Legal News

Early retirement program not discriminatory
January 29, 2002

In a recent arbitration award, a British Columbia arbitrator determined that it was not discriminatory to exclude employees on long term disability (“LTD”) from an early retirement/voluntary severance program.

In Norske Canada Ltd. v. Pulp, Paper & Woodworkers of Canada, Local 2, [2001] A-214/01 (October 29, 2001) (Munroe), the Union brought a grievance on behalf of certain disabled employees of the company. The grievance alleged that the Employer discriminated against the disabled employees, breaching section 13 of the B.C. Human Rights Code, by declaring them ineligible for an early an early retirement/voluntary severance program.

The Employer operated pulp and paper mills. It introduced an early retirement/voluntary severance program with the goal of reducing the operational hours of the mills by encouraging employees in redundant positions to accept early retirement or severance.

The early retirement/voluntary severance program had certain eligibility requirements, one of which was that an employee must have worked in a “redundant position”, the other being that an employee must actually work at the mills within sixteen months of the program’s introduction. Employees on long term disability or “disabled employees” were not eligible for the program unless they could return to work within sixteen months.

The disabled employee in this award were employees in receipt of LTD benefits. The LTD benefits commenced under the collective agreement after an employee had been totally and continuously disabled for fifty-two weeks or had exhausted the weekly indemnity benefit, whichever occurred last. The receipt of long term disability benefits was dependent on the employee being unable to perform the duties of his or her occupation for the first eighteen months, and thereafter the duties of any occupation for which the employee is qualified by education, training or experience. At the time the early retirement/voluntary severance program was offered, there were nineteen employees on LTD, only one of whom returned to work within the sixteen month eligibility period.

The Employer submitted that it was not discriminatory to exclude the disabled employees from the early retirement/voluntary severance program because the program was a form of compensation or economic benefit associated with active service. The Employer argued that discrimination is not established simply by showing that employees unable to work are not afforded the same compensation or benefits afforded by employees who do work.

Arbitrator Munroe ruled that the true purpose or underlying rationale of the company’s early retirement/voluntary severance program was consonant of the goals of human rights legislation. The arbitrator found that in the application of the program, participation was accorded to those of the disabled employees who could establish eligibility within a defensible period (sixteen months) in relation once again to the program’s legitimate purpose of reducing the overall number of operational hours in the mills.

Arbitrator Munroe agreed with the Employer and concluded that the appropriate group to compare the employees on LTD to was the other employees, who, like the disabled employees, did not meet the eligibility requirements or other terms and conditions of the early retirement/voluntary severance program. The arbitrator determined that when the employees on LTD were compared with the other excluded employees, there was no evidence of discrimination on a prohibited ground (ie. disability).

This award illustrates that employers may exclude employees on LTD from early retirement/voluntary severance programs, without such exclusion being discriminatory, where the purpose of the program is tied to an employee actually performing work in the employer’s business. This is an important decision for employers who are downsizing in the current economic climate.

The employer was represented by Harris & Company counsel.

(Click here for link to Decision)