National laws setting out compulsory retirement ages will be unlawful under EU law unless objectively justified by a legitimate aim. The future of the UK default retirement age will now turn on whether the UK Government can show it is objectively justified. This may not be established until 2009. In the meantime UK employers may be willing to bet that the Government will succeed, particularly given the wide margin of discretion given to Member States referred to below, and continue to rely on the default retirement age. Other more cautious employers will want to carefully consider requests to continue working past 65 and only refuse where there are compelling reasons.

The EU Equal Treatment Framework Directive prohibiting age discrimination includes a recital that it is without prejudice to national provisions laying down retirement ages. In a recent Spanish case the ECJ has ruled that the Directive nevertheless bites on national measures governing the conditions for termination of employment where the retirement age is reached. Compulsory retirement provisions are discriminatory on the basis of age, and therefore unlawful unless shown to be an appropriate and necessary means of achieving a legitimate aim.

The case concerned Spanish laws which permitted collective agreements to provide for compulsory retirement at 65 provided the employee had sufficient service to draw a pension. The ECJ held that the law's aim to promote better access to employment through a better distribution of work between generations was a legitimate aim, and that it was an appropriate and necessary means of achieving it, given that member states retain a broad discretion in this area. (Palacios de la Villa v Cortefiel Servicios SA, ECJ)

This decision impacts on part of the challenge to UK age law being brought by Heyday (see our July/August ebulletin here). The good news for Heyday is that the Directive does apply to laws on retirement ages; the bad news is that the ECJ has emphasised the broad discretion States have in justifying inequalities based on legitimate aims. Heyday is reported to be pressing ahead with its case, although currently the reference to the ECJ does not ask it to consider whether the UK retirement provisions are justified; unless the questions are reframed this issue will wait until the case returns to the High Court. Differences between the Spanish and UK laws and in the circumstances surrounding their introduction mean that it is by no means a foregone conclusion that the UK Government will succeed in justifying the UK retirement provisions.

Pending the Heyday judgment, it appears that many tribunals are staying retirement claims. One more bullish tribunal which struck out such a claim, on the basis that it had no reasonable prospects of success, has just been overturned on appeal. The EAT has apparently granted leave to appeal the question of whether it is permissible to stay tribunal proceedings pending the outcome of an ECJ decision. (Johns v Solent, EAT).