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Employment Law Update
Keith Simpson
Keith Simpson

Retirement Agreements. Now that the Government has eliminated the mandatory retirement age (employers can no longer require an employee to retire at 65), how do employers manage this situation? If an employer needs certainty for future HR planning, they should consider retirement agreements. Assuming a senior/older employee voluntarily agrees, parties can specify in writing a fixed date upon which employment will end. In assessing the enforceability of these contracts, let us review how the courts have interpreted employment contracts. Basically neither employers nor employees are permitted to contract out of the Employment Standards legislation, labour codes nor human rights' laws. Courts consider the bargaining position of both parties upon contracting; and in particular, whether employees have freely negotiated and agreed to a fixed retirement date. There must be actual consideration to make the agreement enforceable (ie. a monetary incentive, a bonus or other perks). Clearly, an employer can not make a unilateral, material change to an employment relationship, without being exposed to a claim for constructive dismissal. This new legislation has created problems for employers, who in the past would tolerate decreasing output, poor performance or personnel issues (short of 'for cause'), by simply waiting for retirement age. Also problematic are situations were an older worker's abilities are reduced as a result of disabilities or illness; which can trigger obligations to accommodate. In such circumstances an employer not be able to terminate unless they could establish 'undue hardship' - a high standard. In all, challenging issues that may be addresses in a carefully negotiated and drawn Retirement Agreement. Restrictive Covenants Revisited Historically, Courts have held that non-competition covenants in employment contracts may be unenforceable, as constituting a restraint of trade; and therefore, contrary to public policy. Generally, to enforce such a covenant, the employer has had to prove that they have 'industrial proprietary' interest which warrants the protection of the Courts. In the past, employees were perceived to have the stronger bargaining position, forcing new hirers to sign agreements disadvantageous to the employees, when departing. Such improvident bargains restricted employees rights to work in their chosen are for either: (i) too long a period of time and/or (ii) an overly broad geographic area (ie. two years, in all of Ontario). However, in areas where employees are in demand (ie. the Alberta oil patch), employees have far more bargaining power to insist on the removal of restrictive covenants or a significant reduction in time and/or geographic area. On the other hand, a recent Court decisions upheld a non-competition covenant. In that decision, that non-competition covenant was an intricate part of the purchase agreement for the sale of a business, for which the vendors received "very adequate consideration" and the departing employees were experienced business men who appreciated the importance of the covenant in the sale of the business. Furthermore, given the Alberta economy, it could no longer be taken, as a given, that the employer had the upper hand in negotiations. In conclusion, the drafting of and enforceability employment contracts are an ever shifting area of the law, requiring ingenuity and an appreciation of the economic context.

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