1. Age discrimination: Supreme Court tinkers with law on retirement ages

In Seldon v Clarkson Wright and Jakes the Supreme Court has confirmed that employers need to give careful consideration when seeking to justify mandatory retirement ages.  Inter-generational fairness and facilitating a dignified exit are confirmed as potential legitimate aims, but employers must show that the identified legitimate aim actually applies to their business and that the particular retirement age chosen is appropriate and necessary to achieve that aim - which will remain difficult to establish.

The Supreme Court has ruled that, to be capable of justifying direct age discrimination, an employer's aim must be (i) of a public interest nature, rather than an individual aim of the business, and (ii) consistent with the social policy aims of the State.  The first part is a change to the test adopted by the Court of Appeal (see our July 2010 ebulletin), which ruled that the aim can relate to the individual business provided it is consistent with the UK social or labour policy behind the age regulations.  However, the distinction may make little difference in practice, given that there appears to be no need for the public interest aim to apply to anyone outside the employer's workforce.

In this case the relevant aims of a retirement age of 65 in a law firm partnership deed were staff recruitment and retention, workforce planning, and avoiding the need to expel partners by performance management.  The Court of Appeal viewed these as individual business aims which were consistent with social policy.  The Supreme Court rejected the contention that they were individual aims of the business and instead described them as directly related to the legitimate social policy aims of inter-generational fairness and dignity, both of which have been accepted as permissible social policy aims at European level.  On either basis, they were legitimate aims.

Lord Hope explained that there is a public interest in promoting employment for young people, planning the recruitment and departure of staff, and sharing out opportunities for advancement in a balanced manner according to age, notwithstanding that the aims will also inevitably be intimately connected with what employers do to advance the interests of their own business "because that is how the real world operates".  Only narrow objectives such as reducing costs or improving competitiveness are likely to be viewed as solely individual business aims.

The Supreme Court made explicit a further step in assessing justification, namely to ask whether the identified aim is legitimate in the particular circumstances of the employment concerned.  For example, improving the recruitment of young people would not be a legitimate aim for a business which has no problem recruiting younger workers.  Likewise, avoiding the need for performance management may not be a legitimate aim for a business which already has sophisticated performance management measures in place for other sections of the workforce.

The final hurdle for employers seeking to justify compulsory retirement is that the particular means chosen to achieve the aim must be appropriate (ie, meet the objective) and reasonably necessary (ie, there are not other, less discriminatory measures which would meet the objective).  The Supreme Court sent the case back to the tribunal to consider whether the chosen retirement age of 65 satisfied this test in relation to each of the objectives.  It ruled that it was proper to take into account the fact that at the relevant time employees were subject to a statutory default retirement age of 65, as this might help to show that the choice of a retirement age of 65 for partners was an acceptable way of achieving the legitimate aim.

The Supreme Court also agreed with the Court of Appeal that:

  • partnerships or employers can justify a retirement age (or other directly discriminatory measure) using an aim which was not specified or in mind at the time it was introduced
  • a retirement age must be justified at the date an individual is retired, both in terms of the general rule but also its application to that individual in the circumstances. However, where it is justified to have a general rule, the existence of that rule will usually justify the treatment of the individual which results from it.  The Supreme Court also noted that, in the context of inter-generational fairness, it is relevant that the partner may well have benefited from the rule at an earlier stage in his life.  The fact that the partners had agreed to the rule in question quite recently was also relevant.   

Where does this leave employers?

Following the abolition of the statutory default retirement age, the ruling will be of interest to employers as well as partnerships seeking to use retirement ages.  However, in practice the differences of emphasis between the Supreme Court and Court of Appeal are unlikely to change the position for most employers.

We still do not know whether the age of 65 was justified in this case, but even if the tribunal concludes that it was, this will not necessarily be a green light for others given the importance of the size and culture of the firm in this case and the fact that the abolition of the default retirement age from October 2011 removes a rationale for choosing that age.  We will have to wait and see whether the availability of pension could provide sufficient rationale for choosing a cut off or whether it will be necessary to compile industry/employer-specific evidence on the impact of specific retirement ages on recruitment/retention or succession-planning.

It is also worth noting that employers with sophisticated performance management tools are unlikely to be able to rely on the "dignity" aim, and employees will rarely be seen as having equal bargaining power and therefore having agreed to the retirement rule (which the Supreme Court considered a relevant factor).  (Indeed the same may be said for partners in some of the larger partnerships.) 

Those employers who have chosen to retain compulsory retirement ages should review their position and keep a close eye on this case as it returns to the tribunal.  Legal challenges are likely only to increase, given that a recently published report by the Pensions Policy Institute has concluded that nearly half of employees over 50 may have to keep working well into their late 70s to achieve their target retirement income.  

  1. Age discrimination: degree requirement needs to be justified

Employers should only impose requirements for job holders to have a degree if these can be justified. Where an employee was coming up to compulsory retirement age and therefore had insufficient time to acquire the degree required to be on the highest grade, this was a disadvantage on grounds of age that required justification, according to the Supreme Court in Homer v CC West Yorkshire Police.

The Court of Appeal had ruled that the disadvantage to employees aged 60-65 was caused by the fact of their imminent retirement and not by their age (see our April 2010 ebulletin).  The Supreme Court rejected this distinction, holding that retirement is inextricably linked with age in a context where employees faced compulsory retirement at 65.  The Supreme Court ruled that it was not appropriate, when considering whether there was age-related disadvantage, to compare those nearing compulsory retirement with those nearing leaving for some other reason such as family reasons, given that the latter group have some choice in the matter.

The case was remitted to the tribunal to consider justification.  As the issue was indirect rather than direct age discrimination, it was not necessary for the employer to establish public interest aims, but it did need to show a real business need and that the requirement was an appropriate and reasonably necessary means of achieving its aims.  The Supreme Court noted that this will involve comparing the impact of the requirement on the employee (in this case, the loss of additional salary and pension associated with the higher grade) with the importance of the aim to the employer.  The tribunal will also need to consider the availability of non-discriminatory alternatives, such as a modified requirement (for all employees) or 'grandfathering' existing employees. 

Lady Hale's leading judgment placed much importance on the employer's compulsory retirement age, leaving it unclear whether there might be scope to differentiate the position where there is no such compulsion.  However, Lord Hope considered that forcing an employee to work on beyond the date he could reasonably expect to retire, in order to obtain the benefit of the degree, was itself indirect age discrimination.  In any event, a claimant might well be able to show that older employees would be less likely to have a law degree given the growth in higher education over recent years, thereby shifting the burden to the employer to justify the requirement.  Employers should therefore consider carefully whether a degree requirement really is needed or whether some form of experience or different qualification can be accepted as an alternative.    

  1. Recruitment: failure to disclose information may shift burden of proof for discrimination claim

Employers can refuse to provide recruitment information to an unsuccessful job applicant who meets the advertised job criteria, but risk this being used to support a finding that there is sufficient evidence of prima facie discrimination to shift the burden of proof to the employer.

The ECJ has ruled that, in deciding whether the burden of proof shifted in Meister v Speech Design Carrier Systems, the domestic court can take into account the fact that the employer refused all access to recruitment documentation (rather than providing redacted documents), the employer's acceptance that the claimant satisfied the job criteria, and its failure to invite her to a job interview.    

  1. Rest breaks: no automatic unfair dismissal right where dismissed for sleeping

The dismissal of employees for sleeping at work was not an automatically unfair dismissal for 'refusing' to accept an employer's breach of working time law (the requirement to provide rest breaks). 

'Refusal' must be explicit and cannot be implied from an employee's failure to comply with the employer's instruction to work without a break.  Although not an automatically unfair dismissal, employees with sufficient service might be able to claim ordinary unfair dismissal. (Ajayi v Aitch Care Homes (London), EAT)  

  1. Termination: effective from date resignation letter received at employer

Where an employee sends a letter resigning with immediate effect, the effective date of termination (for calculating tribunal claims limits and qualifying service) is the date on which the information is communicated to the employer. 

This will be the date on which a letter is opened and date-stamped, whether or not any named addressee has read the letter. In contrast, the effective date where an employer sends a summary dismissal letter is the date the employee reads or has a reasonably opportunity to read the letter. (Horwood v Lincolnshire County Council, EAT)    

  1. Statutory default retirements: notices invalid if fail to refer to statutory provision

The Court of Appeal has confirmed that employer notices to retire employees under the old statutory default retirement age regime given prior to 6 April 2011 are invalid if they do not expressly state that the employee's right to request continued working is pursuant to paragraph 5 of Schedule 6 of the Employment Equality (Age) Regulations 2006.

However, it disagreed with the EAT ruling that the employer's notice should also clarify that any request made by the employee must also expressly state that it is made under paragraph 5.

The decision is relevant to employers with pending cases on this point, and to those who gave notice of intended retirement prior to 6 April 2011 but where the retirement has not yet taken place under the transitional provisions. Of course it is no longer possible to remedy defective notices.

Retirements using an invalid notice that took effect before 6 April 2011 will be automatically unfair but, assuming the tribunal finds the reason is still retirement, not unlawful age discrimination. Compensation may therefore be limited to the basic unfair dismissal award plus up to 8 weeks' pay for breach of the procedure.

Where invalid notices have been given before 6 April for retirement dates after 6 April 2011, the transitional provisions for the statutory retirement regime will not apply. The dismissal will therefore be unfair and probably also unlawful discrimination, unless the employer can objectively justify it. (Bailey v R & R Plant (Peterborough) Ltd, CA)    

  1. Reasonable adjustments for disabled employee: no need to supplement pay during phased return to work

The EAT has confirmed that an employer does not necessarily have to pay for work not done if offering a disabled employee a phased return to work. 

Payment only for the hours worked during a phased return does not put disabled employees at a particular disadvantage, as it applies equally to other part-time workers.  Further, continuing full pay would not normally be a 'reasonable adjustment'. (Newcastle upon Tyne Hospitals NHS Foundation Trust v Bagley, EAT)

The exception may be where the employee's inability to work full-time is due to the employer's prior breach of the duty to make reasonable adjustments.  

  1.  New publications
  • Acas guide "Promoting positive mental health at work"
  • "Disproportionate effort" guidance from the Information Commissioner's Office, covering the extent of a search in response to a subject access request, provision of copies, and how to deal with data that has been electronically archived or deleted (available here).