This article was published in slightly different form in the October/November 2007 issue of the Society for Human Resource Management’s Legal Report.
In the United States, laws against age discrimination are old news. Our Age Discrimination in Employment Act (ADEA) dates back to 1973. Therefore it must seem anticlimactic for U.S. human resources practitioners to learn that in October 2006, the United Kingdom (U.K.) implemented its first law banning age discrimination. The 67-page Employment Equality (Age) Regulations (EEAR) implement a European Union (E.U) discrimination “directive” that requires all E.U. member states to prohibit age discrimination under their local laws. (See the online sidebar, “EEAR in the Context of European Union Anti-Discrimination Laws.”)
With their huge head start complying with age discrimination principles, Americans might assume that the U.K.’s new age law will not present any significant challenges to their international HR compliance efforts. That assumption would be wrong. The U.K.’s new age discrimination law is no Johnny-come-lately clone of the U.S. ADEA. In some key respects it goes well beyond the ADEA.
As such, U.S. multinationals with U.K. employees need to resist the temptation to export their ADEA compliance tools to the U.K. ADEA compliance practices do not transplant across the Atlantic, at least not without some changes.
Like other European laws that implement the E.U. anti-discrimination directive, the EEAR protects the young against policies favoring the old. It also raises compliance issues as to practices that are legal under the ADEA and common in the United States-routine U.S. practices like imposing experience requirements, paying automatic raises or lockstep compensation, offering tenure-based vacation, and ensuring that reductions-in-force do not favor younger workers.
The EEAR is further complicated by the fact that it lets employers in Britain perpetuate the entrenched custom of mandatory retirement. A “little secret” of global human resources is that very many major U.S. multinationals actively impose forced retirement overseas, including often in the U.K. The EEAR lets employers continue with this, but erects some hurdles that make mandatory retirement a tricky business.
This article looks at the EEAR through the lens of a U.S.-based multinational familiar with the ADEA and highlights three compliance steps multinationals should take now.
Four Major Differences
The EEAR works like other equal employment opportunity (EEO) laws, such as those Americans are used to. It reaches recruitment, training, benefits and dismissals, and it prohibits bow direct discrimination and adverse/disparate impact (called in the UK. “indirect”) discrimination, as well as retaliation (called “victimization”). (See the online sidebar, “Two Nations Divided by a Common Language.”)
The EEAR even reaches further than U.S. discrimination laws in that it protects not only employees, but also protects partners in any partnership, the self-employed and independent contractors.
An important effect of the EEAR is its reach into pre-employment recruiting. Before the regulations’ launch, it was perfectly legal for employers in the U.K. to advertise age ranges in help-wanted ads.
The EEAR has pushed the pendulum the other way: Not only must U.K. recruitment ads keep silent on age (as the ADEA effectively forbids), but U.K. help wanted ads are now suspect even if they merely impose experience levels, like “15 years’ experience preferred.” The rationale is that experience minimums have an adverse impact (“indirect discrimination”) against the young.
In the U.S., where the ADEA does not prohibit discriminating in favor of the old and where state laws prohibiting discrimination against the young have been narrowly construed, this is no issue.
This is not to say that in the U.K. all experience minimums are illegal. An employer might justify imposing experience levels by meeting an affirmative burden to prove the requirement is a “proportionate means of achieving a legitimate aim.” However, the level of proof here is high.
Benefits and compensation
Because the EEAR is a two-way street that protects the young from workplace policies favoring the old, and because any employer policy that rewards seniority has a disparate impact against the young, the U.K.’s age discrimination law could have sweeping effects on seniority-based compensation and benefit systems, which under the ADEA are perfectly legal. EEAR compliance requires a special focus on all benefits/compensation offerings with a years-of-service or lockstep component. This principle implicates seniority-based compensation, tenure-based vacation, early retirement incentives, and every other employee benefit linked to age or years of service, even as a vesting requirement.
But the EEAR does offer employers some exceptions, sanitizing those service related pay and benefits offerings that meet three criteria:
- The length-of-service requirement is applied consistently.
- A legitimate business purpose supports the length-of-service requirement (such as that the policy reflects the experience of the employee, rewards loyalty or is motivational).
- The employer has reasonably concluded that the length-of-service requirement will lead to some business benefit.
Further, the EEAR broadly excepts length-of-service minimums of five years, thereby insulating many benefit-vesting requirements.
Like other E.U. age discrimination laws, the EEAR preserves employers’ power to force retirements, a common practice in the U.K. even among U.S.-based multinationals.
The EEAR lets employers impose mandatory retirement at some employer selected retirement age, with age 65 as the presumed minimum.
But the EEAR imposes an affirmative “duty to consider working beyond retirement,” by which U.K. employers seeking to force a retirement must first:
- Send a letter to employees about to reach the designated age.
- Host any requested employee meeting.
- Consider in good faith any timely employee request to keep working.
Some U.K. employers formerly applied mandatory retirement policies selectively, retaining star performers even after retirement age.
Now U.K. employers that want to impose mandatory retirement need to be consistent and to take compliance steps. (See the online sidebar, “Process for Mandatory Retirement.”)
The EEAR carves out some exceptions that do not exist under the ADEA and that may prove broader than the ADEA’s limited “bona fide occupational qualification” (BFOQ) exemption. Chiefly, the EEAR exempts age discrimination that is “objectively justifiable as a proportionate means of achieving a legitimate aim.” Beyond this general exemption, the EEAR sets out other exceptions, such as for:
- Enhanced benefits in layoffs (“redundancies”).
- Limited affirmative (“positive”) action.
- Length-of-service related benefits for service up to five years only.
- Rejecting job applicants because they are within six months of an employer’s retirement age.
Three Compliance Steps
U.S. multinationals employing people in the U.K. should now take three compliance steps.
Ensure that U.K. human resources staff have implemented EEAR compliance practices and communications for recruitment, benefits/compensation, promotion and termination. Be sure help-wanted ads and compensation/benefits offerings comply. Remember that local HR staff may not have the experience with age discrimination concepts that U.S. counterparts do; training and cross-fertilization may make sense, if they account for the differences between the ADEA and the EEAR.
Mandatory retirement procedures
Be sure local U.K. operations have a fully-baked position on mandatory retirement. Do not assume, without verifying, that your U.K. operations have eradicated forced retirement. If a U.K. office perpetuates mandatory retirement, set a retirement age of 65 or older and communicate compliant procedures. Adhere to the EEAR’s rigorous procedural steps. Launch some process for letting workers who hit the retirement age request to keep working.
Code of conduct compliance
It is a bad practice to proclaim, in a global discrimination policy or conduct code, an unqualified position against discrimination on the basis of (among other grounds) age while simultaneously firing staff outside the U.S. merely because they celebrate a qualifying birthday. If your global discrimination policy or code of conduct prohibits age discrimination but your London office imposes forced retirements, change either the global code or the London practice.