Can Irish Employers set a Retirement Age?

The Employment Equality Acts 1998 to 2008 (the ‘EEAs’) prohibit discrimination in employment on nine separate grounds, one of which is age. Interestingly, the EEA’s provide that Irish employers can set the retirement age of their employees without having to justify the particular choice of retirement age as section 34(4) of the EEA’s provides that "…it shall not constitute discrimination on the age ground to fix different ages for the retirement (whether voluntarily or compulsory) of employees or any class or description of employees".

The ability of Irish employers to set the retirement age of their employees seems to directly conflict with the prohibition on age discrimination in the European Council Directive 2000/78/EC, known as the Framework Directive.

What is the European Position? The recent European Court of Justice (‘ECJ’) decision of Fuchs and Köhler v Land Hessen, ruled that a provision of German law, which provides for the compulsory retirement of state prosecutors at age 65, did not breach European law.

The ECJ held that the aim of establishing a balanced age structure to encourage recruitment and promotion of young people and avoid disputes concerning fitness to work beyond a certain age, was a legitimate purpose for the establishment of a retirement age and that it did not go beyond what was necessary by the employer to achieve the aforementioned aims.

The background to this case is that German Federal law provides for permanent civil servants to retire on reaching a retirement age, to be set by the regional state employer. A state law provided that permanent civil servants would retire at the age of 65. Civil servants were only allowed to work beyond 65, if it was in the interests of the public service for them to do so.

The claimants, state prosecutors who had been compulsory retired at age 65, challenged the legality of that retirement age. Under the Framework Directive, compulsory retirement is permitted where it meets a legitimate aim and the means of achieving that aim are appropriate and necessary. The German National Court was concerned that the retirement age of 65 was not a proportionate means of achieving a legitimate aim and referred the question to the ECJ.

The ECJ concluded that "…creating an age structure that balances young and old civil servants so as to encourage the recruitment and promotion of young people, to improve personnel management and prevent possible disputes concerning employees' fitness to work beyond a certain age and at the same time seeking to provide a high quality justice system…" could constitute a legitimate aim of employment and labour market policy.

In considering whether the aim was appropriate and necessary, the ECJ took into account the following factors:

  • the number of prosecutors' posts were limited;
  • prosecutors are appointed permanently and only rarely resign from posts voluntarily and prematurely; 
  • the prosecutors had an option to work to 68, if they sought such an extension and it was in the interests of the service for them to do so;
  • the prosecutors could continue working within another role, which had no age limit;
  • prosecutors retired at 65 on approximately 72% of their final salary.

What does this decision mean for Irish Employers?

This ECJ decision represents the continuation of a liberal approach by the ECJ towards the use of compulsory retirement ages. The context of this decision is significant, however, particularly the fact that the impact of these retirements was reduced by the generous pension provided. It should also be noted that the employer, a state body, was complying with the national law regarding compulsory retirement.

Retirement cases will undoubtedly become the focus of many future Irish cases. The former chief executive of the Equality Authority has commented that, “..the emergence of the age ground as the highest area of case files under the Employment Equality Acts underpins the urgency in tackling the ageism that is all too prevalent in society”.

It is important to note that the Labour Court in the case of Calor Teoranta v McCarthy suggested that if the issue of the compatibility of section 34(4) of EEA’s with the Framework Directive was central to determining a case, it would need to consider seeking guidance from the ECJ. In this context, the ECJ's comments on what could amount to justification are useful. However, whether the Irish courts will continue to follow the approach of the ECJ remains to be seen.