APPEAL COURT UPHOLDS MANDATORY RETIREMENT POLICY UNDER "BONA FIDE PENSION PLAN" EXEMPTION IN HUMAN RIGHTS ACT

Although mandatory retirement at age 65 is no longer legal in New Brunswick, a majority of the province's Court of Appeal has ruled that it can be imposed under an exemption provision in New Brunswick's Human Rights Act, which permits termination of employment "because of the terms or conditions of any bona fide retirement or pension plan".

Detailed Report
Experts' Commentary

APPEAL COURT UPHOLDS MANDATORY RETIREMENT POLICY UNDER "BONA FIDE PENSION PLAN" EXEMPTION IN HUMAN RIGHTS ACT

Employed by Potash Corporation of Saskatchewan Inc. as a miner in New Brunswick, Melrose Scott was forced to retire on his 65th birthday on June 1, 2004 because of the mandatory retirement policy contained in his employer's pension plan. In anticipation of his pending involuntary retirement, Melrose filed a complaint with the New Brunswick Human Rights Commission in February 2004, alleging that the employer's mandatory retirement policy constituted discrimination on the basis of age contrary to the province's Human Rights Act.

Three provisions of the Act were pertinent to Scott's complaint.

Section 3(1) of the New Brunswick Human Rights Act provides that "[n]o employer, employers' organization or other person acting on behalf of an employer shall (a) refuse to employ or continue to employ any person, or (b) discriminate against any person in respect of employment or any term or condition of employment, because of race, colour, religion, national origin, ancestry, place of origin, age, physical disability, mental disability, marital status, sexual orientation, sex, social condition, political belief or activity."

Section 3(5) of the Act states that "[n]otwithstanding subsections (1), (2), (3) and (4), a limitation, specification or preference on the basis of race, colour, religion, national origin, ancestry, place of origin, age, physical disability, mental disability, marital status, sexual orientation, sex, social condition, political belief or activity shall be permitted if such limitation, specification or preference is based upon a bona fide occupational qualification as determined by the Commission."

Finally, s.3(6) provides that "[t]he provisions of subsections (1), (2), (3) and (4) as to age do not apply to (a) the termination of employment or a refusal to employ because of the terms or conditions of any bona fide retirement or pension plan; (b) the operation of the terms or conditions of any bona fide retirement or pension plan that have the effect of a minimum service requirement."

The Human Rights Commission referred the complaint to a Board of Inquiry, which was asked to make a preliminary ruling on the following question: "What criteria must be met to make a finding that a pension plan is a bona fide [good faith] pension plan such [as] to satisfy the requirements of s.3(6)?"

Scope of "bona fide pension plan" exemption: the parties dispute relevance of Meiorin and Zurich Insurance tests

Before the Board, the Commission argued that the term "bona fide" should be interpreted in accordance with the test set out by the Supreme Court of Canada in BCGSEU v. British Columbia (Public Service Employee Relations Commission), [1999] 3 S.C.R. 3, better known as the Meiorin decision. In Meiorin, the Supreme Court held that an employer can defend against an allegation of discrimination in employment by establishing that the impugned standard is a bona fide occupational qualification (BFOQ), but that this requires proof that three criteria have been met: that the employer adopted the job requirement or standard for a purpose rationally connected to the performance of the job; that the job requirement was adopted in the honest and good faith belief that it was necessary to the fulfillment of the legitimate work-related purpose; and that the job requirement was reasonably necessary to accomplish a legitimate work-related purpose, in that it would be impossible to accommodate individual employees sharing the characteristics of the employee alleging discrimination, without imposing undue hardship on the employer.

Potash Corporation, for its part, submitted that the applicable criteria were those established by the Supreme Court in Zurich Insurance Co. v. Ontario (Human Rights Commission), [1992] 2 S.C.R. 321, which dealt with alleged discrimination in setting automobile insurance premiums on the basis of the driver's age, sex and marital status. In that case, the Supreme Court held that, since s.21 of the Ontario Human Rights Code exempts differentiation, distinction, exclusion or preference in contracts from anti-discrimination provisions if it is carried out on "reasonable and bona fide grounds," this exemption is applicable if both the reasonableness and bona fide components are satisfied. The Court held that a discriminatory practice would be "reasonable" for this purpose if it were based on a sound and acceptable business practice and no practical alternative existed.

The Board of Inquiry accepted the Commission's interpretation, requiring Potash Corporation to justify the mandatory retirement rule in its pension plan by meeting the tripartite Meiorin test. It found that Meiorin rather than Zurich Insurance was the applicable precedent, because Meiorin like Scott's case involved alleged discrimination in employment, while Zurich was an insurance matter. On application by Potash Corporation for judicial review, the reviewing judge ruled that the Board had erred in applying the Meiorin test and that the Zurich Insurance test was the applicable standard. The Commission appealed to the New Brunswick Court of Appeal, and Potash cross-appealed, arguing that only the bona fide aspect of Zurich should be applied and it should not have to prove reasonableness.

Appeal court rejects both tests, and fashions its own approach

By a 2-1 majority, the New Brunswick Court of Appeal ruled that neither Meiorin nor Zurich Insurance had application in this case, because s.3(6) of the New Brunswick Human Rights Act unconditionally exempted mandatory retirement requirements from the Act's anti-discrimination provisions if those requirements were part of a duly registered, and therefore bona fide, pension plan.

Writing the majority decision of a three-member panel of the Court, Justice Joseph Robertson first addressed the Commission's arguments in favour of the Meiorin test and the bona fide occupational qualification (BFOQ) standard that it mandates. He observed that "[s]uccinctly stated, s.3(1)(a) of the Human Rights Act provides that no employer may refuse to employ or to continue to employ any person on a number of enumerated grounds, including age. The next relevant provision is s.3(5). It states that notwithstanding s.3(1), a limitation based on age is permitted if such limitation is based on a bona fide occupational qualification (BFOQ). Applying these two provisions to the issue of a mandatory retirement, and ignoring for the moment s.3(6)(a), we can deduce the following. An employment policy that imposes mandatory retirement at age 65 contravenes s.3(1). However, under s.3(5) the employer is entitled to invoke the BFOQ defence."

Section 3(6)(a), Robertson reasoned, "states that s.3(1) does not apply in cases of forced retirement pursuant to the terms of a bona fide pension plan. It necessarily follows that if s.3(1) does not apply then neither can s.3(5). Hence, s.3(6)(a) has the effect of relieving employers of the obligation to justify their mandatory retirement policy as a BFOQ under s.3(5). This is true provided that the employer can establish that a mandatory retirement policy is pursuant to a bona fide pension plan. Yet, the interpretation that the Commission advances with respect to s.3(6)(a) would have us read in the BFOQ test as articulated in Meiorin, thereby defeating the very purpose for which s.3(6)(a) was added to the legislation."

The "fatal flaw" in the Commission's argument was also demonstrated, Robertson found, by the fact that in June of last year Bill 62 was introduced in the New Brunswick legislature to amend the Human Rights Act by repealing s.3(6)(a), which would have the effect of requiring employers in the province to justify any mandatory retirement policy as a BFOQ under s.3(5) to avoid a finding of age discrimination under s.3(1). He considered that, "if this Court were to accept the Commission's interpretative argument that s.3(6)(a) includes a BFOQ component, there would be no need to repeal s.3(6)(a). With or without the amendment, an employer would have to satisfy the BFOQ test articulated in Meiorin. In effect, the Commission is asking us to judicially repeal s.3(6)(a) by adopting an interpretation that negates its obvious purpose." [Editors' Note: Bill 62 was introduced in June 2005, and received second reading, but it has not gone further, and there has since been a provincial election and a change of government.]

Having rejected the Meiorin approach, Robertson turned to the Zurich Insurance criteria, which he described as "[t]he more difficult interpretative issue." He concluded that the reasonableness test set out in Zurich was also inappropriate because "the Supreme Court went out of its way in Zurich Insurance to emphasize that differences exist between discrimination in the insurance and employment contexts", and because "if we were to read in the reasonableness test articulated in Zurich Insurance, we would be reintroducing a critical component of the BFOQ test articulated in Meiorin, thereby forcing the employer to justify why other practical alternatives to mandatory retirement were not considered or adopted." In the case of Zurich, Robertson observed, a reasonableness test was necessary to carry out the intent of the legislature, since "under the Ontario legislation applicable to insurance contracts reasonableness is a statutorily prescribed test." In the present case, the opposite was true, because "a reasonableness test undermines the objective of s.3(6)(a) of the Human Rights Act."

Moreover, Robertson held, "in Zurich Insurance, a non-employment case, the reasonableness component of the statutory test for assessing the reasonableness of a commercial practice (insurance premiums determined according to age, sex and marital status) was formulated in terms of there being no practical alternative to the discriminatory practice. In effect, this formulation is the equivalent of the third criterion outlined in the Meiorin test: an employer must establish that it is impossible to accommodate individual employees without imposing undue hardship on the employer.... Accommodation might permit employees to continue with their employment subject perhaps to individualized testing, where appropriate, and subject to the employer not being exposed to undue hardship. In brief, once the reasonableness test is engaged, the issue refocuses on whether the accommodation of individual employees, who have reached age 65, is a practical alternative to the discriminatory practice of forced retirement. In my view, this is exactly the type of analysis that s.3(6)(a) of the Human Rights Act seeks to avoid."

Justice Robertson acknowledged that, for the purpose of the bona fide requirement of s.3(6)(a), [i]t is not simply a question of whether an employer honestly believes that its pension plan is a viable alternative to forced retirement and that the plan was not adopted for purposes of defeating protected rights. That belief has to be measured against an objective standard in the sense that the belief is reasonable in the circumstances of a particular case." He concluded that "[f]or example, if the employer's pension plan could not be registered under the Pensions Act of New Brunswick, the objective component of the bona fides test might be difficult to satisfy. But this is a far cry from reading into s.3(6)(a) of the Human Rights Act a reasonableness test as formulated in Zurich Insurance."

On behalf of a majority of the Court of Appeal, Justice Robertson dismissed the Commission's appeal, allowed Potash Corporation's cross-appeal, and remitted the matter to the Board of Inquiry to deal with the complaint in accordance with the reasons for judgment.

A Dissenting View

Justice Joseph Daigle dissented, holding that "the [Board of Inquiry's] decision that the test set out in Meiorin is the appropriate test is correct." In Daigle's view, "the legislature's intention is to prevent employers from refusing to employ or continue to employ an individual simply because he or she has reached a certain age.... [U]nlike legislation found in other provinces, the Code's provisions do not specify a maximum age as coming within the definition of age.... New Brunswick's legislation permits ... claims [by individuals over 65 of age-based discrimination] to proceed, subject to an exception for termination either under s.3(5) based upon a bona fide occupational qualification (BFOQ) or an exception under s.3(6)(a) arising out of a term or condition of a bona fide retirement or pension plan.... New Brunswick ... provides a more progressive and proactive legislative scheme. Our legislation ensures that no person, including those over the age of 65, is denied the Code's protection with respect to forced retirements and hiring practices."

Based on this legislative intent, Daigle reasoned, s.3(6)(a) must be interpreted narrowly; thus, "an employer clearly cannot justify a prima facie act of discrimination simply by establishing a term or condition in a pension plan that creates age-based distinctions eliminating the protection from age discrimination accorded employees under s.3(1)." Holding rather that "the bona fide pension plan exemption under s.3(6)(a) is available to permit age distinctions or differentials to be drawn to accommodate the actuarial requirements of various employee benefit plans and to protect the actuarial integrity of such plans," Daigle concluded that "the section must be interpreted in a manner consistent with the meaning of the words 'bona fide pension plan' that will ensure that the Code's dominant purpose of achieving equality and eliminating discrimination based on age is met.... [T]hat objective can best be achieved by adopting as criteria for determination of a bona fide pension plan the three-step test set out in Meiorin. Applying these criteria will ensure that a mandatory retirement policy is only justified as a term or condition of a pension plan if it is reasonably necessary to the effective operation or integrity of the plan and that other less discriminatory means of achieving the legitimate actuarial goals are not available."

EXPERTS' COMMENTARY

Commentary is provided by Louise Greig of the law firm Osler, Hoskin and Harcourt LLP, and Anthony Guindon of Koskie Minsky.

Louise Greig: On December 12, 2006 amendments to the Ontario Human Rights Act which are billed as "eliminating mandatory retirement" come into effect. This decision should be of interest to Ontario employers and employers in other jurisdictions which either have, or are about to, introduce similar changes, because the New Brunswick statute which was considered in this case had been amended in a similar manner back in 1992. That is, since 1992, the New Brunswick Act has not included a definition of "age." Rather, employers in New Brunswick have had to establish a BFOQ to justify the termination of an individual at any age. This is a key difference between the New Brunswick Act and the human rights legislation in some other Canadian jurisdictions, which define age as excluding individuals over the age of 65 (including Ontario before the recent amendments to the Ontario Human Rights Code). 

The issue in the case under review was whether a New Brunswick employer can avoid the age discrimination provisions of the New Brunswick Human Rights Act by implementing a mandatory retirement policy through its pension plan. The answer turned on the scope of a provision of the Act which creates an exception to the general prohibition of age discrimination if the discriminatory practice or policy is a term or condition of a bona fide retirement or pension plan.  

The main legal issue was whether an employer is required to justify the mandatory retirement policy as a term or condition of a pension plan using the test adopted by the Supreme Court of Canada decision in Meiorin: see British Columbia (Public Service Employee Relations Commission) v. BCGSEU, [1999] 3 S.C.R. 3 (S.C.C.). The Meiorin or "BFOQ" test requires the employer to establish that a prima facie discriminatory practice:

(1) was adopted for a purpose rationally connected to the performance of the job;

(2) was adopted in an honest and good faith belief that it was necessary to fulfil the employer's legitimate work-related purpose; and

(3) is reasonably necessary to accomplish the legitimate work-related purpose in the sense that it is impossible to accommodate individual employees sharing the characteristics of the employee without imposing undue hardship upon the employer. 

The majority of the Court held that the Meiorin test does not apply in this context, reasoning that the New Brunswick Act already requires employers to justify age discrimination based on the BFOQ test and it would defeat the purpose of the second exception (i.e., the exception for forced retirement pursuant to the terms of a bona fide pension plan) to re-introduce this test; rather, in the majority's view, the pension plan exception has the effect of relieving employers of the obligation to justify their mandatory retirement policy as a BFOQ provided that the employer can establish that the mandatory retirement policy is pursuant to a bona fide pension plan. 

How does the employer establish the bona fides of its pension plan? The majority did not answer that question, but it did suggest that it may be difficult for an employer to establish the bona fides of its pension plan if it is not registered under pension legislation. It can be inferred from this comment that, to fit itself within the exception, at a minimum, the employer has to establish that its plan is registered under a pension statute. There is no indication in the decision what other facts an employer would have to establish in order to fit within the exception.  

In contrast to the majority, the dissenting judge, Justice Daigle, took a purposive approach to the interpretation of the exception. He reasoned that it was more consistent with the scheme of the Act and human rights jurisprudence generally to interpret the exception restrictively. He disagreed that the application of the Meiorin test to the exception defeated the purpose of the legislation. In his view, the bona fide pension plan exemption was intended for a different purpose, namely, to permit age distinctions or differentials to be drawn to accommodate the actuarial requirements of employee benefit plans and to protect the actuarial integrity of such plans. He concluded that applying the Meiorin test to the exception "will ensure that a mandatory retirement policy is only justified as a term or condition of a pension plan if it is reasonably necessary to the effective operation or integrity of the plan and that other less discriminatory means of achieving the legitimate actuarial goals are not available."

From a pension perspective, the decision of the dissenting judge makes more sense than that of the majority. Minimum standards pension legislation requires that employers define "normal retirement age" as no later than age 65 for pension purposes. However, pension legislation does not prohibit continued employment beyond normal retirement. "Normal retirement age" is the date specified in the plan at which an employee can retire from his or her employment and receive the regular pension benefit provided by the plan. All of the provincial pension statutes expressly contemplate that employees can continue in employment after attaining normal retirement age and makes special provision for such a circumstance (referred to as "postponed retirement").

It seems an odd result that that an employer can avoid a general prohibition on age discrimination simply by including a mandatory retirement provision as a term of its pension plan, particularly given that such a term is unnecessary from a pension perspective. As the dissenting judge held, it seems more consistent with the purpose of human rights legislation to require a connection between the purpose of the plan and the forced retirement provision. The majority decision indicated that the New Brunswick government had introduced legislation to delete the exception in the 2004-05 session of the legislature. Now that the Court of Appeal has rendered its decision in this case, the New Brunswick government may re-introduce the amendment.

Other human rights codes across Canada exempt pension plans from age discrimination but they do it in different ways. The Ontario Human Rights Code, for example, states that the prohibition of age discrimination is not infringed by an employee benefit plan or pension plan that complies with the Employment Standards Act, 2000: see Human Rights Code (Ontario), s.25(2.1) – (2.3), in effect December 12, 2006. A similar provision was in effect prior to December 12, 2006). The regulations under the Employment Standards Act, 2000 provide that the prohibition of age discrimination in that Act does not apply to the establishment of a normal retirement date for voluntary retirees or an early voluntary retirement date or age, provided the plan complies with the provisions respecting normal retirement and early retirement provisions of the Pension Benefits Act (Ontario): see Employment Standards Act, 2000, s.44; Ont. Reg. 286/01, s.4(3). Given the very specific wording of the Ontario exception, we think it is unlikely that an Ontario court would arrive at the result reached by the New Brunswick court in this case. However, the enactment of the recent changes to the Ontario Human Rights Code, more litigation can be anticipated over the issue of age discrimination in Ontario.  

As noted above, human rights legislation differs from province to province. Employers who believe this decision may have relevance to their situation should review their pension plan and the human rights statutes in their jurisdictions to determine how this decision might affect them.   

Anthony Guindon: At issue in Potash was the correct interpretation of the term "bona fide" in section 3(6) of the New Brunswick Human Rights Act. The analysis of the Court majority unfolded, in some senses, along two separate but clearly related tracks: 1) the policy considerations which should inform such an interpretation, and 2) the applicable rules of statutory interpretation. In regard to these matters, the reasons of the majority of the Court reveal certain tensions which are left unresolved.

With respect to the policy considerations relevant to the Court's analysis, there is a clear tension between the importance that employment has for the dignity of the individual on the one hand, and the need to recognize and enforce the will of the Legislature on the other. Here, Justice Robertson, on behalf of the majority, accorded far too little weight to the fundamental importance of employment to the dignity of the individual.

With respect to the interrelation between sections 3(5) and 3(6) of the Act, it is reasonable enough to argue that, had the Legislature intended the same analysis (i.e. the approach developed in Meiorin) to apply to both sections 3(5) and 3(6), the express inclusion of the bona fides requirement in section 3(6) would be redundant. However, the result reached by the majority is nonetheless problematic because, in essence, the only requirement that a pension plan must meet to establish its bona fides is that it qualifies as a registered pension plan.  Were such a result intended by the legislature, surely the Legislature would have employed the term "registered" as opposed to "bona fide."

Similarly, the use of the word bona fide in both sections 3(5) and 3(6) could equally lead to the conclusion that the same, or at least a similar, test was meant to apply to both sections, because it is difficult to imagine a way in which participation in a pension plan could be construed as constituting an "occupational qualification." 

Furthermore, the majority of the Court put a great deal of emphasis upon the proposed amendment to the Act, under which the exception in s.3(6) would be repealed. Justice Robertson reasoned that the amendment to the Act would serve no purpose if the same test was applicable to sections 3(5) and 3(6). However, while at common law an amendment to a statute may be read purposively as an aid to interpreting a legislative provision, such an approach appears to conflict with the clear language of the New Brunswick Interpretation Act, which mandates in s.11(3) that the amendment or repeal of an Act "shall not be deemed to be or to involve a declaration as to the previous state of the law." This aspect of the Court's reasoning is rendered even more problematic by the fact that the amendment is not yet, and may never become, in force. 

Considering the foregoing, the approach adopted by Justice Daigle in dissent is more consistent with the remedial purpose of the legislation, and is more coherent as an exercise in statutory interpretation. That having been said, given the likelihood of the amendments to the legislation in New Brunswick, as well as the general trend across Canadian jurisdictions to repeal mandatory retirement legislation, this debate may be purely academic.

Case Name: New Brunswick (Human Rights Commission) v. Potash Corp. of Saskatchewan Inc.
Court: New Brunswick Court of Appeal
Judges: Joseph Robertson and Wallace Turnbull, Joseph Daigle dissenting
Date: July 20, 2006
Citation: [2006] N.B.J. No. 306 (QL)
Full Text: http://www.lancasterhouse.com/decisions/2006/july/NBCA-Potash.pdf

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