Age-Based Distinction in Long-Term Disability Benefit Plan Justified under Charter

Stikeman Elliott's Alyson Frankie on a recent decision on the Charter and workplace benefits

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.

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Alyson FrankieAlyson Frankie is an associate in the Pensions & Benefits Group. Her practice focuses on pensions and benefits issues relating to corporate transactions as well as pension plan compliance and administration. She also has experience in providing advice regarding pension plan governance, plan mergers, and annuity buy-out transactions.