Default retirement at 65 – is it legal?
Unfortunately we will have to wait just a
bit longer to find out. In October 2006, the Employment Equality (Age)
Regulations 2006 (known as the Age Regulations) came into force, introducing a
standard default retirement age of 65. The Heyday Group (part of Age Concern) challenged
the Age Regulations in the High Court in what has become known as the ‘Heyday
Challenge’, seeking to make it unlawful in the UK to force employees to retire at any
age.
In July 2007, the Heyday case was referred
to the European Court of Justice (ECJ) by the High Court and in March 2009, the
ECJ finally handed down its decision, ruling that a national rule permitting
compulsory retirement at 65 or over, can be, in principle, justified. However,
the ECJ has bounced its decision back to the High Court, and it is now up to
the High Court to decide the following:
- whether compulsory retirement at 65 can be justified by the UK by
a legitimate aim relating to employment policy, the UK’s labour market and
vocational training; and
- whether the Government’s chosen way of achieving that
legitimate aim by imposing a default retirement age is appropriate and
necessary.
Until the High Court has made its decision,
the situation remains unclear. Over 800 cases have been stayed at Employment
Tribunals whilst we await a definitive ruling.
The implications of the Heyday challenge
could have a significant impact on employers. If the default retirement age is
quashed by the High Court, all employers will need to revert back to the
position before the Age Regulations came into force. As a consequence, all
stayed claims are likely to succeed and claimants will be entitled to
compensation accordingly, unless their retirement can be objectively justified
by the employer.
For now, the Age Regulations remain in
force as drafted, at least until the High Court has given its decision, and employers
can continue to require employees to retire at age 65 or above. However, it is
good practice for employers to discuss retirement options with employees, and
to avoid forcing them to retire before they are ready.
If employers are considering making any
compulsory retirements, it is important that the following retirement
notification provisions of the Age Regulations are complied with:
- Give the employee written notice, 6-12 months before the
intended retirement date, and inform them of their right to request to
continue to work
- If you fail to comply with the time limit, then you must give
written notice as soon as possible. Unfortunately, you may still be liable
for compensation of up to eight weeks of the employee’s pay (subject to a
statutory cap of £350 for a week’s pay) for the delay. Failure to give the
employee written notice 14 days before the intended date of retirement
will render the dismissal automatically unfair and you will be liable for
further compensation
- The employee can request to work beyond the intended date of
retirement, and the request should be made 3 months before the intended
date of retirement. However, if you have failed to comply with your time
limit for written notification, the employee can submit their request at
any time up to the intended date of retirement
- If the employee makes a request to continue working, you must
either agree in full or arrange a meeting within a reasonable time to
discuss it with the employee. The employee has the right to be accompanied
to the meeting
- You must inform the employee of your decision in writing and of
their right to appeal. You cannot make a retirement dismissal without
giving notification of your decision
- If the employee exercises their right to appeal, you must hold
another meeting within a reasonable time and inform the employee of your
decision in writing
- If you decide to refuse the employee’s request, then the
retirement dismissal should take place on the intended date of retirement.
You are not required to give reasons for your decision, although you must
ensure that your reasons for the dismissal are not discriminatory
- If you agree to allow the employee to work beyond their
retirement, you should agree a new retirement date. There is no need to
follow a further procedure at the date of retirement if the new date for
retirement is 6 months or less away, but if it more than 6 months away,
you will have to restart the retirement process
- If no date is set then you can still retire the employee at a
later stage by following the above procedure again
- Ensure you set out the arrangements in writing, and agree the
terms on which the employment will continue (if they have changed).
Irrespective of the outcome of the Heyday
challenge, the Government has pledged to review the effectiveness of the
default retirement age in 2011. With the uncertainty surrounding the current economic
climate, many of us simply cannot afford to stop working at 65. In addition, the
population is living longer, and many employees are fit well into old age or do
not have the cushion of valuable pensions which would otherwise provide a
strong incentive to retire. With that in mind, it is not unfeasible that
employers may see the default retirement age increased to say 70 or abolished
altogether.
Tina Wisener is a Partner at Doyle Clayton Solicitors
