That's it, I'm staying: Retracting retirement

Exclusive to Canadian HR Reporter from Rudner Law.

Doesn’t retirement seem straightforward? An employee, after many years of dedicated service, decides that they’ve had enough (or have enough) and put in their notice of their last day of work. Their employer starts to make preparations for the employee’s going away party, and the employee gracefully departs.

Things don’t always work out that smoothly, however. Sometimes, before the employee’s scheduled last day, the employee advises the employer that they’ve changed their mind and would like to remain on, permanently, or for a few months more.

From the employer’s perspective, it seems to be an obvious answer, right? The employee has put in their notice, and the employer has no obligation to accept their choice to reverse their decision. The employer does not need to change its plans and can proceed with the employee’s departure.

This is not always the case, and in some cases, the employer may be setting itself up for liability by proceeding with the employee’s exit. However, by taking the right steps in advance, the employer might be able to proceed with the employee’s departure and set its defence up if the matter is later contested. 

The State of the Law

From an employment law perspective, retirement and resignation are very similar - and the same rules largely apply to both. A resignation must be clear and unequivocal when the employee provides it. Where an employee loses their temper and retires or resigns in haste, it is unlikely to be a clear and unequivocal resignation, and may not be upheld on later review. In addition, the employer must have accepted the employee’s stated intention in order for this to be effective.

A retirement must be clear and unequivocal - it cannot be subject to any conditions. If it is, it will not have been clear and unequivocal, and the employer will be required to accept the employee’s intention to retract it.

Even still, an employee may retract their retirement notice by advising their employer of their intention to do so. In some circumstances, depending on the employer’s actions after being told of the retirement, it may have no alternative but to allow the employee to follow through with a retraction.

If the employer has acted on the employee’s stated intention to retire - such as by taking steps to fill the soon to be vacant role, either by interviewing or having hired a replacement, it may be safe in rejecting the employee’s attempt to retract their notice of retirement. This, however, is not guaranteed - the employee may still claim that the employer has wrongfully dismissed them, and seek reasonable notice at common law.

This could lead to a significant amount of liability on the part of the employer, particularly if the retiring employee has spent all of their career with the employer. Courts have recently moved past the unofficial “cap” of 24 months of reasonable notice on dismissal in certain circumstances, with notice periods of 27 months and 30 months both having been upheld on appeal.

 This liability may be compounded if the employer describes the employee’s departure as a “retirement”. Where this happens the employee may have a claim not only for reasonable notice at common law but also for breach of their right to equal treatment on the basis of age under the Human Rights Code. If successful, it may entitle the employee to damages over and above any award of reasonable notice at common law.

Best Practices

When an employee advises their employer that they intend to retire, it is important for the employer to act on this immediately. First, review the circumstances of the employee having provided notice and ensure that it was both clear and unequivocal.

Second, confirm the employee’s intention to retire, in writing, and confirm their last day of employment. You should also confirm all of the administrative aspects of the retirement, such as transitioning benefit plans or making pension arrangements.

Finally, act on the employee’s intentions and work to fill their soon to be vacant position. If promoting internally, make the necessary arrangements, including identifying suitable candidates, interviewing them, and preparing an updated employment agreement. If hiring, advertise the role and start interviewing.

Takeaways

None of the above steps will guarantee that the employer has a completely defensible position if the retiring employee changes their mind about departing. However, these steps, properly documented, may assist the employer to support its position that it had acted on the employee’s decision to retire if the employee chooses to retract their notice of retirement or resignation.

Unfortunately, a retracted retirement may mean that the employee’s tenure with the employer ends in protracted litigation and acrimony between the parties, instead of a party and fond memories of a career.