McLaren started working, he was not told about a retirement policy, and he assumed that he would be required to retire at age 65. Mr. McLaren did not give notice to the employer, however, that he intended to retire.

The Court at trial found that McLaren had been wrongfully dismissed and was entitled to an 18 month notice period, and found that McLaren had six months’ notice of the employer’s intention not to retain him at the age of retirement.  The court also indicated that while Mr. McLaren did express an intention to resign, he did not act upon his intention by offering a letter of resignation or giving notice that he intended to resign.   The court found that it could not apply a resignation from the circumstances.  The judge awarded damages for 12 months salary, which amounted to an amount in excess of $100,000.  The decision was upheld on appeal, and is the last word on this topic in BC, for the present.

Retirement is an event which has to be planned in advance.  Many workers today, particularly those without pension plans, have to face the fact that retirement and the loss of a regular income stream, is a harsh reality. Whether one is 65 or not, one still has to eat, be sheltered, and pay taxes!  In McLaren, the court held that it is unfair to hold employees to chit chat about retirement, when it is easy for an employer to manage its business affairs to prevent uncertainty, surprise and expense about certain future events such as aging employees. Poor advance planning, by the employer in this case, cost it over $100,000 in damages plus court costs to the successful employee, and legal fees paid to the employer’s counsel.

In Johnson v. Global Television Network Inc. (CH Vancouver Island), 2008 BCCA 33, the court came to a different conclusion on the issue of mandatory requirement where the court found that mandatory retirement was a term of the employment contract. The court inferred that mandatory requirement at 65 was part of the employment contract because Johnson had voluntarily enrolled in the employer’s retirement plan and the employer contributed to the plan for many years.

Unless an employer relishes large surprises, employers should not assume that an employee will retire when that employee becomes 65. An employer should ascertain, well in advance, the views of the employee, and give proper advance notice in writing to the employee, if the employer intends that the employee shall retire as of age 65. An employee who expresses an interest in retirement, may change his mind. It is likely that without some concrete evidence of a resignation, that an employer who fails to give notice will be liable in damages for wrongful dismissal. Given that older employees, are often also longer term employees, often with little prospect of securing alternative employment, the damages will be substantial. An employee who wishes to work beyond 65 may wish to consult a lawyer where the employer wishes to terminate that employee, and has not given adequate notice. While retirement policies can be helpful, the policy must be one that is clearly expressed, acted upon, and part of the employment contract. A court will not necessarily infer, or find from the circumstances, a term that the employment contract ceases when an employee attains the usual retirement age. As we can see from McLaren, assumptions can be dangerous and expensive.

Paul Love, Arbitrator & Mediator