An Ontario arbitrator has confirmed the validity of the long-term disability exception to the mandatory retirement rule.
When Ontario eliminated mandatory retirement in 2006, the legislation provided an exception for insured employment benefit plans to maintain a cutoff based on age.
“This was intended to avoid destabilizing existing insurance plans while still permitting parties to negotiate changes,” says Lorenzo Lisi, a partner in the workplace law group at Aird & Berlis LLP. “For the most part, however, this has not become a hard collective bargaining issue and most unions focus on achieving post-retirement benefits for their members.”
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Although unions have rarely challenged the exception, the Ontario Nurses Association decided to contest the provision in the University Health Network’s benefits plan that ended long-term disability coverage at age 65.
The parties agreed that ending LTD coverage at age 65 offended the Charter of Rights prohibition on age-based distinctions. The key question for arbitrator Eli Gedalof was whether the exception could be “demonstrably justified” under the Charter as being within “reasonable limits” on employees’ rights and went no further than necessary in impairing them.
At the outset, Gedalof concluded there was a “rational link” between the exception and the governing legislation’s goal.He reasoned LTD is intended to replace employment income that normally ends at retirement, meaning that terminating LTD at retirement made sense in terms of the intended function of disability insurance.
Otherwise, Gedalof concluded there was “minimal impairment” of employees’ rights.
The evidence, he noted, established that most nurses retired at age 65, so the exception didn’t significantly affect the employer’s benefit structure; that employees maintained the right to bargain for benefits continuing past age 65; that extending LTD past age 65 blurred the distinction between wage and retirement income; that securing LTD benefits beyond age 65 was difficult and very costly if available, potentially leaving fewer resources for other employees; and that many employers did provide post-retirement benefits.
“In other words, the carve-out was narrowly focused and created minimal impairment and amounted to a reasonable and proportionate way to achieve the legislation’s objective,” says Lisi, who wasn’t involved in the case.
But the ONA argued because other means could satisfy the legislation’s intent, the exception went further than necessary.
“The Association points to evidence establishing viable alternative models of coverage, other provisions of the [Human Rights] Code and the [Employment Standards Act] that illustrate how necessary age-based distinctions can be evaluated without a complete exclusion from age-based protections and to other Canadian jurisdictions where such blanket exclusions do not exist,” Gedalof observed.
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But he rejected this submission. “The question that must be answered… is not simply whether it is possible to provide some form of LTD post-age 65 that is not cost-prohibitive. Neither does the availability of an alternative mechanism for meeting the legislative goal necessarily mean that the mechanism adopted by the Legislature does not meet the standard of minimal impairment.”
The upshot is that Ontario employers appear to be on firm constitutional footing in ending LTD coverage at age 65.
But the decision, Lisi observes, is limited to LTD and doesn’t authorize age-based distinction involving other benefits such as health, dental and life insurance.
“Other benefits may raise different considerations and employers who implement a cutoff should ensure they can justify their plan designs with clear evidence as to cost, risk and plan viability.”