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Copyright © 2011, Emerald Group Publishing Limited
Retirement age abolition – the aftermath
Article Type: Corporate law outlook From: Strategic Direction, Volume 27, Issue 9
At the beginning of April this year, the default retirement age (DRA) was swept away as a result of the Equality Act 2010.
This was one of the more contentious, if not most hotly debated, issues under the Equality Act 2010 given that the DRA – which was only introduced in 2006 – was a prime example of a permitted working practice which was blatantly discriminatory on the grounds of age. In the minds of many, therefore, it had to go.
It was interesting that in the run-up to the end of March 2011 there was a significant amount of speculation in the national media that many companies would take advantage of this final opportunity to effectively have a “clear out” of staff who would be 65 before the end of September 2011. The justification for this was that unless the opportunity was taken they would be left with the much more difficult and potentially long-winded capability management route in order to remove older workers.
It is not clear whether there will ever be any statistics to show if there was actually a rise in the number of enforced retirements as a result of employers taking a more robust stance. The great advantage to employers under the original system was that they could “retire” employees who met the criteria and they were under no obligation to give any reason for a refusal of a request to work beyond retirement age. As long as the criteria were met and the procedure was followed to the letter, then there was a presumption that retirement was the reason for termination and no right of action would lie.
It seems that less has been written about how to deal with the situation post DRA abolition. The collective wisdom seems to be that it would be unwise for any employer to attempt to justify its own retirement age and it is clear that the government, in reality, does not wish to provide employers with an easy option for dispensing with their older employees.
With an ageing population and the recognition that people are living longer, it is accepted that there is a need to work longer to save for retirement. The removal of the DRA was seen as a way of encouraging this and it seems quite unlikely therefore that employers who seek to avail themselves of an “employer justified retirement age” (EJRA) are likely to have a tough time satisfying the courts that it is, in fact, justified.
What this all means is that there is now no safe age at which employers can retire employees. It may even be argued that it is necessarily age discriminatory to even discuss with employees what their plans are for retirement.
Clearly, employers need to show objective justification for dismissing at any set age and, more likely, employers are going to need to implement robust and non-discriminatory capability procedures to remove employees who it is felt are no longer performing to the required level and who may be at or beyond state pensionable age.
On reviewing standard terms and conditions of employment, employment law advisers have been quick to pick up that retirement age provisions are no longer legal. However, employers concerned about succession planning and career advancement are necessarily loathe entirely to dispense with such provisions, even though they may be, on their face, illegal.
The recommendation is that employers need a framework in order to facilitate open and honest discussion with employees, given that all employees will at some time want to consider retiring. After, most if not all will have some form of pension plan, especially after next year with auto-enrolment.
Without such a system employers may ultimately be faced with an unwelcome churn at the younger end, especially from employees who feel that it is unfair for them to have to wait around indefinitely for advancement.
Employers need to think about having a provision with regard to retirement in their contracts of employment, but rather than a clause which requires retirement the recommendation is that there should be reference to a framework whereby future career plans are discussed on a regular basis.
In this way employers will be able to justify why discussions are being built into an appraisal system conducted annually and hopefully save themselves from allegations of ageism simply by virtue of the fact that they are having the discussion.
For those employers who find the notion of having no set retirement age simply too uncertain, perhaps they do wish to venture into the risky area of justifying their own retirement age. If this is the case, they need to show that there is a real business need, i.e. legitimate aim, for such an age, that having a particular retirement age meets that aim and that it is proportionate to use that retirement age as a means of meeting that aim.
In such cases, employers need to show that a balancing act has been carried out, weighing the discriminatory effect on the employee against the benefits achieved to the business and considering whether the aim can be met by less discriminatory means.
A word to the wise, however, can be drawn from existing case law, not least that of Hampton v. Lord Chancellor and Ministry of Justice . In this case the Ministry of Justice failed to convince the Employment Tribunal that compulsory retirement of Recorders at 65 was justified. It was a legitimate aim to want to ensure a reasonable flow of new appointments into the judiciary.
The evidence did not support the argument that retirement at 65 was a proportionate way of meeting the aim. Whilst it was significant that other judicial office holders could retire at 70 one wonders just how impartial the judiciary could be on this issue.
Being slightly more blunt, it is undoubtedly going to be an uphill struggle to try to persuade “senior” members of the judiciary on behalf of an employer that a retirement age is in some way justified when such judges may themselves already be above that age.
Philip PagetHead of Employment Law at Yorkshire law firm Gordons.
If you wish to discuss the contents of this article further, please contact Philip Paget, head of employment law at Gordons LLP on 0113 227 0212 or e-mail: email@example.com
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