1. Given the division of labour, each person has a function in our complex economy. It could be in general labour or on a more specialized level, as with a trade or profession. Alternatively, it might be a position in management, from low-level to the top office. Whatever the work, it is an important part of life. And this is truer today now that people are working longer. Indeed, there are more 50+ workers than ever before. Hence, it is appropriate to review the law governing the employee, particularly as regards the mature worker. This part comprises an introductory chapter on employment, dealing with contract, termination-dismissal and notice. For the employer, we have included as appendices, management tools grounded in administration and law. The second chapter surveys age bias/discrimination in the workplace and analyzes mandatory or forced retirement. And the third chapter examines the early retirement decision, same detailing the forces for and against.
CHAPTER 1—EMPLOYMENT: CONTRACT, TERMINATION-DISMISSAL, NOTICE
2. The principal resource in any organization is its people. In a successful company, the employment of proper staff is essential. In some instances, employee dismissal may be necessary. An employer must be careful in respecting the rights of its personnel. It must pay particular attention to the situation of the 50+ employees. We will examine some of the aspects involved therein. After considering an employment agreement, we will provide a survey of existing labour legislation. Next, we will analyze termination/dismissal and review some exemplary jurisprudence. Then, we will look at unemployment. In order to better deal with the disengagement of an employee, we provide “The Gold Disengagement Drill” (Preferred Termination Practices).
SECTION 1—EMPLOYMENT CONTRACT: DEFINITIONS, ELEMENTS AND MORE
3. The employment of a worker by an employer is a common occurrence. It is a contractual relationship. It may or may not involve a union. While people generally know of this relationship, most do not understand its legal niceties. For explanatory purposes, we will begin with several key definitions, a description of its nature, an enumeration of the elements of the employment contract and some analysis.
83. Standard Life Assurance Co. v. Horsburgh ( B.C.J. No. 2321): In 2000, an internal investigation of its pension and group insurance sales unit uncovered a scheme that left 80 clients with losses totaling about $1.8 million. Standard accused three employees of defrauding it by representing that certain corporate pension clients were dealing through a broker when in fact the customers were being serviced directly. They included Martin Horsburgh, a former sales manager of group pensions, Donald Liesch, a former regional group manager and Peter Plunkett, a former branch administrator. They had funneled commissions paid by Standard through a broker, Priority Financial Services Ltd., which they controlled. Dan Hintz, a relative of Mr. Liesch, was the sole shareholder and officer of the broker. As a result, in late 2000, five sales representatives in three offices were fired. Some phases of the case are herein-below written:
(a) Lawsuit: A civil lawsuit was instituted by Standard in British Columbia. In their defense, the three former workers argued that they had not misled the company and that fee splitting was an accepted part of the corporate culture. In addition, the defendants counter-sued the company for wrongful dismissal, accusing senior executives in the Montreal head office of “discriminatory” conduct against anglophone employees. However, that action was adjourned.
(b) Judgment: On October 10th, 2003, Standard won a court judgment to recover $450,000 from the three staff members who collected the unauthorized commissions. Madam Justice Janet Sinclair Prowse of the Supreme Court of British Columbia found: i. That these fired employees from the Vancouver office had conspired to defraud the company; ii. That commissions paid to Priority were shared among the three and Mr. Hintz; iii. That Mr. Hintz, through his company, Priority, provided the vehicle that allowed the scheme to work; iv. That representations made by the former workers to Standard were false and the defense testimony about the fee splitting was unreliable; v. That the men falsified clients’ instructions so that commissions could be paid to Priority; vi. That the clients did not want a broker, but were supposed to be dealing with sales representatives who were Standard personnel; vii. That some clients did not get what they wanted while others, who did sign the appropriate documents, were not advised that Priority was now their broker; viii. That by going through a broker and with commission payments being deducted from returns, 13 corporate pension plan clients received lower rates of return over a 10-year period beginning in 1991; ix. That Standard ended by reimbursing the clients’ commissions, totaling $450,000. Respecting the clients, the Court declared:
They were misled from the outset and paid more through a lower rate of return than they should have paid…[In five of the cases, the men forged clients’ signatures on company documents], Not only had their signatures been forged but these clients had never heard of Priority nor had they appointed anyone to be a broker…They did not want a broker.
CHAPTER 2—AGE BIAS/DISCRIMINATION IN THE WORKPLACE
161. Discrimination is illegal. Age bias in the workplace is a form of discrimination. The growing number of employed Baby Boomers makes this an increasingly important issue. Employers must be made more aware of the legislation and existing case law in order to understand the parameters of age discrimination in the workplace. A review of the law thereon is warranted.
SECTION 1—CANADA-WIDE STATUTE REVIEW: DISCRIMINATION AND HUMAN RIGHTS LAWS
162. First, we will examine the legislation respecting age bias and the topic of mandatory retirement.
Overview of Legislation
163. The protection starts with The Canadian Charter of Rights and Freedoms (Part I of the Constitution Act, 1982(79), being Schedule B to the Canada Act 1982 (U.K.), 1982 c. 11) and The Canadian Human Rights Act (R.S. 1985, c. H-6). In addition, there are provincial laws, (i.e. Human Rights Codes), relating to the rights and liberties of the person that outlaw discrimination in employment and set down equality rights and safeguards. Many of such laws expressly designate age as a prohibited criterion of distinction.
225. Blais et Commission des droits de la personne c. Compagnie minière Québec Cartier ( R.J.Q. 2729): In the Québec Cartier case, the complainant was a 60 year-old foreman with 28 years of service who had been a devoted and valued employee. In 1989, he was informed that his position would be eliminated following the merger of his and another position. His employment continued until 1990, at which time the employer imposed an early retirement. The complainant lodged a grievance alleging that he was the victim of age discrimination. The ruling was as follows:
Held, the complaint was upheld. A prima facie case of discrimination was made out and defendant was unable to demonstrate on a balance of probabilities that it would have made the same decision were it not for complainant’s age. According to statistical evidence adduced at the hearing, complainant’s age group was more seriously affected by dismissals than any other in defendant company. Moreover, the merger was never implemented in that the newly created position was given to two persons under the age of 40. Defendant failed to show that there existed a rational connection between complainant’s age and the duties required of the position that he held. Damages included compensation for lost wages and a lump sum for loss of dignity.
225.1 Accordingly, age discrimination was found where an employee’s position was to be merged and an early retirement was imposed. Furthermore, the claim was upheld since the employer failed to prove the absence of discrimination on a balance of probabilities.
CHAPTER 3—ROAD MAP TO AN EARLY RETIREMENT DECISION: FORCES FOR AND AGAINST
276. Retirement constitutes a major life transition. As a person approaches retirement, it is important to make the best possible choices. Herewith is a road map to the (early) retirement decision.
SECTION 1—EMPLOYER REASONS FOR AN EMPLOYEE TAKING EARLY RETIREMENT: HISTORICAL TRADITION, DECLINING RETIREMENT AGE, ECONOMIC CIRCUMSTANCES, COUNTERVAILING FORCES AND ALTERNATIVES
(See Part 3, Chapter 1, Section 3, Paragraphs 56 & f. plus Part 3, Chapter 1, Section 4, Paragraphs 103 & f.)
277. A worker must take retirement at some time. If at 60, and not so willing, he or she could be “chloroformed.” So joked, William Osler, the famed doctor and McGill-educated author. This light-hearted remark at the turn of the century caused a furore. Of course, this is not an appropriate solution. But there are instances where an employer encourages a worker to retire or, if reticent, even forces him or her to do so. Several reasons prompting such action are hereinafter written. Some are of a general and wide application, while others are essentially age-related.
PART 4—THE 50+ ENTREPRENEUR
1. The phrases senior entrepreneur or entrepreneur at a senior level have a dual meaning. First, with the emphasis on senior, it could mean a mature worker thinking about recreating a career by now going into business for himself or herself. Second, with the emphasis on entrepreneur, it could signify a 50+ individual, the leading member of the top management of a company he or she has founded and now needing to address transition issues. Each faces particular challenges when approaching retirement.
CHAPTER 1—THE NEW ENTREPRENEUR: LAUNCHING/BUYING AN ENTERPRISE
2. A number of near-retirees or retirees do not wish to re-enter the work force. In contrast, they want to reinvent themselves by becoming self-employed and going into business. Aging Baby Boomers, especially corporate refugees, are in the vanguard of this trend. What follows are a few key definitions, the description of a business in capsule form, the profile of a founder/owner and the ‘ins’ and ‘outs’ of founding, owning and operating a company.
SECTION 1—LAUNCHING A NEW BUSINESS: BECOMING SELF-EMPLOYED
3. The self-employed worker is his or her own boss. In other words, when working for himself or herself, the market is the boss. And, if resourceful, he or she will find work. According to jobsmyway.com, there is a start-up every 10 seconds; self-employment is therefore not a rarity. An examination of the state of this type of employment follows.
CHAPTER 2—THE FAMILY BUSINESS AND SUCCESSION
236. A family business might fail at any time. Alternatively, it may experience considerable success by finding the right clientele, developing and evolving. The retirement of a founder/owner of such a company may be problematic. Indeed, succession is a major hurdle and a special issue. As a result, we shall analyze this great challenge considering the people, their problems and some solutions.
SECTION 1—THE FAMILY BUSINESS: ALL FOR ONE AND ONE FOR ALL?
237. A family business is an establishment for the purpose of selling goods and rendering services at a price. Said business is owned by a family and therefore has unique characteristics. While such businesses can be successful, they may entail certain advantages and obstacles, which merit close examination.
239. Up to 90% of Canadian businesses are family-owned. Small businesses are the backbone of the Canadian economy, providing two-thirds of new jobs, 50% of salaries and more than 55% of the gross national product, but they cannot be measured in numbers alone. These family-run firms are essential in the supply chain. It has been said that, “They are a tremendous source of vitality and involvement in the communities in which they operate…making their succession a vital issue for all of us” (McGovern, Sheila, “Managing, Family affairs, Planning succession can be intimidating,” The Gazette, Montreal, Monday, April 16, 2001, pg. F1).
240. As well, they are the building blocks of the American economy. In fact, there are approximately 18 million businesses in the U.S. and more than 80% of these are family-owned. Family-owned (and operated) businesses account for more than 50% of the nation’s employment and over 50% of the country’s gross national product (Fishkind, Russel J., Robert C. Kautz, J.K. Lasser Pro Estate and Business Succession Planning [electronic resource]: A legal guide to wealth transfer /New York, John Wiley & Sons Inc., U.S. 2001, xvi, p.23 cm http//www.netlibrary.com/urlapi.asp?action=summary8v=1&book1d=56794 (J.K. Lasser Pro Series).
241. It is a distinctive enterprise, some of whose particularities are as follows:
(a) Sense of utility: The products work and are useful or the services are needed. They contribute to a certain quality of life. It applies as much to the founder/owner and family as to customers and their families;
(b) Values: A founder/owner holds true to certain basic principles of living. And the family firm, in turn, reflects the mindset of such a social unit. An example is S.C. Johnson & Son, Inc., which proudly proclaims its essence by the mention of offspring and the addition of the tag line, a family company;
(c) Top grade: It also has and keeps high standards. At the outset, the founder/owner did good work. The company continues to be attentive to detail and ensures that its goods and services are fine, fit and proper for the use intended by customers. The firm stands behind its work product. A perfect example is Eaton’s at its peak. Timothy Eaton and the later Eaton clan-leader(s) went so far as to promise that, should a customer be dissatisfied with a product, the money would be cheerfully refunded. Another example is a Montreal haberdashery, now defunct, which used to say, “If it doesn’t fit, we won’t let you wear it”;
(d) Tradition: It stands for something and includes a sense of pedigree, heritage and continuity. Although the years pass, times and styles change and technology moves on, the ingrained culture of the company remains constant. With H.F. Johnson, following Sam Johnson, S.C. Johnson & Son, Inc. is into its fifth generation.
SECTION 2—THE AGING FOUNDER/OWNER AND ENTOURAGE: THE GOOD, THE BAD AND THE UGLY
252. A family firm going through maturity is quite an experience. At the epicentre is an older founder/owner, framed by a carnival of characters that constitute a family. It is very much imperfection personified. An analysis is as follows.
253. The “family” cannot be removed from a family business. In a few words, it starts and ends with the human condition. Some specifics follow.
254. A business that is family-owned (or controlled) or family-run bears the very large imprint of its founder/owner. Approaching retirement accentuates the best and worst in a person. As a near-retiree, he or she could now be described as a basket of the following characteristics.
Making an Exit Strategy as Part of a Succession Plan and Doing it Right
276. In view of the above, Canada’s entrepreneurial class is in crisis. But like any other challenge, this too can be overcome. The solution is for a clear-thinking founder/owner to cut through the excuses, emotions, facts and forces, all obstructing the way. And he or she then must make an exit strategy as part of a succession plan.
281.2 Sell it to an insider. This is where he or she sells the business or the company, in whole or in part, to a family member, senior manager or long-serving employee. It has been said that a well-planned sale can be a crucial stage of ownership.
It cannot be informal. Of course, business is business. And free is no favour. Instead, there is a contract under which the purchaser is obliged to discharge a monetary consideration, this along with the implicit responsibility to properly manage the business and achieve good results. A fair price must be reached. As to the up-front payment on closing and the term of installments, it could be a sweetheart deal. With 10% down, there might be 10 years to pay off the balance of sale. Ideally, in this way, an owner will smoothly turn the business over to the successors.
297. In the classroom context, a professor will describe a business problem and the students discuss possible solutions. In accordance with this format, we will now provide several fact patterns, same highlighting several poor decisions and common instances of family discord. A commentary will follow each scenario. Also included are several suggestions with respect thereto. This material may serve as a resource for the founder/owner and family to better deal with this time of change.
© 2005 Practitioners’ Press Inc./ TM Practitioners’ Press Inc.