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Retirement after 65 – a gold watch or a P45?
Article Type: Employment law outlook From: Human Resource Management International Digest, Volume 19, Issue 5
The Employment Equality (Age) Regulations, which were introduced in October 2006, included provisions for a default retirement age (“DRA”) of 65. This meant that employers could force employees to retire at age 65 or above, without a risk of claims for unfair dismissal or age discrimination, provided that they followed a set retirement procedure.
Citing the context of an ageing UK population, with older people being more economically active than in the past, and to bolster depleted pension funds by encouraging people to work for longer, the Government has abolished the default retirement age with effect from 6 April 2011, subject to transitional provisions. Under those transitional provisions, the employer had up to 5 April to give six to 12 months’ notice of retirement under the statutory retirement regime, provided that the employee was 65 or over before 1 October 2011, and the employer followed the requisite procedure.
What does this mean for retirement in the future?
Following the removal of the DRA, can employers force employees to retire?
There are two main options. An employer may continue to operate a default retirement age or alternatively may decide not to have a set retirement age in place in future.
Maintaining a default retirement age
Any dismissal for retirement (whether at age 65 or any other stipulated age) that does not fall within the transitional provisions above will be discriminatory on the grounds of age, unless it can be objectively justified.
The Government has indicated that it does not think it would be easy to justify a compulsory retirement age. This is a view supported by ACAS and some of the case law in this area. What is certain is that clear and robust evidence will be required if an employer is to stand any chance of justifying a retirement age, but this is certainly the more risky of the two for employers.
Objective justification requires two limbs to be met:
there must be a legitimate aim; and
the means of achieving that aim must be proportionate, meaning that:
the discriminatory effect is outweighed by the importance and benefits of the legitimate aim – which is actually achieved; and
there is no reasonable alternative way of achieving the legitimate aim.
It is likely to be easier for employers to show that there is a legitimate aim than it will be to establish proportionality. Legitimate aims which have been raised in previous cases include promoting the recruitment and retention of younger employees by ensuring there is a clearly defined career path as a result of the compulsory retirement of older workers (rather brutally known as the “dead man’s shoes” argument); contributing to a pleasant workplace and protecting the dignity of older workers by not requiring them to undergo performance management procedures before dismissing them; having an age-balanced workforce and inter-generational fairness; and facilitating long term employment planning.
Employers are more likely to fall at the second hurdle. Establishing that the legitimate aim is achieved by enforcing a compulsory retirement age of, for example, 65 as opposed to 62 or 67 is likely to be extremely difficult to do. This is made more difficult by the scope for an employee to argue that there is a reasonable alternative means of achieving the legitimate aim. An example is provided by the case of Martin v. Professional Game Match Officials (2010 ET/2802438/09), in which a Tribunal found that a retirement age of 48 could not be justified for football referees. The employer relied on maintaining a high standard and establishing a career route for those joining the profession as legitimate aims.
The Tribunal, however, rejected the proposition that a mandatory retirement age of 48 was proportionate, noting that other European countries had different retirement ages and there was no evidence to support 48 as being the appropriate age as compared with, for example, 46 or 50. There were also found to be less discriminatory ways of achieving the same aim, for example conducting objective fitness and competency tests.
There is also a tension between European and UK case law, with European case law adopting a less restrictive, more theoretical approach to age related employment requirements than the pragmatic Tribunals in the UK. For example the European Court of Justice agreed with the German government that a rule restricting applications to join the fire service to those under 30 was justified on evidence that few over 45 had the high physical stamina needed and a run in period of 15 years was reasonable (Wolf v. Stadt Frankfurt Am Main).
In contrast, an age limit of 36 for applicants to train as air traffic controllers was found not to be justifiable by a UK Employment Tribunal. The Employment Tribunal considered the available expert evidence to be of “dubious” value and expressed concern about whether alternatives to the age bar had been seriously considered (Baker v. National Air Traffic Services Ltd). Only time will tell how the case law on objective justification develops. In the meantime, it is fair to say that the bar is set at a high level for any employer who adopts the route of seeking to justify any particular fixed age.
No mandatory retirement age
In the absence of an ability objectively to justify a mandatory retirement age having no retirement age in future is the safer option. There will be potential for unfair dismissal and age discrimination claims in connection with any termination of employment and a need therefore to ensure that there is a potentially fair reason for any dismissal – for example poor performance, ill health or redundancy – and that a fair procedure is followed.
Essentially, the change makes it more difficult to dismiss older workers if they are still capable of performing, but those who do want to retire at 65 will still be able to do so. The positive element to all of this is that employees should be judged on their ability to do their job, not their age.
Employers should ensure that they have robust procedures in place for sickness or disability related issues, performance management and any age related harassment situations.
In addition there may be scope for employers to minimise potential problems by engaging in discussions with older employees about their plans for the future. There is guidance by ACAS suggesting that all employees should be offered this option, not just the older ones, to avoid the risk of age discrimination. However, provided care is taken in relation to the nature and frequency of such discussions it might well be justifiable to limit this practice to older employees who may be considering retirement.
Sarah JamesAssociate Solicitor at Dickinson Dees LLP, Newcastle upon Tyne, UK.