Canadian High Court Upholds Mandatory Retirement Arrangements

July 21, 2008 ( - The Supreme Court of Canada has ruled that companies with mandatory retirement policies are immune from age discrimination suits as long as they show that their pension plans are not a sham to circumvent employee rights.

The ruling came in the a suit by a New Brunswick miner challenging his mandatory retirement enforced through an exception to a provincial ban on such mandatory age rules in the event an employer’s retirement plan is designed to have employees stop work at age 65, according to a Canwest News Service report.

Miner Melrose Scott alleged that New Brunswick’s exemption amounts to unjustified age discrimination. Scott worked at the company’s New Brunswick mine for 20 years until he turned 65 in 2004.

Justice Rosalie Abella, writing for the 4-3 majority, rejected the New Brunswick Human Rights Commission’s argument that the legal standard should be much higher for companies in that they should have to show that it would be impossible to accommodate individual employees without imposing “undue hardship” on the employer or the plan.

Meanwhile, Chief Justice Beverley McLachlin, accused the majority of setting the bar too low for employers. She proposed a more stringent test requiring companies to show that their policies are “reasonably necessary to the operation and sustainability of the plan.”

According to the news report, the Canadian High Court steered clear of an invitation to make a sweeping policy pronouncement on forced retirement for the first time in almost 20 years, sticking exclusively to the exemption test that should be applied under New Brunswick law. The decision means the New Brunswick Human Rights Commission will now have to consider Scott’s complaint against his former employer, the Potash Corp. of Saskatchewan, using the new standard.

Provinces that allow pension-plan exemptions to forced retirement include New Brunswick, Alberta, Prince Edward Island and Newfoundland and Labrador.

The Supreme court ruling is available here .