Scrapped retirement age will live on in private sector, says expert

Out-Law News | 29 Jul 2010 | 1:35 pm | 3 min. read

The Government will scrap the law allowing organisations to force workers to retire at 65 but companies will find it easier than ever to run their own compulsory retirement schemes in the wake of a Court of Appeal ruling yesterday, an expert has said.

The Government announced today that it will scrap the default retirement age in October 2011. From that date it will no longer be legal to make employees leave an organisation just because they have reached the age of 65.

But the law will still say that any age discrimination will be legal if it can be 'objectively justified' and a court ruling yesterday clarified exactly what that means, according to Tom Flanagan, an employment law expert at Pinsent Masons, the law firm behind OUT-LAW.COM.

"An employer can still justify a mandatory retirement age and use justifications like wanting to balance the workforce and provide opportunities for younger employees," said Flanagan. "The Court of Appeal's ruling sets not that difficult a test, it is not particularly stringent."

Leslie Seldon was a partner in law firm Clarkson, Wright and Jakes who was forced to retire after turning 65. He brought a claim against the firm alleging unlawful age discrimination, but an Employment Tribunal and an Employment Appeals Tribunal ruled against him. Yesterday the Court of Appeal did so too.

Flanagan said that the Court of Appeal's ruling outlined what a company's compulsory retirement must look like to meet the objective justification requirement of the law. He said that the requirements laid down by the Court are not as stringent as might have been expected.

"The Seldon case actually established that you can justify a retirement age and can do it on the basis of wanting a balanced workforce, to create opportunities for younger employees," he said. "The European Court of Justice had said in an earlier case that compulsory retirement schemes had to have legitimate policy objectives, but the Court of Appeal said that this was a Government issue, not a test that private employers needed to satisfy."

The Government had indicated in its recent budget that it would scrap the default retirement age (DRA), and has now said that it will be phased out from April 2011 over a six month transition phase.

The Government said in a statement that as people live longer the move was designed "to help and encourage people to work for longer against the backdrop of demographic change".

“With more and more people wanting to extend their working lives we should not stop them just because they have reached a particular age," said Employment Relations Minister Edward Davey. "We want to give individuals greater choice and are moving swiftly to end discrimination of this kind."

“Older workers bring with them a wealth of talent and experience as employees and entrepreneurs. They have a vital contribution to make to our economic recovery and long term prosperity," Davey said.

But business leaders said that while it was desirable to aim to stop the ending of people's employment just because they are 65, the particular plans outlined for the Government will cause companies problems.

"The Government’s timetable to scrap it will give companies little time to prepare," said John Cridland, CBI deputy director general. "Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed."

"This will create uncertainty among employers and staff, who do not know where they stand. There will need to be more than a code of practice to address these practical issues; we will need changes in the law to deal more effectively with difficult employment situations," said Cridland. "For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible."

On BBC Radio 4's Today programme this morning, Davey said that the Government was willing to consider more guidance than is currently available, but rejected the charge that the plans would cause problems for business.

"We think some of these problems have been overstated," he said. "People can performance manage their employees, people can talk to them sensibly and if they're no longer capable of doing the work they can be asked to leave. That's legal now."

Despite arguments that better management in companies will ensure that anyone not up to their job will be made to leave a company regardless of their age, Cridland said on the Today programme this morning that this was not an easy process for businesses.

"The principle is fine and one we support but there are lots of unintended consequences here," he said. "It's not an easy thing to manage somebody out because they are no longer able to keep up their productivity and businesses will need changes in employment law to help them to do that if they can't use retirement age."

The phased procedure being used to introduce the change will mean that after April 2011 employers will not be able to issue any new notifications for compulsory retirement using the DRA procedure. Only people notified before 6th April will have to take compulsory retirement, which means the process will be entirely phased out by October of that year.

Pinsent Masons' Flanagan said that the change is likely to lead to disputes. "The result is almost inevitably going to be more litigation on the issue because there is not the legislative framework there any more, and it will all be about the fairness and reasonableness of any dismissal," he said.