Is forcing staff to retire lawful? - January 08
The Age Discrimination legislation, which came into force in the UK in October 2006, introduced a default retirement age of 65, after which employees could be compelled to retire providing a prescribed process was followed.
It is our experience that many employers have adopted the process of retiring staff at 65 in line with the legislative provisions and only depart from this where there is a clear business case to do so.
However the legitimacy of the UK government’s decision to adopt this default retirement age is being challenged by the Heyday Group and is due to be considered by the European Court of Justice in 2009.
In the meantime it is open to employees who are “retired” against their will to challenge this by bringing Employment Tribunal proceedings. Although employers will have acted entirely in accordance with current UK Age Discrimination law the Employment Appeals Tribunal has recently decided (in the case of Johns v Solent SD Ltd) that such claims should not be struck out but should be stayed pending the outcome of the Heyday case. This means that employers are left in a position of uncertainty until the ECJ’s decision.
We have had an insight into the direction that the ECJ may take when they recently considered a similar challenge in relation to the retirement age of 65 under Spanish national law (in the case of Felix Palacios de la Villa v Cortefiel Servicios SA).
From their decision the following conclusions can be drawn;
• Adopting a default retirement age potentially constitutes age discrimination and will only be lawful if it can be justified by the member state’s Government;
• As a general rule national Governments have considerable scope to set their own social policies, and the means of achieving them;
• In this case the Spanish Government established that the retirement age was justified on a social policy basis, when construed in the context of the need to create opportunities in the labour market given the high levels of unemployment and the good state pension provision for individuals at 65.
If the ECJ adopts a similar approach when considering the UK’s position then it appears that the Heyday group will face an uphill struggle to succeed in its challenge. However the outcome is far from guaranteed, as there are significant differences between Spain and the UK in both the levels of unemployment and the adequacy of the state pension provision and it is unclear how critical these factors will be.
On balance, we would not recommend that employers who have a policy of retiring staff at 65 depart from this. However, employers should appreciate that there is a risk that this approach could be challenged. Employers will put themselves in a stronger position to defend any such challenge if there is a clearly audited decision of the business reason for maintaining a standard retirement age, for example on the grounds of succession planning, to encourage “new blood”, to provide a dignified exit route for staff or on economic grounds.
For further information on this or should you have any queries please contact Alice Reeve at: alice.reeve@rickerbys.com.
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