Layoffs: The new game of retirement chicken

One consequence of ending mandatory retirement is that long-service older workers in their late 60s or 70s are often now entitled to sizeable packages if they’re laid off.

That often creates a situation where older workers who might otherwise retire voluntarily with no compensation are now waiting to get laid off with a tidy settlement. “What I’m seeing is essentially a game of chicken,” says employment lawyer Stuart Rudner, partner at Rudner MacDonald LLP of Toronto. “You have employees waiting for a package and employers who don’t want to give it.”

In the past, the courts assumed workers in their 60s would retire soon anyway, which put a damper on packages, says Rudner. But courts no longer assume any particular retirement date, resulting in higher awards. Last year a 70-year-old blue collar worker with 20 years’ service was awarded 22 months severance pay by the courts, says Rudner, who represents both employers and employees. “In the past, most people assumed he would get far less than that amount.”

Compensation for most laid off employees is determined by the common law as it evolves from court cases, based on the concept that laid-off employees are generally entitled to a notice period or termination pay to tide them over until they can find another job. While many factors go into determining these awards, the three key ones are age, type of position, and how long the person has worked for the employer, says Rudner. “If you talk about a worker in their mid to late 60s—and especially if they have lengthy service—they could be entitled to something in the range of three or four or five weeks for every year they worked.”

If there is evidence of age discrimination or other human rights abuses, there may be punitive damages awarded on top of basic termination pay, says Rudner. On the other hand, if an employee has been fired for severe misconduct (fired “with cause”), they may not be entitled to any compensation.