Background

Enforcing retirement on employees has in the past been a realistic and relatively widely used option for companies looking to reduce their headcount without needing to follow a strict redundancy procedure or compensating the employees in the same way as under a redundancy plan.

Over recent years however, despite specific collective bargaining agreement provisions, the scope of such retirement has been reduced. Initially available to companies as of their employees' 60th birthdays, this option was pushed back to the age of 65, and only possible if the employee had their full pension contribution quota, although it still remained possible for employees aged between 60 and 65 provided that a specific collective agreement provided for training and hiring efforts by the company as "consideration" for retiring an employee.

Until now, employees could be required to leave to take their pension as of the age of 65.

New legislation

The Social Security Financing Law for 2009 has modified the terms applicable to this procedure, re-writing Article L. 1237-5 of the Labour code. This modification entitles all employees to work until the age of 70, only allowing companies to retire them before this age if they expressly agree to this.

Effect on employers

In order to retire an employee before the age of 70 a specific procedure must be followed, requiring the company to ask the employee whether they would leave the company on a voluntary basis. This process must be commenced 3 months before their birthday. If the employee refuses, they cannot be forced to retire. They can be asked the question once a year until their 69th birthday.

2009 is a transitional year for this legislation, which does not apply to employees who have already been notified that they will retire before 1 January 2009. For this year, employees aged between 60 and 65 can still be forced to retire providing this measure falls within the terms of a collective agreement. As of 2010 however, the provisions will enter into full force.

This obligation to obtain the employee's acceptance in order to retire them rather limits the employer's options for older employees, preventing the shortcut which was often used to reduce headcount without actual redundancies.