It’s a year since discrimination on the grounds of age was prohibited for employers (and pension scheme trustees) under regulations which came into force on 1 October 2006 (and 1 December 2006). Will Hutton, writing in the Observer on 1 October 2006, suggested that the change “promises to be the biggest revolution in social attitudes for a generation.” A day later the Financial Times’ John Kay commented that “on Sunday discrimination on grounds of age became illegal in Britain. Most people instinctively know that this is nonsense.” Have either been proved right? Or has an indifferent calm followed the storm of anticipation? The first anniversary of the age discrimination regime is a useful point to consider what, if anything, has changed for employers (and pension scheme trustees) and to discuss what is emerging as best practice.
In the courts
For much of the year HR professionals have been waiting to see if any direction would come from the Employment Tribunals or Pensions Ombudsman. The Tribunals Service published figures at the beginning of September 2007, which revealed only 972 age discrimination claims had been accepted out of 132,577 employment tribunal claims in the 12 months to the end of March 2007. So far there have been no useful decisions to clarify the questions that still surround implementation of the age discrimination regime. One of the first Employment Tribunal decisions was the strike out of a claim against Gap in relation to an alleged ageist advertisement. The claimant had not actually applied for the job and the advertisement was not an accurate reflection of Gap’s actual recruitment practice - fundamental flaws in the claim and not offering a great deal of useful guidance for anyone.
Even before the Age Regulations came into force, the National Council on Ageing, known as Heyday, issued a High Court challenge to the provisions which allow mandatory retirement at age 65. The challenge has recently been referred to the European Court of Justice (ECJ) which is unlikely to hear the case before 2009. It is widely thought that the Heyday challenge has little prospect of success, given early indications following a similar Spanish case for which the final ECJ ruling is awaited. To date, claims made by those over 65 forced to retire have been dismissed. However, it is understood that Heyday is currently seeking a practice direction that all such cases be stayed pending the ECJ ruling in their case.
But it is important to remember that the small numbers reported may hide a much larger number to come. Anecdotal evidence suggests that around 1 in 9 employers have already received an age discrimination claim. The time taken for claims to be processed could explain the difference, and would suggest a flood of claims in the coming year and beyond as employees and their representatives take advantage of this developing area.
In terms of press coverage much attention will be focused on decisions relating to two partners at City law firm Freshfield Bruckhaus Deringer. We are waiting a decision on a case brought by a former partner relating to changes in the firm’s pension scheme and on 14 December 2007, the London Central Employment Tribunal will hear the claim brought by another ex-partner relating to forced retirement.
Best practice for employers
Whilst the age discrimination regime’s first year has lacked decisions from the courts, there is an emerging body of best practice. The most important action for employers is to carry out an “age audit” to examine how employment policies and practices can have age dimensions. Examples have included:
- Benefits based on length of service will be exempt if there is a business need, but it is important for employers to closely examine what business need is fulfilled. Rewarding loyalty alone may not be enough and evidence of staff turnover for example, will be required.
- Thinking around age-specific practices, including health checks and training for certain age groups can make business sense, but is there another less discriminatory way of achieving the same effect? Health checks for senior executives, regardless of age, or training for specific roles would lower the risk of challenge as the focus moves to health and safety in key roles and away from an age specific focus.
- Redundancy or retirement? Making sure a proper retirement procedure is followed may mean employers can avoid making redundancy payments, but we need to wait and see if Employment Tribunals will allow this potential result to stand.
- A secure position on working beyond normal retirement age? Employers are already experiencing the need to prevent executives “reversing” their retirement decisions and to lower the risk of challenges from other employees working beyond normal retirement age but without the usual benefits. Compromise agreements can provide some comfort for employers in this area.
The introduction of age discrimination regulations in pensions has been fraught with difficulty. Even with delay, amendment and DTI guidance the regulations leave some problems. Pensions professionals still have to consider how to deal with providing benefits beyond retirement age; early retirement benefits on redundancy; flexible retirement and enhanced contributions to personal pension schemes. Examples of current best practice include:
- Scheme rule audit and identification of risks, including employer and scheme practices that are clearly discriminatory and are not exempted or objectively justifiable;
- Offering members a choice of options at retirement, including ongoing accrual; late retirement uplift; alternative benefit provision; and
- Preparing objective justification arguments in relation to enhanced employer contributions into personal pensions for exfinal salary scheme members.
Age discrimination getting older – what to expect from the next year
We expect to see some heavy lobbying of the government from groups such as the Employer’s Forum on Age in relation to exemptions from benefit provision beyond normal retirement age. This is proving to be one of the most difficult areas for employers because providers of insured benefits are not covered by the age regulations and premiums for older workers are substantially higher. We expect a decision from Europe in the Heyday case about whether the government’s introduction of a statutory default retirement age of 65 is lawful.
The one year anniversary will also be marked by the birth of the Commission for Equality and Human Rights. This new body will not only cover disability, sex and race discrimination, but will also have responsibility for the ‘new’ equality areas of religion or belief, sexual orientation and to ensure the full implementation of the age discrimination regime. A decision to issue codes of practice on age discrimination will at least clarify the government thinking behind some of the more opaque aspects of the age discrimination regime.
Age is going to be an increasingly issue that all employers and pension schemes will have to consider. A lack of judicial activity at this stage should not be taken as a signal that we can ignore age discrimination. Putting in place policies now will, at the very least, ensure that employers and pension scheme are geared up to face the challenges ahead.