BBC Breakfast News recently reported a dramatic increase in the number of employees in the UK continuing to work into their sixties. Employees are no doubt motivated to work longer due to the continuing poor economic climate and the resulting impact on the value of their savings and investments set aside for retirement. However, they are only able to do so as a result of government changes introducing protection against age discrimination (in 2006) and abolishing the default retirement age (“DRA”) of 65 (in 2011). Here our employment team look at the impact of the abolition of the default retirement age and the options available to employers when managing an ageing workforce.
Age Discrimination and the Default Retirement Age (DRA)
Discrimination on the grounds of age became unlawful in 2006 however the regulations allowed for the concept of a default retirement age (DRA) of 65. This was the age that employers could lawfully retire employees without facing a claim for age discrimination. Employers could establish a contractual retirement age that was lower than 65, however, to avoid claims of age discrimination, any contractual retirement age had to be capable of being objectively justified or, in other words, be seen as a proportionate means of achieving a legitimate aim. The default retirement age was removed on 6 April 2011 when the law in relation to retirement changed. Transitional provisions were put in place which expired in April 2012. A dismissal based on a person’s age now amounts to unlawful direct discrimination under the Equality Act 2010, unless the employer can objectively justify the retirement.
What is Objective Justification?
Most employers would prefer to retain a retirement age. This brings into sharp focus the issue of objective justification and whether it is possible for the employer to establish that the contractual retirement age is a proportionate means of achieving a legitimate aim. For an aim to be legitimate it needs to contain a social policy or public interest element- the individual aims of the employer are not sufficient. However it is possible that the individual aims of the employer will contain the necessary element of public interest. Relevant examples include workforce planning, promoting the recruitment and retention of younger employees, protecting against incompetence and ensuring a high quality of service. The legitimate aim must also be relevant to the employer’s circumstances. For example an employer can’t just say that their aim is to promote the recruitment of younger employees if they have not had any difficulty in doing so. For the potentially discriminatory action to be proportionate it must go no further than is necessary in achieving the aim. In considering whether a contractual retirement age is proportionate a Tribunal will consider the following factors:-
- Does it achieve the legitimate aim identified?
- Is there an alternative that is less discriminatory?
- Why is it necessary?
- Does the employer apply it consistently?
What are the options for employers?
Employers have two options:
- Abandon fixed retirement ages altogether and follow a fair procedure (most likely for capability or performance) on a case-by-case basis; or
- Retain a fixed retirement age within the employee’s contract of employment and be prepared to objectively justify its application.
The nature of the business as well as the specific roles that employees undertake will determine which of these options is preferable. For example, posts which require a significant level of physical or mental fitness may more naturally justify a fixed retirement age.
Options in detail
Option 1: Abandoning fixed retirement ages
If there is no fixed retirement age, how then does an employer end the employment relationship? ACAS has produced guidance “Working Without the Default Retirement Age” which advises employers to implement and maintain robust appraisal and performance management procedures throughout the workforce. Applying such policies and procedures across the board should
a) assist managers to deal more swiftly with performance or capability issues when they arise and b) protect employers from allegations of discrimination as they are applied consistently to all, not just older, workers. Since there is no clear or legitimate point at which to have discussion with older workers regarding their future, ACAS propose that such conversations take place as a matter of course with all employees as part of their appraisal procedure. Having these conversations take place across the workforce guards against such conversations being perceived as discriminatory. Conversations of this nature may benefit both the employer and the employee. Take for example the retirement of a senior manager. He or she has worked hard for 40 years and is looking forward to taking things a bit easier however they are physically and mentally fit and have no desire to give up work altogether. The employer may want to retain this employee within the organisation but in a less pressurised role and it is possible that both parties’ desires will compliment the other. Rather than the employee being compulsorily retired or managed out of the business due to poor performance, the parties could agree a reduced role for the employee in which they can mentor more junior members of staff. The employee benefits as they get to stay in employment and the employer benefits from 40 years’ worth of experience. These benefits can only be achieved with an open dialogue between the parties. Unfortunately in our experience a significant number of employers fail to carry out a regular appraisal process and many do not have the manpower or experience to do so consistently. For those employers the temptation will be to have discussions about an employee’s future with their older employers. That inconsistency creates risks of discrimination claims. These risks are magnified when you consider that the employer who does not hold regular appraisals is also likely to have to performance manage an aging, possibly underperforming employee at some time in the future. That process will in itself require time and patience from the employer.
Option2: Retention of a fixed retirement age
If an employer wants to retain a retirement age they should identify their legitimate aim and give careful consideration to whether the retirement age is a proportionate means of achieving that aim.
Legitimate aims
The Supreme Court case of Seldon -v- Clarkson Wright and Jakes (A Partnership) (2012) gives employers useful guidance on what legitimate aims are available to employers. This case considered the compulsory retirement of a partner of a law firm. The firm stated that compulsory retirement at the age of 65 was required to pursue the broad social policy aim of “inter-generational fairness” and not having to expel partners by way of performance management related directly to the social policy of “dignity”. The Supreme Court agreed with the firm and indicated that their aims were indeed legitimate and in accordance with the public interest.
Proportionate means
In our opinion the difficulty will be in satisfying the second limb of the test: the issue of whether the retirement age is a proportionate means of achieving that aim. Take for example the case of Baker v National Air Traffic Services (NATS) which illustrates the difficulty in establishing objective justification. NATS had a maximum age of 36 for new recruits and had to defend a claim from a potential new recruit who was over that age. NATS argued that the age bar was justified and argued that its legitimate aims were to achieve a high success rate in training, provide an adequate pool of qualified individuals, receive a reasonable period of service post training and ensure safety. The Tribunal found that they failed to show a correlation between the age and those stated aims. NATS were also criticised for failing to consider other less discriminatory alternatives to achieving their aims. For example if safety is an aim, what is it about being over 36 that increases this risk? If there was a concern that older employees were less able. surely it would be appropriate to assess them on an individual basis?
Consistency amongst employees
Further, an employer must ensure that it applies a retirement age consistently. Making exceptions in respect of particularly key employees will undermine the assertion that the particular cut-off point is necessary in order to pursue the aims indicated. However, this draws attention to the weightier counter-argument in that compulsory retirement takes no account of individual circumstances.
Recommendations
The ACAS guidance indicates that employer justified retirement ages have tended to be used and accepted by courts in exceptional circumstances (where the job requires a significant level of physical and mental aptitude). Therefore, where an employer does not have employees in such roles it will be more difficult to justify a retirement age. Should an employee bring a claim, an employer would be left to the mercy of the courts to decide whether their aims were legitimate and achieved proportionately. It may be more attractive for small businesses to rely on what they can control. By implementing robust appraisals, performance management and capability procedures across the whole organisation, those employers will ensure that they are discussing such issues with all employees, not just those who are older. Not only should this process improve performance across the business as a whole, it should ensure that if problems arise they are dealt with expeditiously. It also creates the possibility of more open dialogue between the employee and employer about the employee’s future plans and will not have the effect of discriminating against older employees as the policies are applied consistently across the board.
