On 13 January 2011, the government published its response (the Response) to its consultation on phasing out the default retirement age (DRA). The Response confirmed that the DRA would be phased out between 6 April 2011 and 1 October 2011. This article will explore the impact of the DRA on employers since its introduction in 2006 and then summarise the key considerations for employers once it is abolished.

The DRA

The Employment Equality (Age) Regulations 1996 (the Regulations) introduced the DRA with the effect being that an employer could lawfully compel an employee to retire providing they were over the age of 65.

In order to compel retirement under the Regulations, the employer must comply with Schedule 6, which sets out the procedure to be followed. In summary the employer must provide notice of the impending retirement and allow the employee the opportunity to request to continue working. It should be noted that employers are not required to have a mandatory retirement age. Only when they do, would the Schedule 6 procedure be applicable.

Employers can implement a retirement age of over 65 should they so choose, but if they wish to retire employees at an age below 65, then this must be objectively justified (s.19 Equality Act 2010).

Criticism of the DRA

The DRA has been viewed as allowing employers to discriminate against employees over 65 regardless of their capability to continue working. Age UK challenged the DRA (R (on the application of Age UK) v Secretary of State for Business, Innovation and Skills [2009] EWHC 2336 (Admin)) as being incompatible with the Equal Treatment Framework Directive 2000/78/EC. Despite the challenge ultimately failing, one judge criticised the DRA as being more discriminatory than was necessary on a sector of persons, still willing and able to work.

Further, the DRA has been criticised as incompatible with the increasing proportion of the population aged over 65 and the subsequent need for many to work longer in order to save for retirement.

Abolition of the DRA

The Government's proposal on phasing out the DRA were raised in its July 2010 ConsultationDocument Phasing out the default retirement age, and those proposals were confirmed in its October 2010 Government response to the abolition of the default retirement age.

The DRA is going to be phased out over a six month transitional period. The transitional period started on 6 April 2011 and will continue until 1 October 2011 when it will be abolished entirely. Acas guidance, Working without the default retirement age (the Acas Guidance), explains that during the transitional period, retirements that were already in process will continue to completion providing that:

the employee was notified of the impending retirement prior to 6 April 2011;

a late notification is issued between 30 March and 5 April 2011;  

the retirement date is before 1 October 2011;  

the DRA procedure, as set out in the Regulations is followed; and  

all other requirements of the former DRA regime are followed.  

It should be noted, that the provisions on allowing short notice of the retirement to be given to the employee, was repealed on 6 April 2011 and so no longer permitted after this date.

Comment

Implications for Employers

Employers should be aware of the following key implications of the change in the legislation:

  • It may still be possible to retire an employee lawfully, providing the retirement age can be objectively justified.

Such justifications are currently used most commonly when an employer has a fixed retirement age under 65, for example in some emergency services roles that require a high level of fitness. Such justifications must meet a legitimate aim of the employer and be a proportionate means of achieving that aim.

Employers should consider whether there is an alternative, less discriminatory way of achieving the same result.

 

  • As part of the abolition of the DRA, Schedule 6 of the Regulations is also being repealed, with the effect that the framework for discussions of retirement will no longer exist.

Without the regulatory framework, fears will exist that the initiation of any discussion of retirement may be considered discriminatory.

The Acas Guidance provides suggested "good practice" for conducting discussions with employees concerning their future plans:

  • discussions should be commenced on a general basis and built into the appraisal process which should be held, at least, annually;
  • avoid potentially discriminatory questions based on the employee's age; and
  • ask open questions about the employee's short, medium and long term plans.
  • Removal of fixed retirement ages will not necessarily result in a significant increase in uncertainty with regard to continuation of employment.

Many organisations currently have no fixed retirement age at present which means that questions of continuation of employment in relation to age must be handled in the same way as such questions in relation to all other employees.

As with all protected characteristics under the Equality Act 2010, the starting point for employers should be to assume that an employee is capable of making a valid contribution  regardless of their age. When any performance or health issues arise as a result of the employee's age, this must be dealt with in the same way as an employer would deal with any of the other protected characteristics.