The ECJ has ruled that a German law providing for a default retirement age to be set by collective agreement, and the collective agreement setting that age at 65, were justified.

The aims of sharing employment between the generations and avoiding dismissals of older workers on grounds of capability were legitimate. In deciding that the measures were proportionate means of achieving those aims and therefore justified, the ECJ was influenced by the element of collective negotiation, the availability of pension to replace salary, and the fact that a retired person seeking a new job could still claim age discrimination.

Although the decision is helpful in accepting the relevance of pension provision and collective negotiation to justification of retirement ages, member states do enjoy a broad discretion in implementing directives which is not available to individual employers. Once the default retirement age is abolished (due in October 2011), tribunals are likely to apply a stricter test to individual employers. (Rosenbladt v Oellerking Gebäudereinigungsges, ECJ)

The ECJ has also ruled that a Danish law providing long service employees with severance payments of up to three months' pay to assist them while searching for work was unlawful because employees eligible to take pension were excluded.

Although it was legitimate to seek to avoid payments to those not looking for work but instead receiving pension, the law was not proportionate as it also excluded employees who wanted to continue with their career despite being eligible for pension. Such employees might be forced to take an early retirement pension at a reduced level.

Employers should review any enhanced redundancy schemes under which payments vary according to an employee's pension eligibility, particularly where they reduce prior to an employee reaching 65 based on an assumption that those eligible for pension will not wish to continue working, and generally once the default retirement age is abolished. (Anderson v Region Syddanmark, ECJ)