0434-99-ES D.H. Howden, Division of Sodisco-Howden Buying Group Inc., Applicant v. James Lines and Ministry of Labour, Responding Parties.

BEFORE: Anthony Brown, Vice-Chair.

APPEARANCES: Lorraine Por and Sylvain Pelletier for the applicant; James Lines and Doug Lines for the responding party; Brian Blumenthal for the Ministry of Labour

DECISION OF THE BOARD; February 15, 2000

1. This is an application pursuant to the Employment Standards Act (“the Act”) for review of an order to pay made by an Employment Standards Officer.

2. A hearing was held on December 21, 1999.

3. The issue in this application is whether or not the retirement of the responding party James Lines at age 65 was a “termination” within the meaning of that term in subsection 58(1) of the Act.

Facts

4. Mr. Sylvain Pelletier testified for the applicant D.H. Howden (referred to as “the company” or “the employer”). He is the company’s corporate human resources manager. He identified a copy of the company’s mandatory retirement policy, A-20, which states in part:

The normal retirement age for employees employed by the Corporation is age 65. The normal retirement date will be the day employees reach their 65th birthday. This date may, upon approval of the President, be extended to the end of the month during which the employee attains age 65.

At the discretion and with the consent of the Corporation, retirement may be postponed in specific cases for a defined period of time. Such cases must be approved by the President and are subject to review on a year-to-year basis, but in no event may the individual postpone beyond the attainment of age 71.

5. The remainder of the policy addresses the company’s “retirement conditioning program” which allows employees to take time off work prior to their retirement date.

6. The policy is dated September 1, 1995. Mr. Pelletier stated that it existed prior to that date but was not sure how long it has been in existence. It is his understanding that, in 1995-96, many of the company’s policies were renewed and thus given new dates. He stated that the company follows the retirement policy. He is aware of one extension beyond age 65 at the request of the company, in the case of a senior management employee. He stated that the company has a group retirement plan but not all employees participate in the plan. If an employee were to work past age 65, contributions to the plan would stop at that point. A photocopy of Mr. Lines’ “Record of Employment” for Human Resources Development Canada was filed with the Board. Mr. Pelletier stated that it indicates that Mr. Lines “retired” (Code “G” ).

7. Mr. Pelletier stated that all company managers have a copy of the corporate policy manual but he could not be sure they share it with employees. He admitted that it was possible that employees may not know about the written retirement policy.

8. Mr. Lines testified that he was employed by the company for 14 years. Because he started with the company late in his career, he did not opt to participate in the company retirement plan. He started by helping the company liquidate one of its stores, and then took a position in the company’s facility in London, Ontario. He stated that he intended to work past age 65. Approximately six months prior to reaching age 65, he approached Mr. Mark Fraser, then the Human Resources Manager, and inquired about working past age 65, and was told that he would have to make a written request for an extension of employment. He states that although he was unaware at this time of the company’s written policy on mandatory retirement, he was aware that it was common practice for employees of the company to retire at age 65.

9. In a letter dated December 29, 1997, Mr. Lines requested to be allowed to continue his employment beyond his birthday in July, 1998. Mr. Lines testified that this letter was sent to Mr. Fraser, to his immediate supervisor, and to the Vice-President/

General Manager of the company. He stated that does not know if the company president saw his letter. However, by memorandum to Mr. Lines dated January 8, 1998, Mr. Fraser cited the company’s retirement policy A-20 and informed Mr. Lines that his request had been denied:

I have brought up your letter to both Jim Woolsey [Mr. Lines’ supervisor] and Richard LaRochelle [V.P. and General Manager] and they both wish to thank you for your request. Unfortunately, it will not possible (sic) for you to work past July 28, 1998.

10. Mr. Lines understood from this memorandum that he would not be permitted to work past age 65. Mr. Lines took Fridays off work for three months leading up to his retirement date. He asserts that he took these days off at the direction of the company. The company policy states that employees with 10-15 years experience may take Fridays off during the three months leading to retirement.

11. Mr. Lines retired on July 31, 1998, three days after his 65th birthday. He applied for Employment Insurance benefits, at which time a staff member of the Employment Insurance Office suggested he should inquire of the Ministry of Labour as to his entitlement to severance pay. Mr. Lines stated that it was at this point that he requested and obtained a copy of the retirement policy from the company and saw that it permitted extensions to age 71 with the president’s approval. He stated that managers at the company do not share the company’s policy manual with their staff.

The Statutory Provisions

12. Subsection 58(1) defines “termination” as follows:

"termination" means,

(a) a dismissal, including a constructive dismissal,

(b) a lay-off that is effected because of a permanent discontinuance of all of the employer's business at an establishment, or

(c) a lay-off, including a lay-off effected because of a permanent discontinuance of part of the business of the employer at an establishment, that equals or exceeds thirty-five weeks in any period of fifty-two consecutive weeks,

and "terminated" has a corresponding meaning.

13. Subsection 58(5) prescribes the circumstances in which subsection 58(2) does apply, as follows:

(5) Subsections (2), (3) and (4) apply to,

(a) a regular full-time employee and a regular part-time employee;

(b) an employee whose employment is terminated as a result of a strike or lock-out except where the employer establishes that the permanent discontinuance of all or part of the business at an establishment is caused by the economic consequences of the strike;

(c) an employee who is absent because of illness or injury, if the employee's contract of employment has not become impossible of performance or been frustrated by that illness or injury;

(d) an employee who received or was entitled to receive notice of termination but who died before his or her employment was terminated or would have been terminated if notice of termination had been given;

(e) a permanent discontinuance of all or part of a business at an establishment however caused, whether fortuitous, unforeseen or by act of God;

(f) an employee who loses his or her employment by the exercise by another employee of a seniority right; and

(g) an employee who, upon having his or her employment terminated, retires and is entitled to receive a reduced pension benefit.

14. Subsection 58(6) prescribes the circumstances in which the severance provision does not apply, as follows:

(6) Subsections (2), (3) and (4) do not apply to,

(a) an employee who refuses an offer by his or her employer of reasonable alternative employment with the employer;

(b) an employee who refuses to exercise his or her seniority rights to obtain reasonable alternative employment;

(c) an employee who has been guilty of wilful misconduct or disobedience or wilful neglect of duty that has not been condoned by the employer;

(d) an employee who, upon having his or her employment terminated, retires and receives an actuarially unreduced pension benefit;

(e) an employee whose employer is engaged in the construction, alteration, maintenance or demolition of buildings, structures, roads, sewers, pipelines, mains, tunnels or other works where the employee works at the site thereof; or

(f) an employee who is employed under an arrangement whereby the employee may elect to work or not when requested to do so.

The Parties’ Submissions

15. The applicant asserts that its contract of employment with Mr. Lines was analogous to a fixed term contract that came to an end when he reached the company’s mandatory retirement age of 65 years. It argues, in essence, that because the contract came to an end in this manner, there was no “termination” within the meaning of that term in subsection 58(1) of the Act because that term is defined to include only dismissal, constructive dismissal and certain lay-off situations. It argues that the retirement policy was an implied term of the oral employment contract, and both parties reasonably expected that Mr. Lines would leave his employment at age 65.

16. Counsel submits that Mr. Lines, having reached retirement age, cannot be said to have suffered a loss for which severance pay would compensate him. Counsel referred the Board to several decisions dealing with the nature of “severance”. Counsel submits that section 58 is intended to compensate persons for such things as loss of employment opportunity or expectation, loss of investment in years of service with the company, and diminished pension benefits. See, for example, Goodyear Canada Inc. v. U.R.W., (unreported Ont. Divisional Court Dec. 6, 1989), Ball Packaging Products Canada Inc. (Re) [1992] O.E.S.A.D. No. 254, and Crown Cork & Seal Canada Inc. (Re) [1991] O.E.S.A.D. No. 162.

17. Mr. Lines responds that he has in fact suffered a loss of opportunity because he expected to work past age 65.

18. Mr. Lines states that he left his employment involuntarily and that he was “terminated” within the meaning of subsection 58(1).

19. Counsel for the Ministry of Labour submits that, under subsection 58(1), “termination” should be interpreted to include circumstances where there is a retirement and the employee is not in receipt of a pension benefit. Counsel argues that any doubt about the intent or meaning of the Act should be resolved in Mr. Lines’ favour, in accordance with Rizzo & Rizzo Shoes Ltd. 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27 where the Supreme Court of Canada confirmed that the Act, as “benefits-conferring legislation”, should be interpreted in a “broad and generous manner”.

Decision

20. The Board is not persuaded that the employment contract between the company and Mr. Lines can fairly be characterized as being a fixed term contract or analogous to a fixed term contract. (It is therefore not necessary for the Board to determine whether Mr. Lines would be disentitled to severance pay if he did have a fixed term contract with the company.) There are insufficient facts to support any notion that the company considered itself legally obligated to retain Mr. Lines’ services until he reached age 65 or that Mr. Lines considered himself obligated to work until age 65. He chose to stay on with the company after his original assignment was complete. This was an employment relationship that either party could unilaterally end at any time, provided that they did so in accordance with the law.

21. Mr. Lines may have known all along that the company would terminate his employment at age 65. But the fact that he may have known this does not make what happened any less a termination. If the parties had an expectation that Mr. Lines’ employment would end at age 65, it was an expectation of unilateral “termination” by the company, not of a mutually-agreed parting. There is no evidence that Mr. Lines voluntarily resigned his employment.

22. Clause 58(5)(g) states that the severance pay provision applies to:

(g) an employee who, upon having his or her employment terminated, retires and is entitled to receive a reduced pension benefit;

23. Clause 58(6)(d) states that the severance pay provision does not apply to:

(d) an employee who, upon having his or her employment terminated, retires and receives an actuarially unreduced pension benefit;

24. Neither of these provisions pertains to Mr. Lines. However, it is noteworthy that both refer to the employee as being “terminated”. Under clause 58(5)(g), the employee, having been terminated, “retires” and takes a reduced pension benefit. Under clause 58(6)(d), the employee, having been terminated, “retires” and takes an unreduced pension benefit. Mr. Lines was terminated at age 65. He was retired. Mr. Justice Laskin comments on this distinction in his dissent in Bell Canada (cited below):

Is it so clear that a unilateral discretionary termination of service, such as occurred under the company-administered plan, must be held, as a matter of law, not to be a dismissal because the company refers to it as a retirement? “Retire” is both intransitive and transitive in the dictionaries, and certainly the grievor did not retire but was retired. In plain English, he was put out of his job.

25. It is difficult to believe that the Legislature did not intend to require severance pay for persons who are forced to retire and who have no pension, when the Act requires severance pay for persons who are terminated and who retire on a reduced pension benefit. See Ascona Spinning Ltd. (Re) [1990] O.E.S.A.D. No.31.

26. The Legislature could have excluded this “form” of termination from section 58 in the same manner that it was excluded from the Notice of Termination provisions in section 57. Under clause 2(g) of Regulation 327, section 57 of the Act does not apply to a person who,

(g) having reached the age of retirement according to the established practice of the employer, has his or her employment terminated.

27. In clause 2(g), it does not matter whether the person receives a pension benefit. It is broad enough to encompass what occurred with respect to Mr. Lines: he reached the age of retirement according to the established practice of the employer and had his employment terminated. In view of the fact that the Act contains this express provision for section 57, it would be unreasonable for the Board to infer a similarly broad exception for section 58. In fact, the opposite inference is more appropriate, that is, if the Legislature intended to exclude persons such as Mr. Lines from section 58, it would have.

28. Counsel for the company referred the Board to Bell Canada v. Office and Professional Employees’ International Union, Local 131 (1973) 1973 CanLII 18 (SCC), 37 D.L.R. (3d) 561 in support of its argument in favour of making a distinction between dismissal and retirement. This case dealt with an arbitrator’s award arising from a grievance of a dismissal from employment, in which there was a preliminary objection that the retirement on pension of the grievor was not a dismissal and therefore not arbitrable under Article 8 of the collective agreement which only referred to dismissal and suspension. The Court (Judson, J.) determined that “dismissal, suspension and retirement on pension are three different and distinct concepts”, and as a result the matter was not arbitrable. In Bell Canada, the court was interpreting whether or not Article 8 included “retirement on pension” in addition to dismissal and suspension. Article 8 was essentially a just cause clause dealing with disciplinary matters. It is therefore not altogether surprising that the Court refused to read “retirement on pension” into the provision.

29. The context in the instant application is entirely different, where the Board is dealing with a statute that confers certain protection upon employees and where the meaning of “termination” can be determined from the definition in subsection 58(1), from subsections 58(5) and (6), and from the statute as a whole. The Board agrees with Referee Bendel in Ascona Knitting (cited above) where, after considering Bell Canada, he concludes:

The [Bell Canada] decision cannot reasonably be understood as deciding that the word “dismissal”, regardless of the context in which it is used, is not broad enough to cover a retirement. I am satisfied that the word “dismissal” is not a word that has the same meaning and connotation in all contexts, and that it can extend to retirement where the context so requires.

30. The decisions mentioned in paragraph 16 above are all readily distinguishable from the present application and they do not assist the applicant’s interpretation of section 58. Severance pay may help a former employee until he or she is able to secure other employment, or may compensate for reduced pension benefits or earlier than expected termination but its purpose is not limited to these (or similar) circumstances. In my view, it would be inappropriate to embark on a speculative analysis of why severance pay is required by section 58. A severance payment will likely have a different meaning or significance for each person. Some may simply regard it as a reward.

Disposition

31. The Board finds that Mr. Lines was terminated within the meaning of subsection 58(1) and is therefore entitled to severance pay in accordance with subsection 58(2), as calculated by the Employment Standards Officer.

32. The Director of Employment Standards is directed to disburse the money held in trust as follows:

To the employee $7,781.06

To the Government of Ontario Consolidated Revenue Fund $778.11

interest earned on the moneys held in trust in this matter is to be paid to the above parties in proportion to the amounts paid out.

33. The application for review is dismissed.

“Anthony Brown”

for the Board