The Cost of Terminating Older Employees Is Increasing

Oct 11, 2016

Since the elimination of mandatory retirement in Ontario, employers have been required to manage the costs associated with terminating older employees. The costs can be significant because many of these employees did not sign employment contracts with termination clauses; these employees are entitled to “reasonable” notice of termination which can be 24 months or longer.

Recent cases suggest that older employees are obtaining higher wrongful dismissal damage awards, and it appears that judges may not expect these terminated employees to look for alternative work as seriously as younger employees. This blog discusses one of these cases.

The Case: Ororio v. The Canadian Hearing Society

Ms. Ozorio was terminated after 30 years’ service as a result of a re-organization when she was 60 years old.

The judge appears to have taken the following facts into account when awarding Ms. Ozorio 24 months pay in lieu of notice of termination:

  • She was divorced and the primary caregiver for a sick son who needed medication, and she also cared for her elderly mother who lived with her,
  • The employer’s initial settlement offer was 12 months pay and 2 months’ benefit continuation whereas at trial the employer argued that the reasonable notice period was considerably more (i.e. in the 18 to 20-month range),
  • The employer only paid her the minimum termination pay and severance pay she was owed under the Employment Standards Act,
  • The employer did not offer a reference letter,
  • The employer did not offer outplacement counselling,

When discussing the rationale for awarding 24 months notice the judge noted “Generally, a longer notice period will be justified for older long term employees…”

Who Is An Older Employee?

The judge on this case referred to two other cases which noted that a 60-year employee or an employee in their 60s face “extremely stiff competition with much younger applicants for the same kind of employment”, and a 60-year-old employee did not face a good prospect of re-employment “competing with younger, more recently trained and less likely expensive talent”, respectively.

Are Older, Long Service, Non-Executive Employees Entitled to Lengthy Notice Periods?

The short answer is yes. The judge referred to several cases where other judges concluded that older and long term employees in non-executive positions were entitled to pay in lieu of 24 months’ notice.

Lessons to be learned:

  1. If you are terminating a long service employee who is 60 years old or more think long and hard before making a low ball, initial settlement offer.
  2. If you are terminating an employee without cause and performance is not an issue then offer to provide the employee a reference letter. It can help the employee find work more quickly and therefore reduce damages. And it looks bad. My guess is that some judges increase the notice period because it seems hard-hearted not to provide a no cost reference letter to someone who could benefit from it.
  3. If you are terminating an older, long-term employee with no work experience outside her service with your organization then seriously consider offering the employee outplacement counselling. It can – and often does – help the employee find work more quickly and therefore reduce damages. The facts in this case suggest the employee was a perfect candidate for outplace counselling.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

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