Jun 26, 2018

Denial of benefits to older employees violates Charter of Rights, Ontario Human Rights Tribunal rules

Talos v. Grand Erie District School Board, 2018 HRTO 680 (CanLII)

June 26, 2018

In an important decision with wide-ranging implications, the Ontario Human Rights Tribunal has held that provisions of Ontario's Human Rights Code and Employment Standards Act, which prohibit mandatory retirement at age 65 but by way of exemption effectively permit age-based distinctions in pension, benefit, and insurance plans for employees aged 65 and over, violate the prohibition against age-based discrimination in s.15(1) of the Canadian Charter of Rights and Freedoms. In the Tribunal's view, the denial of the Code's protection to workers aged 65 and older creates a distinction based on age, since the impugned provisions operate to permit lower compensation to older workers and entrench the stereotype that their labour is worth less. Finding that actuarial evidence available since the abolition of mandatory retirement demonstrates that the provision of benefits to older workers is not financially prohibitive, the Tribunal ruled that this infringement cannot be justified as a reasonable limit under s.1 of the Charter, as the Legislature could devise a less intrusive means to meet the objective of maintaining the financial viability of benefit plans. Accordingly, the Tribunal concluded that the legislative provisions were not available as a defence to a claim of age discrimination. The Tribunal ordered the complaint to proceed.

The Facts:

When a school teacher's extended health, dental, and life insurance benefits plan was terminated on his 65th birthday, the teacher filed a human rights complaint and brought an application alleging that the exception in the Ontario Human Rights Code that permits employers to terminate benefits for workers aged 65 and older infringed his equality rights under s.15(1) of the Charter of Rights.

Employed as a secondary school teacher by the Grand Erie District School Board, Wayne Talos chose to continue to work on a full-time basis after he turned 65, in part because his family faced large medical expenses arising from his wife's serious illness, which had caused her to stop working in 2006. His wife had no employer-sponsored benefits and did not qualify for various government-sponsored benefits as she was below the age of 65. In a February 1, 2012 letter, Talos was advised by the school board that his workplace benefits plan would end on March 31, 2012 because he was turning 65 on March 8 of that year. He was unable to obtain an adequate individual insurance plan, as the cost was prohibitive and the coverage not as extensive as was needed to fully cover his wife's illness. Talos and his wife applied for and received some assistance from government-sponsored drug plans, but were required to pay a $3,000 deductible. As well, some drugs that were previously available under Talos' employee benefits plan were not covered by the government plans.

Talos filed a human rights complaint with the Ontario Human Rights Tribunal alleging discrimination in employment on the basis of age, contrary to s.5(1) of the Human Rights Code, seeking monetary compensation of $160,000 for lost benefits and compensation for injury to dignity, feelings, and self-respect. On August 13, 2013, he gave notice that he intended to argue that s.25(2.1) of the Code, exempting benefit plans from age-based discrimination, contravened his equality rights under s.15(1) of the Canadian Charter of Rights and Freedoms, which prohibits discrimination on the basis of enumerated grounds, including age. Unlike the benefit exemption provisions in the Human Rights Code, the Charter does not limit protection to a particular age group.

Involuntary retirement at age 65 was eliminated in Ontario with the passage of Bill 211 in late 2005, which removed the upper age limit of 65 in s.5 of the Human Rights Code. However, s.25(2.1) of the Code states that "[t]he right under section 5 to equal treatment with respect to employment without discrimination because of age is not infringed by an employee benefit, pension, superannuation or group insurance plan or fund that complies with the Employment Standards Act, 2000 [ESA] and the regulations thereunder." Section 44(1) of the ESA, found in Part XXII of the Act, provides, in part, that "no employer or person acting directly on behalf of an employer shall provide, offer or arrange for a benefit plan that treats [employees] differently because of the age, sex or marital status of employees." However, for the purposes of Part XXII of the ESA, age is defined in s.1 of Ontario Regulation 286/01 as "any age of 18 years or more and less than 65 years."

At the hearing, an actuarial expert called by the Ontario Government testified that the cost of extended health care benefits typically decreases at age 65, as a result of government-sponsored drug plans available to seniors, but that the cost gradually increases after age 65 as more health care and higher cost drugs are needed. The expert witness further hypothesized that the cost of such benefits could increase significantly due to "anti-selection," whereby employees with high cost drug claims would be more likely to keep working after age 65 to maintain their benefits, although he acknowledged there was little data currently available regarding this issue. In contrast, an actuary called by the Ontario Human Rights Commission (OHRC) provided a data study indicating that the cost of a combined dental and supplementary health care benefit plan for employees aged 65 and over was approximately the same as the cost for employees aged 40-49, given the availability of government programs to cover certain increased costs. In this expert's view, it was financially sustainable to include employees aged 65 to 79 in health care and modified life insurance benefit plans, even with plan cost increases of 10-15 percent year over year, based on an assumption that five to 10 percent of the workforce is aged 65 or older, and taking into account that retirees' claims costs are considerably higher for every age group above 50. As well, a sociologist specializing in gerontology and ageism testified that older workers often choose to work beyond retirement due to financial necessity and that they continue to face disadvantage in the workplace through negative stereotypical attitudes despite the prohibition against involuntary retirement.

The Arguments:

Talos argued that s.25(2.1) of the Human Rights Code violated his equality rights under s.15(1) of the Charter, since it created a distinction on an enumerated ground, i.e. age, that perpetuated prejudice or stereotypes. He submitted that the provision was not saved by s.1 of the Charter, which allows reasonable limits on fundamental Charter rights, as there was no pressing and substantial concern and further, the provision resulted in more than a minimal impairment of his rights. The Ontario Human Rights Commission (OHRC) and other intervenors argued that the blanket exclusion under the impugned provision was arbitrary and too broad, was not justified on actuarial grounds and devalued older workers. They contended that workplace group benefits could address the needs of older workers without discrimination, while still allowing employers and insurers to invoke the defences in ss.11 and 22 of the Human Rights Code where differential treatment is justified by credible actuarial evidence that demonstrates bona fides and/or establishes undue hardship.

The school board submitted that there was no violation of s.15 of the Charter because Talos, as a unionized professional, was a member of an advantaged group and suffered no disadvantage in his senior years, nor was he the victim of perpetuated stereotypes, given the generous nature of his pension plan and other negotiated collective agreement rights, as well as the availability of government-supported programs for those over 65. As well, contending that the increased costs of providing benefits to older workers would either significantly increase the cost of benefits or would result in a significant reduction in benefits provided to all employees, the government submitted that the choice of age 65 as the point to differentiate in benefits was justified and a reasonable limit on employees' rights under s.1 of the Charter, as it was the age at which a majority of employees retired and could transition to pension benefits.

The Decision:

In a 112-page decision, Yola Grant, Associate Chair of the Ontario Human Rights Tribunal, ruled that s.25(2.1) of the Code violated s.15(1) of the Charter and was not justified as a reasonable limit under s.1.

Grant first noted that, although the Tribunal had jurisdiction to determine a constitutional issue raised during an application, it did not have jurisdiction to issue a general declaration of invalidity, but could refrain from applying the impugned section if it was found to be unconstitutional. She also held that Talos had standing to bring the constitutional challenge, since the denial of Code protection through the "carve out" in s.25(2.1) was a serious issue, Talos had a genuine interest in the issue given his family's direct experience of disadvantage from the loss of benefits, and his application was a reasonable way to challenge the validity of the provision. She added that Talos' personal wealth or status as a unionized professional was irrelevant, as he was required to demonstrate only that he was a member of a group that was adversely affected. Emphasizing that the provision in the Human Rights Code exempting benefits from age-based discrimination "applies to all workers 65 and older, whether they are males or females, unionized, professional, recent immigrants or Canadian-born residents," and whether they had "a long or short career or [were] well paid or not," Grant determined that Talos had standing to bring a constitutional challenge on two bases: "as a person who directly experienced disadvantage and as a member of the group of '65 and older' workers who experienced disadvantage through the loss of workplace benefits and the loss of Code protection."

Turning to whether s.25(2.1) of the Human Rights Code infringed the prohibition against age-based discrimination in s.15(1) of the Charter, Grant set out the two-part test first articulated by the Supreme Court of Canada in Law Society of British Columbia v. Andrews, 1989 CanLII 2 (SCC), and affirmed in Kahkewistahaw First Nation v. Taypotat, 2015 SCC 30 (CanLII), which asks: "(1) whether the law creates a distinction based on an enumerated or analogous ground; and (2) whether the impugned law fails to respond to the actual capacities and needs of the members of the group and instead imposes burdens or denies benefits in a manner that has the effect of reinforcing, perpetuating or exacerbating their disadvantage."

On the first question, Grant found that the denial of benefits and Code protection to workers aged 65 and older was prima facie a distinction based on age, observing that "[workers under the age of 65] are protected by the Code from age-differentiated group benefits, except in limited circumstances and then only on an actuarial basis, while [those who are 65 and older who perform the same work are] not afforded Code protection and [are] thus vulnerable to not being rewarded equally for work performed."

Next, Grant held that Talos experienced various disadvantages, including loss of peace of mind, financial outlays, and the need to apply for needs-tested government benefits. She rejected the school board's contention that Talos suffered no substantive disadvantage since he was eligible for a "generous" pension and government-sponsored benefits, remarking that these considerations were "irrelevant to his assertion of his right to equality in relation to employment benefits as part of his total compensation package." Referencing the second question set out in Taypotat, Grant opined that "[b]eing stripped of benefits at age 65 and older is not responsive to the needs of older workers," observing that many of these benefits, such as dental care, life insurance, and paramedical treatment, are not replaced by government-sponsored benefits, and that this disadvantage is exacerbated by the fact that older workers face "significant cost hurdles" in replacing their workplace benefits with individual insurance coverage. Also finding that the absence of benefits deprives older workers of the supports needed to maintain their fitness to work, such as day-to-day health maintenance, Grant held that their well-being is diminished in the areas of health, financial, and job security. Finally, she concluded that the blanket exclusion reinforces stereotypes of older workers as less deserving of compensation and equality protection than younger workers, stating:

[T]he impugned law operates to permit lower compensation to older workers, without regard to individual circumstances and without regard to the social, political, economic and historical factors concerning the same group of workers over age 65 who, prior to Bill 211, were subject to involuntary retirement. This serves to devalue the contributions of workers age 65 and older in the workplace and entrenches the stereotype that their labour is worth less. … [T]he impugned law disadvantages workers age 65 and older in the same manner that the pre-2006 Code historically disadvantaged the same age group by denying them protection from involuntary retirement, and thus infringes the equality guarantee of s. 15(1) of the Charter. [emphasis in original]

Asking whether this infringement could be justified under s.1 of the Charter, as a reasonable limit "prescribed by law" that "can be demonstrably justified in a free and democratic society," Grant applied the framework set out by the Supreme Court of Canada in R v. Oakes, 1986 CanLII 46 (SCC), under which the Court is obliged to consider whether: (1) the objective of the limit is "pressing and substantial" according to the values of a free and democratic society, so as to warrant overriding a constitutionally protected freedom; (2) there is a "rational connection" between the means chosen to achieve the objective and the objective itself, and the means chosen "impair as little as possible" the Charter rights or freedoms in question; and (3) the effects of the restriction are proportional to its objective. Grant accepted that the stated goal of preserving "flexibility to provide the same or lesser benefits as provided to younger workers in order to maintain the financial viability of the benefit plans" was a pressing and substantial objective that was rationally connected to the distinction made by the provision. However, she was not convinced that the provision minimally impaired the rights of workers aged 65 and over. Observing that there was no evidence that other alternatives were considered before the passage of Bill 211, which allowed the "carve-out" of benefits despite the prohibition against mandatory retirement, or that any empirical data was considered regarding the financial viability of benefit plans for older workers, she stated:

Even with giving expression to the policy of "measured deference" [to the Legislature] in … consider[ing] … the impugned provisions, … the policy choice to deprive all active workers age 65 and older of Code protection from the elimination or reduction of workplace benefits is not a minimal impairment of these workers' rights. From the Hansard records, there appears to have been little or no thought given to minimizing the impairment of equal compensation and Code access for workers age 65 and older while preserving the viability of workplace group benefit plans.… The "carve out" is all encompassing and is insensitive to whether a particular benefit programs is closely related to age in terms of the cost or the need for the benefit for employees age 65 and older.

Moreover, observing that "there is now 'credible' data … and experience/historical data that can be relied on instead of hypothesis/assumption" indicating that it is not cost-prohibitive to provide coverage to workers aged 65 to 79, Grant opined that "the policy choice to exclude workers age 65 and older from equal protection in employment benefits appears arbitrary and not 'within a reasonable range of choices' to which this Tribunal should accord deference." In effect, she held that it would be less impairing to allow the Tribunal to determine on a case-by-case basis whether the employer's provision of lesser benefits in its workplace was bona fide under the Human Rights Code, stating that "the objective of maintaining financial viability of the group benefits plans can be achieved without hindering the right of an employee to raise a complaint before this Tribunal to examine whether the age-based differentiation is reasonable in the circumstances."

In the result, remarking that "[t]he government's age limit of 65 for protection from discrimination in the provision of benefit and insurance plans appears unacceptable given the cogent evidence to the contrary that there is no close link to costs and age," and that "[t]he actuarial evidence presented in this matter made it clear that there are reasonable ways to protect older workers from discrimination in relation to workplace benefits, while protecting employers from the expense of unduly costly healthcare benefits and life insurance plans," Associate Chair Grant issued an order declaring that "Section 25(2.1) of the Human Rights Code, when read in conjunction with s.44 of the [Employment Standards Act] and [Ontario Regulation 286/01], is unconstitutional…, and as such is not available as a defence" to Talos' claim of age discrimination. Accordingly, she ruled that Talos' complaint should proceed to a determination of the merits and of damages.

Comment:

The constitutionality of s.25(2.1) was previously challenged in Ontario Nurses' Association v. Municipality of Chatham-Kent, [2010] O.L.A.A. No. 580 (QL), reviewed in Lancaster's Pension & Benefit Law, September 16, 2011, eAlert No. 98, in which Arbitrator Brian Etherington upheld provisions in the Ontario Human Rights Code and Employment Standards Act that significantly reduced or eliminated the availability of employer-sponsored benefit and insurance plans to employees aged 65 and older. Similarly to the instant case, Etherington found that the impugned provisions infringed s.15(1) of the Charter by creating a distinction based on an enumerated or analogous ground, i.e. age, and that this distinction created a disadvantage by perpetuating prejudice or stereotyping. However, he concluded that the infringement was saved as a reasonable limit by s.1 of the Charter, given the need for flexibility in cases where the government was pursuing a social policy objective aimed at resolving the interests of competing groups or at implementing solutions that attempted to balance benefits and costs for different parties.

The reasoning set out in Chatham-Kent has been adopted by decision-makers in a number of cases. See, for example, Ontario Nurses' Association v. University Health Network, 2015 CanLII 15359 (ON LA), reviewed in Lancaster's Labour Arbitration, March 9, 2016, eAlert No. 232, in which Arbitrator George Surdykowski dismissed a grievance challenging the constitutionality of a collective agreement provision allowing for the cessation of certain health benefits at the age of 70 on the basis that the union was "seeking to re-litigate substantially the same constitutional issue that was determined against it in Chatham-Kent"; Repaye v. Flex-N-Gate Canada, 2012 HRTO 1258 (CanLII), in which Ontario Human Rights Tribunal Vice-Chair Brian Cook held that "it is clear that workplace … disability plans that differentiate because a person is over 65 cannot be challenged under the Code"; and Kartna v. Toronto (City), 2014 HRTO 395 (CanLII), reviewed in Lancaster's Firefighters/Fire Services Employment Law, September 17, 2014, eAlert No. 86, in which a Toronto firefighter's complaint regarding the cessation of his long-term disability benefits at age 65 was dismissed because it had no prospect of success.

However, in the case under review, the Associate Chair, while endorsing Arbitrator Etherington's reasoning and conclusion that the provision infringed s.15(1) of the Charter, explicitly declined to follow his decision with respect to s.1, observing that she "had the benefit of opinion evidence of various experts that were not available to the arbitrator in Chatham-Kent," and that the actuarial evidence before her differed significantly from that presented in Chatham-Kent regarding the cost associated with benefits for older employees, stating: "In the intervening years since involuntary (mandatory) retirement was eliminated in 2006, societal views of workers over age 65 have changed significantly, compensation packages have also changed, and the experience of claims and costing for a decade are particularly relevant today to the justification of age-differentiated benefits and the financial viability of workplace plans that include workers age 65 and older."

The implications of the Talos decision are likely to be far-reaching, as a similar statutory exemption for benefit plans exists in many jurisdictions across Canada. Moreover, as the Globe and Mail reported (June 8, 2018), quoting B.C.-based human rights lawyer Raymond Hall, the Talos decision will affect those who have experienced disruptions in their career, such as immigrants, the disabled, part-time workers, and women who have taken time off work to have children. As Hall explains, these historically disadvantaged groups are less likely to be in a position to retire comfortably by the age of 65, and are more likely to be reliant on their employee benefits.

Following issuance of the ruling in Talos, Chief Commissioner of the Ontario Human Rights Commission Renu Mandhane stated: "What this decision stands for is that it's not acceptable for employers to routinely and categorically take away benefits from older workers. The decision is important because it sends a message that older workers are equally valuable, that they're equal contributors in the workforce."