In March of this year, the European Court of Justice (ECJ) decided that the UK default retirement age (DRA) of 65 introduced by the Age Regulations could be compatible with the overarching EC Equal Treatment Directive (the Directive) provided that the DRA could be objectively and reasonably justified. It was for the High Court to determine if the DRA is in fact justifiable.

The High Court had to consider four issues:

Question 1 - What principles apply when deciding if the Government correctly implemented the EC Directive into national law?

To put this question into context, the Directive states that member states may provide that differences in treatment on grounds of age will not be unlawful discrimination if the differences can be objectively and reasonably justified by a legitimate aim. The ECJ rejected Heyday's argument that, when implementing the Directive, the individual member states had to list every possible legitimate aim. However, the ECJ did state that in order for aims to be "legitimate" they must have social policy objectives and they must have an evidential basis to support them.

To decide if the Government did have a legitimate aim based on social and economic policy, the High Court established the following principles:

a.it was appropriate to look to the aims and policy identified at the time the Age Regulations were implemented, not at the present time

b.the Government must prove justification to a high evidential standard - the court could not merely agree with the rationale as this could undermine the principle of equal treatment

c.the principle of proportionality should be applied and this involved three elements:

i.whether the unequal treatment was a useful, suitable or effective means of achieving a legitimate aim or objective;

ii.whether there were alternative means of achieving the aim which had less impact on those suffering the unequal treatment; and

iii.even if there were no alternative means of achieving the aim, does the treatment have an excessive or disproportionate effect on those suffering the unequal treatment.

Question 2 - Can material relating to evidence given to parliamentary committees and the recommendations of those committees be received and relied upon by the court?

Yes.

This issue arose because of a last minute application by the Attorney General claiming that it was constitutionally improper for the court to receive evidence given by a witness of a parliamentary committee and the views of the committee itself. Mr Justice Blake said that there was no constitutional reason why the court should not be allowed to review and consider this evidence. He therefore took it into account in reaching his decision.

Question 3 - In light of all the evidence, is the default retirement age of 65 (established by Regulation 30) lawful?

Yes.

In answering this, Mr Justice Blake had to scrutinise what was the "legitimate aim(s)" being pursued. Furthermore, was a DRA of 65 a proportionate means of achieving the aim(s).

What was the legitimate aim(s) being pursued?

The social policy aims which influenced the decision to introduce a DRA of 65 were set out in the Government's July 2005 Coming of Age consultation document, as:

i.workforce planning

ii.the avoidance of an adverse impact on the provision of occupational pensions and other work related benefits.

These aims included: the prevention of "job blocking"; the encouragement of saving for retirement; the protection of the dignity of workers at the end of their working lives; improvement in the participation of workers in the 50-64 age group (as employers can recruit older employees in the knowledge that they can be retired); and the encouragement of culture change.

Heyday argued that these were not clear and consistent policy aims and that the Government had succumbed to lobbying pressure at a time when it was anxious to be business friendly.

However, Mr Justice Blake was satisfied that the Government had proved to a high evidential standard that the introduction of the DRA was based upon a legitimate social policy aim that could be described as "maintaining confidence in the labour market". He judged this to be a social policy aim of general public interest that could be distinguished from reasons particular to an individual employer's situation.

Is a DRA of 65 proportionate?

Again, yes. Mr Justice Blake held that a DRA was a proportionate way of giving effect to the social aim of labour market confidence. As to adopting age 65 as the DRA, looking back to the time the Age Regulations were implemented, it was lawful although it was "not a bold decision". He commented that given our changed economic circumstances since the time of implementation, and the burdens that an ageing population places on the social security system, a DRA above age 65 would now seem sensible.

He commented that if the Age Regulations had been implemented today, or the Government had not announced on 13 July 2009 that it was bringing forward its review of the Age Regulations to 2010, then he would have concluded that a DRA of 65 was not proportionate because it creates a greater discriminatory effect than is necessary. He concluded that a higher DRA would not have any adverse affect on the labour market or block access to jobs.

Question 4 - Is the justification of direct discrimination (Regulation 3) compatible with the Directive?

Once again, yes.

Regulation 3 allows direct discriminatory treatment by employers on the grounds of age if the treatment can be shown to be a proportionate means of achieving a legitimate aim. It was argued that given any discrimination had to be justified by a legitimate aim backed by a social policy objective, individual employers would not have a social policy objective and therefore Regulation 3 was not compatible with the Directive.

Mr Justice Blake admitted that it would be harder for an individual employer to justify discriminatory practices or treatment based on a social aim but this did not make Regulation 3 unlawful.

Conclusions

The High Court has tried to please both sides. By confirming that the current DRA of 65 is lawful, employers have been given a break in difficult times. However, the judge's comments about a different result being likely if the Age Regulations were introduced now appease the age equality groups who can be confident that the tide is turning in their direction.

The principles established for looking at whether or not a directive has been implemented correctly seem logical and well thought out. They will no doubt be used in future cases. The issue of parliamentary privilege added extra excitement to the Attorney General's last minute challenge and begs the question; how could the court have decided the legitimacy of the Government's social and economic policy without any evidence?

The decision is what we expected. It was not hard for the court to identify a legitimate social policy aim for the introduction of a DRA. Trying to convince the court that age 65 is proportionate, and therefore the right age for the DRA, was always going to be harder. This is especially true given our current economic climate, with the need for older people to keep earning and the difficulty of obtaining new employment. In effect, the Government has been saved by its timely announcement that it is to bring forward its review of the Age Regulations to next year.

What does this mean for employers?

Employers can breathe a sigh of relief for the time being and continue to retire employees at age 65 without risk of age discrimination or unfair dismissal claims as long as they comply with the statutory processes. Employers shouldn't be complacent though. Mr Justice Blake has given the Government a clear warning that, in the current social and economic climate, a DRA of 65 is no longer proportionate.

The Government review of the Age Regulations is next year and our money is on the half way house and a new DRA of 68, to match the new state pension age. However, with the election coming up, a complete removal is not out of the question if it is deemed a vote winner. We may also see employee-friendly changes to the statutory right to request to work beyond retirement. Bodies, such as the Equality and Human Rights Commission, are currently campaigning for a requirement that employers should be obliged to state the reasons for refusing a request (although employees have always been able to serve an age discrimination questionnaire).

Employers should try to stay ahead of the game by starting to rethink how they could manage their older workforce if forced retirement is no longer an option. Specific areas for consideration are flexible retirement options, performance management and workforce demographics and planning.