The Equality (Miscellaneous Provisions) Bill 2013 (the “Bill”) is likely, if enacted in the coming months, to introduce a statutory obligation to objectively justify the setting of compulsory retirement ages within an employer’s workforce. In this update, the Employment and Pensions team review some of the Bill’s practical implications for employers.

Retirement ages

The European Court of Justice (“ECJ”) has stated that the compulsory retirement of workers is discriminatory on the age ground, and therefore must be objectively justified. However in Ireland, section 34(4) of the Employment Equality Act 1998 (the “1998 Act”) expressly permits the use of differing retirement ages. The Bill proposes to amend section 34(4) of the 1998 Act to require employers to demonstrate that the setting of differing retirement ages:

  • is objectively and reasonably justified by a legitimate aim, and
  • the means of achieving that aim are appropriate and necessary.

This is something which is likely to be challenging from an employer’s perspective. In many cases, no coherent policy may have been in place when a particular employee was given a retirement age which differs to other employees within the same organisation.

Currently, there is also no statutory retirement age in Ireland for private sector employers. However, many employers still specify a retirement age in their contracts of employment as the unfair dismissals legislation does not apply once an employee has reached the employer’s normal retirement age.

Although the unfair dismissals legislation does not apply, an employee on a contract of indefinite duration, who reaches the employer’s normal retirement age, may still be able to take an equality claim on the ground of age. The Equality Tribunal in Ireland has followed the ECJ reasoning and found in a number of cases that a contractual retirement age must be objectively justified i.e. it is necessary and is achieving a legitimate aim.

Fixed-Term Contracts

However, currently employers are free to offer a fixed-term contract to a person over the compulsory retirement age without having to provide any objective justification. The recent Equality Tribunal case of McGuinness v Maynooth Mission to China Inc confirms that the offering of a fixed-term contract to a person after he/she has reached the compulsory retirement age will not constitute age discrimination.

In general, employers are only obliged to objectively justify a renewal of a fixed-term contract. However the Bill, if enacted in its current state, will require employers to objectively justify offering an initial fixed-term contract to employees who have reached their normal retirement age. For employers who adopt this practice, they now face the complication of having to objectively justify offering such contracts to those employees.

What does this mean for you?

In summary, employers should exercise caution when offering such fixed-term contracts as it may operate to establish a custom and practice for employees who wish to challenge their compulsory retirement at the company’s normal retirement age.