From 6 April 2011, the UK ceases to have a "default retirement age" of 65 (the “DRA”) at which employers may require an employee to retire automatically without facing unfair dismissal (termination) claims. The DRA (first introduced in the Employment Equality (Age) Regulations 2006) permitted employers to retire individuals at the DRA, provided they followed a specific statutory procedure, without this giving rise to statutory claims for unfair dismissal.

While the DRA is abolished, employers may continue to have an “Employer Justified Retirement Age” (“EJRA”), which may be higher or lower than 65, at which employees must retire. However, an EJRA may only be retained if the employer can show objectively that an EJRA is a “proportionate response to achieve a legitimate aim.”

If an employer wants to have an EJRA, it will have to have objective evidence likely to be accepted by an employment tribunal in the event of a challenge to support the reason for a decision to have an EJRA.

While European case law suggests that workforce planning and "intergenerational fairness" may be acceptable reasons for a compulsory retirement age, English employment tribunals have applied a more restrictive approach when considering age discrimination issues; e.g., in Baker v. National Air Traffic Services Limited, a tribunal held that an age bar of 36 for trainee air traffic controllers to commence training was not proportionate, since NATS could not demonstrate “viable empirical evidence” that older air traffic controllers were unable to perform the job function.

The leading case in the UK is Seldon v. Clarkson, Wright & Jakes (currently under appeal to the English Supreme Court). Clarkson, Wright & Jakes requires partners to retire at the partnership retirement age of 65. In the lower courts, the partnership's reliance on "workforce planning" and “collegiality” as justification for a compulsory retirement age has been held to be a “good” reason, but how the Supreme Court will approach the issues of workforce planning/collegiality may well be different.

Until the case is heard, and in all probability until a number of cases have been heard by employment tribunals on employer reasons for maintaining compulsory retirement, our view is that employers should proceed on the assumption that tribunals will feel obliged to test any employer justifications with a degree of rigour.

What should Employers be doing now?

Employers should determine whether or not they wish to have an EJRA. If so, care will need to be taken to determine the rationale for the EJRA and to document it fully. We believe that for different occupations, it may be possible to have different EJRAs', or to have an EJRA for certain roles and no EJRA for others; e.g., if a role truly requires specific attributes, or perhaps more pertinently, where there is a legal bar on individuals over a certain age performing a specific role.

If an EJRA is not maintained, employers should then consider how workforce management and capability procedures will be applied in the future. In principle, since age will no longer be a reason for the end of employment, applying fair performance and capability assessments will be imperative. Such assessments and procedures should be reviewed to ensure, so far as possible that they are either not discriminatory or that any potentially discriminatory items can be justified.

Once a decision has been made as to whether to have an EJRA or not, appropriate communication of the decision should take place with employees. If within UK operations it is usual to discuss issues of this nature with an employee and/or trade union representatives, we would advise that such discussions take place before any final decisions are made by the employer.

What about staff who are 65 or close to 65 now?

Under the legislation, transitional provisions permit retention of the DRA for employees who reach 65 on or before 3 September 2011, provided that the employer complies with the DRA notification provisions in relation to the retirement - .i.e.,if six months before the DRA the employer serves notice on the employee of the approaching DRA, and the employer considers any request to remain in employment beyond the DRA (that consideration need not give rise to an agreement for the employee to remain), then it will be possible to retire staff who hit 65 before 3 September under the transitional provisions.

Employers may wish to consider whether or not they have any staff who fall within the transitional provisions, as a matter of urgency, and determine whether or not they wish to serve the appropriate notice.