An aging workforce: the legal issues (Part I)
The impact of the aging workforce is being felt globally in the economy and is directly affecting businesses. Unprecedented issues have arisen, such as labour shortages, greater health care needs for the elderly, and decreased private and public investments with fewer people contributing as the baby boom generation retires. In addition, the issues of older workers and eldercare have come to the forefront as demographic trends continue to show declining fertility rates and a steady increase in life expectancy. Statistics and analysis on the aging workforce can be found on the Service Canada website.
Moreover, the impact on the workforce is greater than expected. Employers as well as employees have several HR challenges to deal with, including: early retirement, working beyond age 65 for various reasons, age discrimination, labour and skills shortages, cross-training (knowledge retention/transfer), health and safety, health care costs. And older worker may feel an increased need for work-life balance measures. Several of these issues also have legal implications, and that is what we will explore in this series.
Let’s start with a brief discussion on age discrimination.
Human Rights legislation across Canada covers discrimination based on age. The law forbids age discrimination in employment with very few exceptions, one of which is the bona fide occupational requirement. In the law, age is generally defined as being 18 years or older (19 years or older in some jurisdictions). This means that employers cannot treat employees differently without justification because of their age. In general, age discrimination in the workplace occurs when an employment decision is made on the basis of an employee’s or applicant’s age. Most of these decisions are made in the context of the employer’s recruiting and hiring, performance management, disciplinary and termination practices.
It is important to remember that the concept of who is an “older” person is relative. As indicated in several human rights commission guidelines: discrimination on the basis of age can be experienced by persons beginning as early as 40 to 45, particularly in employment. The term “older” is not meant to denote “old age” or to stigmatize persons in any way. Rather it is simply used as a relative concept meaning older than those who are less likely to face the particular types of discrimination being discussed.
The gist of it all is that age should not be used to deny hiring, training or promotion opportunities, to dismiss, or to force employees to retire because they’ve reached a certain age, unless there is a justifiable (bona fide) reason under the circumstances.
Human rights legislation recognizes that there may be legitimate reasons for employment discrimination on prohibited grounds such as age. The legislation allows an employer to justify a standard, factor, requirement or rule that has an adverse effect because of age by showing that it is a bona fide requirement. The legislation also allows direct discrimination in employment for reasons of age if the age of the applicant is a bona fide requirement because of the nature of the employment.
So what does this mean practically for employers?
To illustrate, during the economic downturn, many companies (of varying sizes) downsized/restructured and had to terminate a number of employees. With the best of intentions, many of our subscribers wondered if they could consider senior employees or employees 65 or over to dismiss or temporarily lay off. If you follow the rules of the law, the logical answer would be no. Why? Because you would be exposing your organization to possible discrimination claims as a result of the selection process.
In these situations, the older workers were inadvertently becoming a logical target for downsizing because of the higher salaries normally earned by workers who have been employed for longer period of time, and who might be above the age of 40. Given that the rationale behind downsizing is to lower payroll costs, an employer must exercise careful and considered judgment in selecting employees for termination, where the majority of higher-paid employees are over the age of 40.
It is crucial for employers to understand that any dismissal decision they make based wholly or partly on an employee’s age could be considered a violation of human rights law and would be scrutinized (unless there is an existing bona fide justification or requirement). In addition, if comments about age, or age discriminatory actions, were part of the reason for downsizing, it could constitute a valid basis for an age discrimination claim.
Under the circumstances, the employee would only need to prove that age was a determining factor in the employer’s decision to terminate. To defend such a claim, the employer would have to show that it made the decision based on reasonable factors other than the age of the employee, or that there existed a known bona fide justification or requirement.
Doorey’s Workplace Law Blog provides an interesting review of lessons learned in age discrimination suits. He relates a recent UK case where a British employment law tribunal ruled that the Canadian Imperial Bank of Commerce dismissed a 42-year-old executive in its London office in order to replace him with a “younger” and less-experienced (read: “cheaper”) employee.
Damages in this case will be determined at a later date, but CIBC faces a potentially large payout for breaching UK age discrimination laws.
When downsizing, have you discussed the employee’s age as a factor of selection? And, if yes, how did you decide this was not the route to take?
Next topic to be discussed in this aging workforce series will be mandatory retirement and related issues.
First Reference Human Resources and Compliance Managing Editor