The Advocate General of the European Court of Justice has rejected the claim by Heyday (an offshoot of Age Concern) that UK law, which entitles employers to retire employees compulsorily at or after reaching 65, is contrary to EU law.

In 2007, Heyday brought a claim in the High Court against the UK Government that the national default retirement age of 65 under the Employment and Equality (Age) Regulations 2006 (the “Age Regulations”) was incompatible with the EU Law. The High Court referred certain questions regarding the lawfulness or otherwise of the Age Regulations to the European Court of Justice (ECJ). Before the ECJ can give its judgement, the Advocate General (“AG”) must give a preliminary legal opinion which is usually (but not invariably) followed by the ECJ. The AG’s opinion is therefore significant because it is more than likely to be followed.

What did the Advocate General say?

The aspect of the challenge which will be of most interest to employers concerns Regulation 30 of the Age Regulations. This Regulation permits employers to dismiss employees aged 65 and over by reason of retirement. The AG said that Regulation 30 fell within the scope of Equal Treatment Directive 2000/78 (“the Directive”) and so was directly discriminatory on the grounds of age but might be capable of being objectively justifiable in accordance with the test laid down by the Directive; namely that it pursues a legitimate aim and the means of achieving that aim are appropriate and necessary. The AG followed the reasoning adopted by the ECJ last year in Palacios v Cortefiel Servicios SA which concerned a similar challenge to Spanish mandatory retirement ages.

It is important to note that the High Court did not ask the ECJ to consider whether Regulation 30 was objectively justified as this is a matter for the High Court itself to decide. Nevertheless, the ECJ was asked to consider certain questions concerning the objective justification defence.

First, as to whether the justification defence for direct age discrimination under UK law was less strict than that under the Directive, the AG said that it was sufficient for UK law to set out a general justification defence, and that a specific list illustrating the type of treatment which may be justified (as set out in the Directive) was not necessary.

Second, as Regulation 30 is directly age discriminatory, the High Court had asked the ECJ to consider if the objective justification defence for direct age discrimination set out in the Directive should be stricter, in practice, than the objective justification defence for indirect discrimination. The AG said that possibilities under the Directive of justifying differences of treatment on age are more extensive that those based on other grounds. Age discrimination is unlike other forms of discrimination because it is not by its nature “a suspect ground”. Following the Spanish case of Palacios, the AG said that is appears that Member States are left with a relatively wide discretion in identifying the means to be used to achieve a legitimate aim relating to social and employment policies.

The AG concluded that a rule providing for mandatory retirement ages (such as in Regulation 30) can, in principle, be lawful if that rule is objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market, and it is not apparent that the means put in place to achieve that aim of public interest are inappropriate and unnecessary for the purpose.

What does this decision mean for employers?

Employers still need to wait for the final decision of the ECJ (expected in the next 6 months) and then the High Court before they can be sure that the UK’s mandatory retirement age of 65 is lawful. The prospects of success for Heyday have seriously diminished following Palacios and this opinion of the AG.

Assuming that the ECJ follows the AG’s opinion, it will be for the High Court to determine whether Regulation 30 does indeed pursue a legitimate aim which is proportionate. The UK Government has argued that Regulation 30 is justified on the basis that it helps work force planning as it provides a target age for retirement; it also reduces the risk of blocking promotion for younger workers and encourages workers to plan for their retirement. Assuming that this aim is indeed legitimate (because it was accepted in the Palacios case), the Court will have to decide whether the means to achieve such an aim i.e. a blanket mandatory retirement age of 65, is proportionate in achieving that aim.

In Palacios, the ECJ decided that Spanish law on mandatory retirement ages was proportionate. However, UK law is not quite as flexible as the Spanish law, in that under Spanish law, the default retirement age is set by collective agreement, thus giving some flexibility in opting out of the retirement age in respect of certain jobs. The state pension for a retired person in Spain is also different from that provided in the UK. Given these distinctions, there may be scope for Heyday to argue before the High Court that the way in which the UK law approaches the default retirement age is not appropriate, or goes further than is proportionate and necessary to meet the UK Government’s aims.

If Heyday succeeds (which seems unlikely), the Government would have to remove the default retirement age under the Age Regulations. Employers would still be permitted to set their own retirement ages but they would have to be prepared to justify them objectively in the case of each age. Many employees have already challenged their compulsory retirement at 65 by bringing claims in the Employment Tribunal directly against their employers relying directly on the Directive. The claims that have already been made have been stayed pending the outcome of the Heyday decision. If Heyday succeeds, claims against public sector employers will also succeed because public sector employees are able to enforce EU law directly against their employers. The position as regard private sector employer is not so clear (see our Human Capital alert November 2007 regarding the EAT case of Johns v Solent). If Heyday does succeed, it is likely that there will be a flood of discrimination claims brought by employees who are forced to retire at 65. Whatever the outcome of the Heyday decision, the Government is set to review the default retirement age in any event in 2011. It is possible that at that point, the default retirement age could be abolished altogether, though given the arguments for retention which it has advanced in the Heyday case, this seems less likely.

Click here to view the Advocate General’s opinion.