OCTOBER 2011 will see the abolition of the Default Retirement Age (DRA) which means that employers who had adjusted to the ‘planned retirement’ regime introduced in the 2006 Age Discrimination regulations will now have to reconsider how they deal with the retirement of their staff.
Under the previous regime, employers could compel staff to retire on or after their 65th birthday, provided staff were given at least six months’ notice of their retirement and given the opportunity to formally request to stay on beyond the proposed retirement date. To comply with statutory obligations employers would need only meet with the staff member and give consideration to the request. Refusal to extend employment would, under the old rules, be considered a fair dismissal so long as the retirement was not exposed as a sham to get rid of staff who were not performing or attending adequately – with the employer thus avoiding the inconvenience of a protracted performance or absence management process for that employee.
From October this year, this planned retirement procedure is abolished along with the DRA and from April practices will be unable to give the requisite six months’ retirement notice to staff approaching their 65th birthday before the DRA is scrapped.
Of course this does not mean that someone wishing to voluntarily retire (at any age) cannot do so – assuming that they can afford to! The provisions also have no direct connection to the state pension age. But this change does create a dilemma for employers who previously relied on the DRA to shed older staff with relatively little difficulty.
Some employers have contracts of employment or partnership agreements which make reference to 'normal' or 'contractual' retirement ages. However, they will be unable to rely on these documents in order to argue for contractual authority to compulsorily retire employees or partners at a particular age. To do so will risk a claim of age discrimination.
It will be possible under new regulations for an employer to justify the retirement of an employee or partner – but only by showing that the business aim for doing so is legitimate and that the decision to retire the person is proportionate to that aim.
From previous case law, we have some idea as to the ways in which an employer might persuade a court that a compulsory retirement was justified. The following have been found to be ‘legitimate aims’ by the courts in recent age discrimination cases.
Retiring older workers:
- facilitates workplace planning
- facilitates the recruitment and retention of younger workers
- protects the dignity of older workers from undergoing rigorous performance management
- avoids an adverse impact on provision of pension and other employment benefits
- enables the sharing of job opportunities amongst generations.
However, practices should be wary of assuming that the guidance from these cases will transfer directly to their own circumstances.
Our view at Law At Work is that employers facing age discrimination claims arising out of compulsory retirements in future will be required to produce before court detailed evidence of why they are seeking to retire employees at a particular age and why – in the case of the particular employee they are wishing to retire – this is an appropriate course of action.
In practice, there is a lot of evidence to suggest that many employers do not bother with a fixed retirement age, as they simply look at each employee’s case on its merits as they approach (or in some cases go well beyond) 'normal' retirement age. If the person is physically and mentally capable of carrying on working in the job, then most employers will welcome the employee staying on for as long as they and the employer wish to perpetuate the relationship. This is particularly appropriate when one takes into account the demographic changes in the labour force which will result in the age balance of the workforce steadily increasing in favour of older workers over the next decade.
Put simply, creating space for younger workers at the expense of older workers will potentially founder because the younger workers will simply not be available to fill the resultant vacancies.
Our clients are currently asking us to review their contractual arrangements and performance, absence and retirement policies for compliance with the new law. But, perhaps more importantly, they are also asking us to help them find ways of redesigning their retirement practice which will both meet the new legal regime and also the needs of their business in the coming years.
Practices would do well to do the same.
Ian Watson is training services manager at Law At Work
Law At Work is MDDUS preferred supplier of employment law and health and safety services. For more information and contact details please visit www.lawatwork.co.uk