Hello and welcome to the latest in our series of employment videos.
Today’s video is on the topic of age discrimination and compulsory retirement, one year on from abolition of the default retirement age - or the DRA. How have employers and the UK courts been dealing with the issue of retirement since then?
Since 2006, it’s been unlawful for employers to discriminate against an employee on grounds of age. However, until last year, employers could rely on an exception to this rule set out in the Age Regulations which meant that they could lawfully retire employees at the DRA of 65.
The DRA was abolished last year so now employers must decide how best to manage the exit of older employees. They may decide to do this through the performance appraisal system or by way of a compulsory retirement age. Those employers who choose to operate a compulsory retirement age must now be able to justify it in accordance with the provisions of the Age Regulations in order to defend a claim of direct age discrimination.
Developments since abolition of the DRA
In our employment video in May this year, we discussed the recent case of Seldon against Clarkson, Wright and Jakes with Robin Allen QC and also covered the decision in our May Highlights. This decision still remains the key decision on justifying a compulsory retirement age since abolition of the DRA.
The Seldon case
By way of a reminder, the facts of the Seldon case arose before abolition of the DRA for employees but involved a partner in a law firm to whom the DRA didn’t apply. As a result the compulsory retirement age for partners had to be justified in order to avoid a discrimination claim. The decision is therefore relevant to the compulsory retirement of employees now that the DRA has been abolished.
Mr Seldon was a partner in a law firm who was retired by reason of reaching the compulsory retirement age of 65. When his request to continue working was refused, Mr Seldon brought a claim of age discrimination against the firm.
The employment tribunal had to consider whether the compulsory retirement age of 65 set out in the partnership deed was objectively justified - that is, whether it was a proportionate means of achieving a legitimate aim. The tribunal identified three legitimate aims, those of staff retention, workforce planning and limiting the need to expel partners by way of performance management - or the aim of “congeniality”. They also held that the compulsory retirement age of 65 was a proportionate means of achieving these aims.
Mr Seldon’s case went all the way to the Supreme Court which published its judgement in April this year. The Court agreed that the aims identified by the tribunal were potentially legitimate but the case would need to go back to the tribunal to look again at whether the retirement age of 65 was a proportionate means of achieving those aims.
In reaching its decision, the Supreme Court stated that the test for justifying direct age discrimination is different from that justifying indirect discrimination - in that the legitimate aims identified must be “social policy objectives” and not simply reasons particular to an individual employer’s situation, such as cost-cutting or improving competitiveness. The Court referred to two different kinds of social policy objective which have been identified by the European Court of Justice:
The first is that of inter-generational fairness - which can mean a variety of things, such as helping young people find employment, enabling older people to remain in the workforce, and sharing limited opportunities to work in a particular profession fairly between the generations.
The second social policy objective identified is preserving the dignity of older workers, which means avoiding the need to dismiss older workers on the grounds of incapacity or underperformance and so preserving their dignity and avoiding humiliation.
The Court accepted that the aims identified by the tribunal were not simply individual aims of the firm but related directly to these legitimate social policy objectives - the aims of staff retention and workforce planning related to the objective of inter-generational fairness - and the congeniality aim related to the dignity objective.
Justifying compulsory retirement in the future
So where do we go from here?
Currently, there’s no date set for the tribunal to reconsider the Seldon case following the Supreme Court’s decision. So we don’t know yet whether it will decide if the retirement age of 65 was a proportionate means of achieving the potentially legitimate aims in the case.
The Supreme Court considered it relevant that the choice of age 65 as a compulsory retirement age was supported by the DRA in force for employees at the relevant time. But, now that the DRA has gone, as employers, you can’t be sure of justifying a retirement age of 65 in the future even if the tribunal decides that it was justifiable in the Seldon case.
The important point to note is that although the Supreme Court has made it clear that it’s possible in theory to justify a compulsory retirement age, justification won’t be easy to establish. In order to succeed, you will need to clear a number of hurdles.
Firstly, you’ll need to identify your potentially legitimate aim. This must be related to a social policy objective, for example, improving the recruitment of young people in order to achieve a balanced and diverse workforce, which is related to the social policy objective of inter-generational fairness.
Next, you’ll need to establish that the aim identified is legitimate in the particular circumstances of the employment concerned. For example, improving the recruitment of young people in order to achieve a balanced and diverse workforce is a potentially legitimate aim - but if in fact you have no trouble recruiting the young in the first place, it may not be a legitimate aim for your business.
You’ll also need to prove that the means chosen to achieve the aim, for example, imposing a compulsory retirement age of 65, are both appropriate and necessary to achieve the aim of improving the recruitment of the young. Could you achieve the same result by less discriminatory means? Could you, for example, choose the less discriminatory retirement age of 67 or 70 and still achieve the same result? Or, if your business requires minimum levels of physical or mental fitness, could you use fitness or competence tests as an alternative to having a retirement age at all?
Your chosen retirement age must have the effect of achieving the aim identified in your particular case. This means that if there’s no evidence that a particular retirement age would have the desired effect, it won’t be possible to justify it. For example, even in posts requiring a particular level of physical or mental fitness, such as in the emergency services or air traffic control, you would need to be able to point to evidence that levels of fitness decline at the particular retirement age chosen in order to justify it.
The question of when it will now be possible for UK employers lawfully to operate a specific compulsory retirement age is still very much up in the air.
Whilst the tribunal may ultimately decide it was lawful in the Seldon case, its decision will be of limited application in other cases because it will be based on the particular facts of Seldon and the fact that there was a DRA of 65 in place for employees at the time.
Future cases may of course throw further light on this.
This video is intended to give you a summary of some of the recent developments on age discrimination and compulsory retirement and we will of course keep you informed of future developments. However, if you have any questions on any aspects of today’s topic, then please don’t hesitate to contact us.
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