April 2011: the beginning of the end?
Earlier this year 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.
There will be transitional protection for retirements notified before that date. At the time of writing we are still waiting for the final regulations to be published, but it seems likely that all valid retirement notices served before 6 April will be effective, subject to some provisos which will include a requirement that the employee reaches 65 before 1 October 2011. Shorter notice can be given until 5 April, but this may be subject to payment of compensation of up to eight weeks’ pay. The exemption which allows employers to reject applicants 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The right to request procedures will be repealed, though they will still apply to retirements notified before 6 April. 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.
Employers will still be able to justify a compulsory retirement age if it is a “proportionate means of achieving a legitimate aim”. 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 still have to act reasonably in the way they enforce a justified retirement age – for example by giving the employee sufficient advance notice.
Regulations will clarify when it is permissible to stop group benefits such as life cover for older employees. 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.
The cleaner, the professor and the ECJ
In October 2010 the European Court of Justice had to decide a case involving a part-time German cleaner, Giselda Rosenbladt. There was a collective agreement that dictated her terms and conditions, including providing for compulsory retirement at the age of 65. She was unhappy when her employers relied on it to retire her, because her state pension was not enough to live on.
The ECJ looked at the aims of the employers’ side when negotiating the collective agreement. It thought “facilitating employment for young people, planning recruitment and allowing good management of a firm’s personnel, in a balanced manner according to age” were all potentially legitimate aims.
It also concluded that the means adopted to achieve them were capable of being proportionate for a number of reasons. These included the fact that the compulsory retirement clause was part of a collectively negotiated agreement, that retirement was tied to eligibility for a pension, and that Ms Rosenbladt was not prevented from going back into the labour market on grounds of her age.
The following month the ECJ reached a decision about the forced retirement of a professor at the Technical University of Sofia, Vasil Georgiev. There is a provision in the Bulgarian Labour Code that permits compulsory retirement of professors at the age of 65. However universities are permitted to extend professors’ contracts for up to three years beyond that age by a series of one year fixed term contracts.
The ECJ was prepared to accept that the Bulgarian Government’s stated aim of “allocating posts for professors in the best possible way between the generations” could be legitimate. It also thought that the means chosen were capable of being proportionate, given that professors could work for up to three years beyond their normal retirement date, and that they would be entitled to a retirement pension from the age of 65.
The ECJ emphasised that it was up to the national court to make an assessment on proportionality. In doing so it will need to take into account Professor Georgiev’s argument that the legislation he is challenging “is not aligned to the reality of the labour market”. He pointed out that the average age of university professors is 58 and that the younger generation shows little enthusiasm for an academic career, at least in Bulgaria.
ACAS’ guidance Working without the default retirement age 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”.
The most commonly cited justification for imposing compulsory retirement is that it makes way for younger workers. Independent research shows that, at least at a national level, younger and older workers are not often direct substitutes. Employers who wish to use workforce planning as justification will therefore need to show that their organisation is an exception to the general rule. This is likely to be easier to show for particular job descriptions than for the entire workforce. They will also need to show that there are no viable alternatives to imposing compulsory retirement in order to achieve their aims.