July 22, 2008

Mandatory retirement upheld in New Brunswick under the terms of a bona fide pension plan

On July 18, 2008, the Supreme Court of Canada ("SCC") released its decision in the case of New Brunswick (Human Rights Commission) v. Potash Corporation of Saskatchewan Inc., 2008 SCC 45 giving clarity to the term “bona fide or retirement pension plan” in human rights legislation in New Brunswick. The decision has implications for legislation in other provinces.

Human Rights Complaint

In 2004, an employee of Potash Corporation, Melrose Scott filed a complaint with the New Brunswick Human Rights Commission because he was forced to retire at the age of 65 pursuant to Potash Corporation’s mandatory retirement policy, as reflected in its registered pension plan. He alleged that this constituted a prohibited form of age discrimination under the New Brunswick Human Rights Code (the “Code”).

The Code contains a general prohibition on age discrimination in employment. There are two main exceptions to this prohibition: (i) in the case of a bona fide occupational qualification; and (ii) in the case of a bona fide retirement or pension plan. The issue before the SCC was what constituted a “bona fide retirement or pension plan”.

The Meiorin Test Does Not Apply

There has been substantial jurisprudence on the issue of what constitutes a bona fide occupational qualification under human rights legislation in Canada (see the “Meiorin” decision of the SCC: British Columbia (Public Service Employee Relation Commission) v. British Columbia Government and Service Employees’ Union, [1999] 3 S.C.R. 3). There is a stringent three-part test under the Meiorin decision to determine bona fides in the context of an occupational qualification. One of the questions placed before the SCC in the Potash case was whether or not the Meiorin test should also be used to determine the bona fides of a pension plan. The SCC ultimately concluded that the criteria in Meiorin should not apply.

Meaning of Bona Fide Pension Plan

The decision of the SCC was split 4/3, with the majority of the judges ruling that the phrase “bona fide retirement or pension plan” means a “legitimate plan, adopted in good faith and not for the purpose of defeating protected rights”. The Court held that there are subjective and objective components to determining bona fides. The subjective component relates to the purposes for the establishment of the plan. The objective component relates to the legitimacy of the plan. In this regard, the registration of the plan under pension standards legislation, although not determinative of bona fides, certainly supported such a finding.

Implications of the Potash Decision

Although the Potash decision interpreted the New Brunswick Code, it has implications for human rights legislation beyond New Brunswick and possibly for other forms of legislation dealing with pension plans in other contexts. For example, the recently amended British Columbia Human Rights Code refers to a “bona fide retirement, superannuation or retirement plan”. Discrimination by reason of age does not apply to the operation of such a plan. Further, in deciding whether a pension plan is bona fide under employment standards legislation, labour legislation, or even pension or tax legislation, the courts in future cases may refer to the tests in the Potash decision.

For further information on this development or related matters, please contact any member of our Labour, Employment and Pensions and Benefits group.