The High Court has held that the UK’s default retirement age of 65 is lawful.

The Court was satisfied the Government had proved to the requisite high standard that the default retirement age was a proportionate means of achieving legitimate social policy aims such as securing the integrity of the labour market and its short term competitiveness. The Court might have reached a different conclusion if the Government had not brought forward a review of the Age Equality Regulations to 2010. 2 days before trial the Secretary of State for Business Innovation and Skills announced it would review regulation 13 in early 2010. The Equality and Human Rights Commission considers that 70 is the earliest appropriate age for the default retirement age but this has little popular support.  

Age Discrimination - Failure to redeploy

London Borough of Tower Hamlets v Wooster UKEAT/044/08

Mr Wooster was employed by Tower Hamlets on secondment. Under the terms of his pension scheme he would be entitled to an early retirement pension if he remained in the Council’s employment until his 50th birthday in July 2007. In October 2006 he was notified that his secondment was coming to an end and that unless alternative employment within the Council could be found he would be dismissed for redundancy in 12 weeks’ time.

In the absence of any suitable alternative role being identified his employment was terminated at the end of December. In the lead up to his redundancy, Council refused an offer by the seconded employer to extend his secondment until he became entitled to his pension. Mr Wooster brought a claim for unfair dismissal and unlawful age discrimination. As the Council had failed to comply with the statutory dismissal procedure the dismissal was automatically unfair and it was held that he had been discriminated against, as an employee who was not aged 49 would not have been treated in the same way.

Key point: Employers should be cautious about dismissing an employee so close to retirement age where this would deprive him or her of access to age related employment benefits. However there may be circumstances in which a dismissal might be justified on the grounds of costs.

Age discrimination – avoiding early retirement

Woodcock v Cumbria Primary Care Trust

In this case the Tribunal held that an employers’ decision to dismiss an employee before his 49th birthday in order that he would not become entitled to substantial early retirement and pension benefits was less favourable treatment on the grounds of his age. However the treatment was justified since it was a proportionate means of bringing an end to the Claimant’s employment and thus avoiding the additional cost of enhanced benefits.

Mr Woodcock had been employed as Chief Executive of the North Cumbria PCT. His role disappeared under the restructuring plans of the National Health Service. He was unable to secure alternative employment by the PCT who became aware that if he remained in employment until his 50th birthday, he would be entitled to early retirement and enhanced pension benefits which would cost the PCT in the region of up to £1m. He was therefore sent a letter on 23 May 2007 giving him 12 months’ notice of his dismissal for redundancy to take effect just before his 50th birthday.

Taking into account that he had been paid a substantial redundancy payment of some £230,000 the Tribunal considered that Mr Woodcock had been treated unreasonably by being dismissed without a consultation meeting. The dismissal was however a proportionate means of pursuing the PCT’s aims of preventing Mr Woodcock becoming entitled to a windfall with the result that the dismissal was justified under the Age Regulations.

Key point: Cost cannot be the sole justification for age discrimination but it can be included in the balance with other justifications, unlike the Wooster case above where the Respondents did not raise a defence of justification. Age discrimination – factors for objective justification

Pulham and ors v London Borough of Barking and Dagenham UKEAT/0516/08

In this case the EAT had to consider whether an employer was able to objectively justify the continuation of a remuneration scheme which relied on both length of service and age after 1 October 2006 when the Age Regulations came into force.

The Council operated a scheme to reward loyalty and experience under which employees were paid increments provided they had completed 25 years’ service and were aged over 55. Ms Pulman satisfied the length of service criterion but was not old enough to join the scheme. Although the Council identified the policy as potentially discriminatory it agreed with the unions that it should deal with it in the course of  negotiating a single status agreement. When this was agreed with the majority of unions it was treated as taking effect from 1 April 2007 and closed to new entrants.

Ms Pulman was then told that since she was not currently receiving payment she was not entitled to any payment under the scheme. The Council’s aim was to modify the scheme to remove the illegality resulting from the Age Equality Regulations and this was therefore a legitimate aim and reflected the interests of the workforce as a whole, so the discrimination was justified. Ms Pulham appealed.

The EAT considered the Tribunal’s reasoning was flawed in that the correct question was whether it proportionate for the Council to have pay protection arrangements in place which continued for a substantial period where there was a difference in treatment based on age.

Key point: Employers must be able to provide Tribunals with sufficient information about the costs of changing such a scheme. The fact that a scheme or policy may have union or workforce support is not an automatic route to justification.

Default retirement age consultation

The Government has asked businesses and individuals to submit evidence on the default retirement age for the review taking place next year. The law around employment and retirement needs to reflect changes in economic and social circumstances. The Government is asking for evidence by 1 February 2010 including the following:

  • The operation of the default retirement age in practice.
  • The reason that businesses use mandatory retirement ages.
  • The impact on businesses, individuals and the economy of raising or removing the default retirement age.
  • Experience of businesses operating without a default retirement age.
  • How could any costs of raising or removing the default retirement age be mitigated and benefits realised.

Age discrimination: redundancy payment scheme

ABN Amro v Hogben 2009 UKEAT/0266/09

Mr Hogben was employed at ABN until his dismissal for redundancy with effect from August 2008. He was head of structured funding and investments and a post at managing director level. His redundancy was as a result of the integration process which followed the takeover of ABN by RBS in mid-2007. He was unsuccessful for three new roles and in November 2008 he presented a claim in the Employment Tribunal complaining of unfair dismissal and age discrimination. He claimed that his non-selection for the three roles was discriminatory on the grounds of age, age discrimination in respect of his bonus, and age discrimination in respect of his enhanced redundancy payment because depending on the length of service, younger employees were unable to achieve the same level of payment as older employees with longer service. All of his claims were struck out, save his claim that the length of service element in the Bank’s redundancy payment scheme was discriminatory. In respect of his other claims there were no facts indicative of any discrimination.