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Terminating Older Employees: The Cost has Never Been Higher

By now we all know that for the most part there is no mandatory retirement age in Ontario. For a variety of reasons, including shortfalls in retirement savings or job satisfaction, many employees are working well past the traditional retirement age leading to increasing numbers of older employees. In recent years, Ontario courts have trended towards awarding older employees higher damage awards for wrongful dismissals. Courts have also held older employees to a lower standard in terms of the efforts required to mitigate wrongful dismissal damages by finding replacement employment. The result is that employers are faced with significantly increased risk of liability when terminating older employees.  

In a recent decision, Ozorio v Canadian Hearing Society, the Ontario Superior Court of Justice provided employers with a reminder of the ever-increasing costs involved with terminating older employees. Ozorio, a 60 year old non-executive level employee with 30 years of service, was terminated as a result of company reorganizing caused by significant operating deficits experienced by the company. The court awarded Ozorio 24 months’ pay in lieu of notice of termination for her wrongful termination. The award was based largely on her age and on the resulting ”competitive disadvantage” she would face against younger more recently trained employees. To support its findings, the Court highlighted a number of recent decisions where older, long serving, non-executive workers were also awarded 24 months’ notice.

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

• A well-crafted employment agreement can effectively restrict employees’ entitlements upon termination. Employers should ensure all employees execute written employment agreements with enforceable termination provisions. Had Ozorio executed an employment agreement, her entitlements could have been limited to 34 weeks’ pay. You can read CCPartners’ recent blogs on the importance of well-drafted employment agreements here, here, here and here;
• Employers are within their rights to provide employees with working notice of termination instead of termination pay. By providing working notice, an employer can substantially reduce 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 Ozorio with 18 months’ advance notice of termination, there would have been no liability at the end of the notice period except for Ms. Ozorio’s statutory severance pay of twenty-six (26) weeks’, which cannot be provided through working notice;
• Wherever possible, employers ought to offer the terminated employee a reference letter. Reference letters increase an employee’s chances of finding replacement employment, which, in turn, reduces employer liability. In this case, the Court considered the fact that the company did not offer a reference letter; and
• Outplacement counselling can be an effective tool for assisting a terminated employee find replacement employment. Employers ought to consider offering employee outplacement counselling upon termination. This is especially so in instances such as in this case where the employee was long-serving with little to no work experience outside of the employer’s organization.

The lawyers at CCPartners are well versed in all aspects of employee terminations and can help employers reduce exposure, whether proactively at the hiring stage or at termination. Click here for a list of experienced lawyers as CCPartners who can help.