The (hopefully) final draft of the Regulations, under which the current default retirement regime is to be abolished, was published on 4 March 2011. The latest draft rectifies the widely publicised anomaly in the transitional provisions which plagued the previous version and created considerable uncertainty for employers.

Overview

The Regulations are due to come into force on 6 April 2011, after which employers will no longer be able to issue notices to retire under the statutory default retirement regime without exposure to unfair dismissal and unlawful age discrimination claims.

Going forward, employees who wish to maintain a compulsory retirement age for all or part of their workforces will need to show that to do so is a proportionate means of achieving a legitimate aim to avoid liability for unlawful age discrimination.

We plan shortly to issue a DechertOnPoint explaining fully the implications for employers of the abolition of the default retirement age (DRA). In the meantime, the changes to the transitional provisions which should inform employers’ plans over the coming weeks in relation to employees who are already 65 or who reach 65 before 30 September 2011 are explained further below.

Change to Transitional Provisions

The transitional provisions set out in the new draft Regulations clear up the anomaly which surrounded the retirement of employees already aged 65 by 6 April 2011.

Retirement Notices

Employers now have certainty that they can retire employees relying upon the DRA on or after 6 April 2011 provided that:

  • notice of retirement has been issued under the statutory DRA regime on or before 5 April 2011; and 
  • the employee has reached 65 (or the employer’s retirement age if later) on or before 30 September 2011.  

Requests to Continue Work

Employees whose retirement dates have been fixed under the DRA regime will be able to submit requests to extend employment, but the last day for doing so will be 4 January 2012. To enjoy the protection of the DRA regime, the maximum extension to which an employer can agree is six months.

Accordingly, the latest possible date for retirement of employees who are 65 by 30 September 2011 under the DRA regime will be 5 October 2012. This allows for the employer to issue 12 months’ notice of intention to retire on 5 April 2011 with a retirement date of 5 April 2012 and a further six month extension (agreed on or before 4 January 2012) to 5 October 2012.

Duty to Consider

Employers also need to be aware of the need to avoid the risk of a challenge from an employee to their operation of the current DRA procedure. A recent tribunal case held that the employer was in breach of the compulsory retirement process—leading to an award of some two years’ compensation reflecting the period post retirement age for which the employee had wished to work—when it treated the matter as a formality and was found not to have approached the process in good faith. Employers need to approach the procedure properly even in its dying days.