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Case Law Update: Age-Based Distinction In Long-Term Disability Benefit Plan Justified Under Section 1 Of The Charter – Employee Rights/ Labour Relations



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In Rayonier v. Unifor,
Locals 256 and 89
(the “Decision”) the long-term
disability (“LTD”) coverage provided by Rayonier (the
“Employer”) under the parties’ collective agreement
was challenged by Unifor, Locals 256 and 89 (the “Union”)
on the basis that by ceasing LTD coverage for employees aged 65 and
older, the Employer was discriminating against employees on the
basis of age. The Union further argued that provisions under the Human Rights Code
(Ontario)(“HRC”), the Employment Standards
Act
(Ontario) and the Benefit
Plans
regulations thereunder (“ESA”) –
which exclude age-based distinctions under the terms of
certain benefit plans for employees aged 65 and older from the
prohibitions on age-based discrimination under the HRC and ESA
– violate section 15(1) of the Canadian Charter of
Rights and Freedoms
(the “Charter”). Section
15(1) of the Charter provides that every individual is equal before
and under the law, including the right to the equal protection and
equal benefit of the law without discrimination based on age.

Arbitrator Knopf found that because LTD coverage terminated when
active employees reached the age of 65, leaving them without a
benefit available to younger workers, this differential treatment
amounted to prima facie discrimination under
section 15(1) of the Charter. However, it was ultimately found that
the age-based restriction under the LTD plan incorporated into the
parties’ collective agreement was justified under section 1 of
the Charter, which guarantees the rights and freedoms set out in
the Charter subject only to such reasonable limits prescribed by
law as can be demonstrably justified in a free and democratic
society.

In determining that the age 65 limit for LTD coverage was
reasonably justified, the following were cited:

  • Eligibility for Retirement Income. The cut-off
    age is rationally connected to and consistent with (i) the age at
    which government pensions, such as Canada Pension Plan
    (“CPP”) are available on an unreduced basis, and (ii) the
    age by which employees become eligible for an unreduced pension
    under the employer-sponsored pension plan.

  • Minimal Impact. It has a minimal impact on any
    affected workers because other benefits are available to workers
    aged 65 and older. The impact was limited based on the demographics
    of this workforce, including the fact that the vast majority of
    bargaining unit members retire at an average age 60 and few
    individuals work past age 65.

  • Overall Benefits Package. Other health related
    benefits continue to be available to workers without any age limit
    attached, including extended health insurance and 52 weeks of
    short-term disability benefits.

  • Cost and Availability of Enhanced LTD
    Coverage
    . The evidence indicated that no insurers offer
    LTD without any age restriction and that 99% of available LTD plans
    have a cut-off age of 65. Although providing two-years of LTD
    coverage for employees aged 65-70 (as requested by the Union) might
    not have been cost-prohibitive for the Employer, future costs for
    such coverage could potentially be significant.

  • Collective Bargaining. The Arbitrator declined
    to send the parties back to the bargaining table or find that
    coverage should be expanded, in part, because the terms of the LTD
    benefit plan were reached through free collective bargaining. Free
    collective bargaining has been affirmed by the Supreme Court of
    Canada as a necessary precondition to the meaningful exercise of
    freedom of association guaranteed under section 2(d) of the
    Charter.

  • Proportionality. The LTD plan was found to
    meet the “proportionality test” (i) by virtue of the fact
    that age is a lesser concern in the context of the overall package
    of benefits available under the parties’ collective agreement,
    and (ii) when weighed against the importance of giving deference to
    the economic and social value of allowing employers and employees
    to determine the conditions of their workplaces for
    themselves.

In addition to the challenge to the age-based restriction in the
LTD plan, the Decision also considered other grievances related to
life insurance coverage, which were upheld based on the
interpretation and application of the terms of the parties’
collective agreement. Therefore, employees aged 65 and older were
entitled to life insurance coverage, which added to the suite of
other benefits provided after LTD coverage ceased at age 65.

This Decision identifies a number of considerations for
employers when deciding how to structure workplace benefits,
especially when obtaining coverage for employees aged 65 and older.
While employers can still rely on the exceptions under the HRC, and
ESA, it would be prudent to carefully evaluate any age-based
cut-offs for employees aged 65 and older. As noted in the Decision,
prohibitively high costs or the inability to source certain types
of benefits for employees past age 65 can support a distinction in
the level of coverage provided to different employees based on age;
however, where cost and availability do not significantly affect
the provision of certain types of benefits to workers aged 65 and
older, it would be harder to justify differential treatment,
especially where no offsetting or alternative benefit is
available.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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