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Archived - Discussion Paper on the Review of Labour Standards in the Canada Labour Code

I. Responding to the Evolving Workplace

E. Termination of Employment

4. Pensions and Severance Pay

Commission Recommendations:

The provisions of Part III that disentitle workers to severance pay if they are entitled to pensions should be reviewed in light of changes to the law and practice governing the age of retirement and the shift from defined benefit to defined contribution plans. The purpose of the review should be to ensure that Part III does not prematurely, unfairly or unnecessarily deprive older workers of severance pay. (R. 8.5)

Under Part III, employees lose their right to minimum severance pay if they are entitled, upon termination of employment, to a pension under the Canada Pension Plan, the Quebec Pension Plan, Old Age Security, or an employer-sponsored pension. This applies regardless of the number of years that the employee has served with the employer.

Circumstances have changed since this provision was originally enacted two decades ago. Employees are less likely to retire at age 65, and are also less likely to receive a defined benefit pension actuarially calculated to replace a fixed portion of their earnings. Furthermore, more and more people have started receiving pensions before they fully retire from the workforce, and the pensions they receive may bear little relationship to their earnings or years of service.

Some commentators have expressed concerns that the provision that disentitles workers from receiving severance pay if they are entitled to a pension may raise Charter issues.

The provision also seems to create extreme and unjustifiable differences in how similar employees are treated. For instance, an employee with 20 years’ service whose employment is terminated a month after becoming entitled to a pension loses entitlement to severance pay altogether, while someone two months younger with the same service is entitled to 40 days’ severance pay.

Perhaps the most controversial aspect of this provision is that it disentitles workers to severance pay if they are entitled to OAS. Pensions under OAS are financed from general taxation revenues, rather than employee/employer contributions. OAS pensions are calculated based on age and the number of years lived in Canada, and have nothing to do with workforce participation.

For discussion:

Is there any reason to retain the provision that disentitles employees to severance pay if they are eligible for a pension? Does this matter need to be reviewed further, or can a decision be made now?

5. Group Termination of Employment

Commission Recommendations:

• The current provisions of Part III dealing with group terminations should be retained, subject to the following modifications designed to make the procedures more fair, consistent and expeditious:
  
  • The Minister’s power to waive the required procedures should be delegated to Regional Directors of the Labour Program; and
  • The criteria for exercising this power should be more clearly defined at present. (R. 11.2)

Provisions dealing with group terminations were added to the statute in 1971. They were originally meant to operate alongside of legislation, which has since been repealed, designed to facilitate labour market adjustment. The current provisions require the employer to give 16 weeks’ notice to the Minister of Labour of its intention to dismiss or lay off more than 50 employees within a four-week period. After notice is given, a joint labour-management planning committee must be convened to develop an adjustment plan that eliminates the need for termination of employment or minimize the impact of termination on redundant employees and assist them in finding other employment. If no agreement can be reached on an adjustment plan, an arbitrator may be appointed to assist the parties. The process can generally result in a sensible, transitional process that rarely involves the assistance of an arbitrator.

On the submission of any person, the Minister of Labour can waive the application of all or any of the provisions on group termination, if he is satisfied that they would be unduly prejudicial to the interests of the employees, any classes of employees, or the employer, or would be seriously detrimental to the operation of the industrial establishment. The Minister can also issue a waiver if the provisions are not necessary because measures have already been established at the workplace to assist the redundant workers, and these measures are substantially the same or to the same effect as the provisions of Part III. A waiver can apply to an industrial establishment or any classes of employees within the establishment. It can be subject to any terms or conditions specified by the Minister. The Minister can delegate the power to issue a waiver to other officials within the Labour Program.

Discussion

The Ministerial waiver process might be more transparent if the grounds for issuing a waiver were set out in greater detail. This could be done in Part III or the regulations, or even in policy documents prepared by the Labour Program. On the other hand, the general terms currently used in Part III provide some flexibility, which may be useful.

The Commission’s suggestions with respect to group terminations are also meant to make the system work more efficiently. For example, Part III limits waivers to “any establishment”, which may be problematic for large employers who have a comprehensive plan for downsizing a number of establishments over a period of time. Provided that the criteria are met, it may make sense to approve the complete plan as a package, rather than require a separate submission and waiver process for each and every establishment. In addition, other clarifications to the group termination provisions may be required in order to ensure that the intent of the legislation is respected.

For discussion:

• Should the current provisions regarding the criteria for approval of waivers be retained? If so, are informational policy documents required to clarify these provisions and to provide helpful examples?
• Should Part III be amended to ensure that waivers can apply to a number of establishments operated by the same employer?
• Are other modifications required to clarify the group termination provisions so as to ensure that their intent is respected?

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Date Modified:

2012-02-15