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65 Year Old Employee Bound By Retirement Term in Pension Plan
January 31, 2008

The British Columbia Court of Appeal recently found that an employee was bound by a term in a company pension plan which required him to retire at the age of 65.

The employee, an on-air television station manager, had worked for the employer and its predecessors for 39 years. In 1974, after nine years of employment, he joined the employer’s voluntary pension plan. One of the pension plan documents stipulated that the “normal retirement date” is an employee’s 65th birthday.

Approximately one year before the employee’s 65th birthday, the employer made changes which resulted in the elimination of his job. He was given the option of taking on different duties for a year or remaining on the payroll until his 65th birthday without having to work. He treated the employer’s actions as a breach of his employment contract and alleged that he had been constructively dismissed. He also claimed that he had not agreed to retire at 65 and that he was not bound by the retirement term in the pension plan.

The BC Supreme Court upheld his constructive dismissal claim. The Court concluded that he was not bound by the term in the pension plan because it was not part of his employment contract. He had been constructively dismissed, the Court said, and he was entitled to 24 months’ pay in lieu of notice, amounting to more than $200,000.

The Court of Appeal reversed the trial decision, finding the employee bound by the retirement term in the plan. According to the Court, he had voluntarily joined the pension plan and he received consideration for his obligations under the plan in the form of the employer’s contributions to his pension for more than 30 years and his continued employment on the basis that he would retire at 65. As a result, he was entitled only to damages arising from his constructive dismissal one year before his retirement.

Although this case may be of limited precedential value to British Columbia employers because the Human Rights Code has been amended to prohibit mandatory retirement, employers should still consider whether pension plans or other employment documents establish a contractual obligation on employees to retire at 65.

(Click here for link to Decision)