Overview

Last month the Government announced its response to the consultation launched in July 2010 on the abolition of the default retirement age. Resisting calls for a year’s grace from the CBI and other employers’ organisations, it is sticking to the original timetable which means that the exemption will be removed on 6 April 2011. This is subject to transitional provisions which will protect the exemption where notice of retirement has been given before that date..

This does not necessarily spell the end of compulsory retirement in the UK. Although imposing compulsory retirement is a form of direct discrimination, unlike with other discrimination strands, it has always been possible to justify direct age discrimination if it is a proportionate means of achieving a legitimate aim.

Cases are beginning to emerge from other jurisdictions in Europe – where there is no direct equivalent to the default retirement age – in which employers have sought to justify retaining a compulsory retirement age.

There have also been domestic decisions dealing with situations where the retirement exemption does not apply. The most notable example is a case involving retirement from a partnership, which reached the Court of Appeal earlier this year, and will now be going to the Supreme Court.

These cases suggest that although employers face a tough task in justifying compulsory retirement, it is not a foregone conclusion that it will entirely disappear, regardless of the sector of the economy or the type of job involved.

The changes in more detail

The changes taking effect in April are as follows:

  • The default retirement age will be abolished with effect from 6 April 2011, with transitional protection for retirements notified before that date.
  • Retirement notifications given in accordance with the existing rules will continue to be valid, provided that notice is given by 5 April and the employee is already 65 (or the normal retirement age if this is higher) or will reach that age by 30 September 2011. Shorter notice can be given until 5 April, but this may be subject to payment of compensation of up to 8 weeks’ pay, and may cause other difficulties.
  • The exemption which allows employers to reject applicants for jobs who are aged 64 and six months or older merely on the basis of their age will also be removed.
  • The right to request procedures will be repealed. That means an end to the complex pre-notification requirements and the procedures which allow employees to request a meeting if they do not wish to retire, although these will still need to be observed for retirements covered by the transitional provisions. The final date for service of an employee request under these procedures will therefore be 4 January 2012.
  • It will still be open to employers to justify a compulsory retirement age. Although they will no longer be able to rely on retirement per se as a potentially fair reason for dismissal, enforcing a justified retirement age would be a potentially fair reason for dismissal as it would amount to “some other substantial reason” justifying dismissal. Employers will however still have to act reasonably in the way they enforce a justified retirement age – for example by giving the employee sufficient advance notice.
  • A new exemption will allow employers to restrict group life cover to employees under the age of 65, or the state pension age if higher. At present it is unclear whether employers can do this as a condition for allowing older workers to stay on beyond their normal retirement age.
  • ACAS’ guidance Working without the default retirement age includes suggestions on how discussions with employees about their retirement plans can be handled in a non-discriminatory way. It also expresses the view that for those employers considering retaining a compulsory retirement age “the test of objective justification is not an easy one to pass”.

Conclusions

The following tentative conclusions can be drawn from the interaction of recent case law and the proposed changes to employment legislation:

  • The most persuasive legitimate aim is likely to be encouraging a balanced work force by making way for younger people and facilitating succession planning. However the response to the consultation points out that “it is not often the case that younger and older workers are direct substitutes”. This is backed up by recent research by the Institute of Fiscal Studies. Therefore employers are likely to need hard evidence that a compulsory retirement age will in fact achieve this aim, and that there are no other less discriminatory ways of achieving the same result.
  • Measures tailored to a particular market or type of employee are likely to be easier to justify than broader measures applying across the whole workforce.
  • Measures which are collectively negotiated will be easier to defend than measures imposed on employees on an individual basis.
  • Enforcing compulsory retirement is more likely to be accepted as proportionate if employees are allowed a “soft landing” to manage the transition to retirement, and will be eligible for a full pension at that point.
  • Employers which have thought out the reasons for adopting or retaining a compulsory retirement age in advance are likely to be better off than those which have to justify it after the event.