Background

Even before the Age Regulations 2006 came into force, Heyday issued a High Court challenge to the provisions which allow mandatory retirement at age 65. The High Court promptly referred the matter to the European Court of Justice (ECJ).

On 2 July, the ECJ heard the case, and we now have the Advocate General's (AG) opinion. In particular, the ECJ was asked to consider:

  1. whether national rules which permit employers to dismiss employees aged 65 or over by reason of retirement are permitted and whether this extends to rules introduced after the introduction of the Directive;
  2. if legislation setting out the test for justification of direct age discrimination is required to list the possible legitimate aims; and
  3. is there any and, if so, what significant practical difference between the test for justification in relation to direct and indirect discrimination?

Question 1

Heyday argued that it was contrary to the terms of the Directive effectively to create a national default retirement age after the Directive was agreed in 2000. The relevant Directive is expressly stated to be "without prejudice to national provisions laying down retirement ages". Prior to the introduction of the Age Regulations, the UK did not have a national retirement age, but rather simply a national state pension age.

The AG concluded that the provisions of the UK age discrimination legislation governing retirement dismissals do fall within the scope of the Directive. Accordingly, the UK retirement provisions can be compatible with the Directive, provided they are objectively and reasonably justified. In this sense, Heyday's arguments were rejected outright. On the other hand, the AG has left it open for consideration of whether the default retirement age provisions are in fact justifiable. This is likely to be left to the High Court to determine.

Question 2

On the question of whether the implementing legislation should list every possible legitimate aim that may be justified in order to comply with the Directive, the AG reached his decision quickly and with a large dose of common-sense. He concludes that Member States are not required to define the kinds of differences of treatment which may be justified, despite Heyday's arguments to the contrary. Accordingly, the legislation does not need to specify a list of possible legitimate aims.

Frankly, this makes sense. As the AG succinctly puts it, Member States should not be required to detail explicitly in the implementing legislation every possible circumstance in which age discrimination may be justified by reference to a legitimate aim.

Question 3

Finally, as to whether there is a difference in the test required for objectively justifying direct as compared with indirect age discrimination, the AG agrees with the UK Government that there is no practical difference between the tests.

Unlike other forms of anti-discrimination legislation, the ability to justify direct discrimination is unique to the ground of age. The AG points out that the possibility for justifying different treatment based on age is more extensive than other grounds as "age is not by its very nature a suspect ground, at least not as much as race or sex".

In this sense, while treating people differently simply because they have reached age 65 is directly age discriminatory, the AG accepts that there should be allowance for circumstances in which such treatment may be objectively justified.

So what is the AG's opinion saying?

The opinion is not saying anything new, or controversial.

The points to be decided by the ECJ, which were initially considered by the AG, are on preliminary points – akin to a warm-up ahead of the game "proper". The AG does not address the substantive question as to whether the UK default retirement age is justifiable, nor was he asked to. Rather he is saying that the UK retirement provisions are within the scope of the Directive and, as such, are potentially capable of being justified.

What does this mean?

As a starting point, this is simply the AG's opinion. It is not binding on the ECJ, although it will be highly influential. It could be said to be a knock-back for Heyday, which has had many of its legal arguments rejected.

However, the AG did decide that the default retirement age falls within the remit of the Directive. This means it does not simply take the UK Government outside the scrutiny of the ECJ, which was another possible outcome of the AG's opinion (and one which would leave the Government in a much more comfortable position in that it would not have to face any further scrutiny of the default retirement age).

Instead, assuming the ECJ follows the AG's opinion, the matter will still need to go back to the High Court. It will need to determine whether the Government can establish a legitimate aim and whether this aim can be objectively justified.

What might happen at the High Court?

The question the High Court will need to ask itself is whether a rule allowing employers compulsorily to retire employees aged 65 or over is justified by reference to a legitimate aim.

The AG did provide some pointers to what may or may not be acceptable arguments for possible use by the UK Government. Referring to the Spanish case of Palacios de la Villa v Cortefiel Servicios SA, which was considered by the ECJ late last year, he noted that Member States have relatively wide discretion in implementing the means to be used to achieve the legitimate aim relating to the social and employment policies pursued.

The ECJ found in Palacios that the prohibition of age discrimination under the Directive did not prevent national legislation for compulsory retirement at a certain age, provided the measure was objectively and reasonably justified.

The test of whether a legitimate aim can be identified is likely to be a relatively easy hurdle for the UK Government to overcome. However, it will also be for the Government to show that the means adopted were a proportionate means of achieving that aim.

Although probably surmountable, this is a more difficult hurdle. There were potentially very different socio-economic arguments put forward to justify why set retirement ages were put in place in Spain in the Palacios case. There, the set retirement ages had been adopted as part of a national policy seeking to promote better access to employment by means of better distribution of work between the generations, especially in a context where attempts were being made to regulate unemployment.

It is not clear that the UK Government could use the same arguments, despite the current difficult economic circumstances (especially when the Age Regulations were introduced in a relatively buoyant market). In addition, while it is likely to be able to make a compelling case for setting an age at which retiring employees is acceptable, when balanced against the Government's stated aims of encouraging employees to work for longer, the cut-off point of 65 appears increasingly arbitrary. We await a future decision with interest!