The Court of Justice of the European Union (“CJEU”) has handed down its decision in a case concerning justification of a compulsory retirement age of 67 in Sweden. In the case of Hornfeldt v Posten Meddelande, the CJEU held that the rule was a proportionate and necessary means of achieving legitimate aims and so was not age discriminatory.
H worked for the postal service in Sweden until his employment was terminated when he attained age 67, in accordance with the Swedish national retirement age. In Sweden, all employees have an unconditional right to work until age 67. After that, their employment can be terminated provided their employer gives them at least one month’s written notice. Further, the amount of state pension to which Swedish employees are entitled is based upon the amount of income they have earned over their whole working career. H was concerned that his pension provision earned by age 67 was insufficient and he wanted to work for an additional couple of years to supplement his pension. He complained that his dismissal amounted to direct age discrimination.
The CJEU confirmed that the Swedish retirement age was not discriminatory, as it was in pursuit of legitimate aims and was an appropriate and necessary means of achieving those aims. The aims the CJEU accepted as legitimate included that the retirement age avoided having to dismiss employees whose performance had started to diminish with age, it made it easier for younger people to enter the labour market, and it encouraged diversity of ages in the labour market. The CJEU also concluded the retirement age was “appropriate and necessary” to meet those aims, noting that compulsory retirement ages are widely used by member states to achieve a balance between political, economic, social, demographic and/or budgetary considerations and that member states have a broad discretion to find the right balance between the different interests involved.
The CJEU was asked to consider whether the rule went beyond what was appropriate and necessary, as it didn’t take into account the size of an employee’s pension provision. It concluded that it was not necessary to take an employee’s pension into account, as there was nothing to prevent an employer offering an employee a fixed term contract to allow them to work beyond age 67, and those who had insufficient pension provisions had access to other state benefits.
Impact for employers
- This decision accords with other decisions of the CJEU and UK courts in so far as it confirms that avoiding the performance management of older employees and allowing opportunities for younger workers can amount to legitimate aims capable of justifying a default retirement age.
- Identifying a legitimate aim is usually not too difficult, the more difficult task being demonstrating that the chosen retirement age is a proportionate way (or “appropriate and necessary” to use the wording of the EU Directive) to achieve those aims. Tribunals in the UK have taken a more robust approach to the question of proportionality than the CJEU has done in recent cases, and in the UK, a difficulty would be being able to justify the choice of age 67, if it could be shown that the legitimate aims could similarly be met by adopting a higher less discriminatory age above 67.
- In light of this judgment of the CJEU there will be calls for the Government to reintroduce a default retirement age but we consider the return of a DRA is unlikely.