Tag Archives: default retirement age

Abolition of default retirement age

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I wrote about the anomaly in the draft Regulations last month when I pointed out that it appeared that the new Regulations appeared to exclude the option to give notice to over 65s before the default age was abolished.

The Government announced in January that it was not going to back down on proposals to abolish the so called “default retirement age” on 1 October 2011. Many had argued that increasing the age from 65 to some higher age would be a better solution, on grounds of simplicity, of reducing the number of tribunal claims and of “humanity” (a default retirement age avoids the unpleasantness of having to tell an ageing employee that he is no longer up to the job). However that is not to be.

Under current law, provided the employer has complied with statutory conditions, notably giving between 6 and 12 months notice, he can require an employee to retire at age 65 or over without facing the risk of a tribunal claim. The regulations are due to come into effect on 6 April 2011 and will ensure that, subject to a transitional arrangements, employees whose dismissal takes effect on or after 1 October 2011 will be entitled to claim unfair dismissal and/or unlawful age discrimination even if they are aged 65 or over.

Although this basic position is clear the detail of the transitional arrangements was questionable. Originally the Government indicated that if the minimum 6 months’ notice expired on or before 30 September 2011, then all else being equal the current law would apply so that the 65 year old employee would not be able to complain to a tribunal. That appeared to mean the notice had to be given by 30 March 2011 even though the new Regulations would not be in force until 6 April. The draft regulations as issued have avoided the “retrospective legislation” implications that involved – but in doing seemed to have produced a different complication.

Under the transitional provisions set out in the initialbdraft regulations for an employer to take advantage of the current law the basic requirements were that (i) the employee must have their 65th birthday between 6 April 2011 and 30 September 2011 and (ii) the notice of dismissal must be given before 6 April 2011. As the notice of dismissal can be 12 months notice, it follows that provided the employee became 65 between 6 April and 30 September 2011, the dismissal itself could be set for any time up to 5 April 2012 if, in this example, notice was given on 5 April 2011. So far so good.

However there appeared to be an (in practice probably not very important) potential problem if the employee became 65 BEFORE 6 April 2011. The transitional arrangements could not then apply (as condition (i) above will not be fulfilled). The peculiar result would have been that, at least in theory, it would be possible for an employer to take advantage of existing law by giving 6 to 12 months’ notice before 6 April 2011 requiring an employee who has their 65th birthday in May or June 2011 to retire after 6 or 12 months but it would NOT be possible for him to do the same if the employee had their 65th birthday before 6 April 2011. By the time the notice given to the latter employee expired the current law would have been revoked by the new Regulations. The employer would not be able to take advantage of the transitional arrangements in the new Regulations with the result that that employee would be able, if the facts made it worth while, to sue the employer for unfair dismissal and/or unlawful age discrimination.

HOWEVER, the anomaly in the drafting has now been resolved. The applicable provisions are now as follows.

The last date for giving notice of intention to retire an employee under the statutory regime remains April 5 2011.

The statutory regime allows for a maximum of 12 months’ notice, so that a notice given before April 6 2011 could expire after September 30 2011. Under the new regulations:

  • the old provisions will apply to retirements of employees who are 65 on or before September 30 2011 provided that the employer has given notice of intention to retire on or before April 5 2011;
  • there remains some uncertainty as to the latest date on which such notice could expire – the usual rule is that the day on which notice is given is excluded from the time period, so the maximum notice of 12 months would expire on April 5 2012;
  • an employee could still make a request to continue working, but would need to do so on or before January 4 2012 (as more than three months’ notice is required); and
  • following such a request, an employer could agree to delay the retirement date by six months or less and still rely on the old provisions. This could mean that the latest retirements under the old regime are on October 5 2012. If a longer or indefinite extension is agreed, any subsequent retirement would need to be justified.

Our advice is that notice should be given on or before 5 April 2011. Work on the basis of the end of March with a view to ensuring that there is no risk of the employee not receiving the notice before the deadline. Wherever possible, give notice which is due to expire after six months, e.g. notice given on or before 31 March should be at least six months but expire on or before 30 September (again allowing a few days). Don’t extend the retirement date under any circumstances. By applying this approach, the existing Regulations can be relied on with minimal risk.

Can employers issue redundancy notices for over 65s before 6 April?

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Based on Government announcements made in January this year and corresponding ACAS guidance, the almost universally held view was that employers needed to act before 6 April in order to issue notices to employees who are 65 or over to retire on or before the deadline for abolition of the default retirement age on 6 October. The reason for this is that, in order to act fairly under the current (but soon to be phased out) Regulations, an employer must give notice of retirement of at least six months. This allows time for the employee to object to the proposed retirement and for the employer to consider those objections (a necessary part of the process).

However, in an unexpected development which has caused a good deal of consternation, it seems from the draft regulations which have now been published that only those who turn 65 during the period from April to October can be forcibly retired and those already over 65 are already protected.This directly contradicts the previously announced position and it seems from the draft that, as a result, many notices already issued will have to be withdrawn.

The relevant section of the draft regulations reads as follows:

Transitional provisions
5.—(1) Despite regulations 2 to 4, the provisions mentioned in paragraph (2) continue to have effect in relation to the employment of a person if—
(a) notification in respect of that employment has been given under paragraph 2 or 4 of Schedule 6 to the Employment Equality (Age) Regulations 2006 before the date of the commencement of these Regulations, and
(b) that person will attain the age limit during the period that begins with that date and ends with 30th September 2011.

It is difficult to see how the regulations as drafted can conceivably cover those who are already 65 by the commencement of the transitional period. According to the explanatory note the new regulations will come into force on 6 April and that, at least, is consistent with the Government’s previous announcements.

End of the default retirement age

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We have reported on several occasions over the last few months that the government is planning to scrap the default retirement age at age 65 but doubts were expressed about whether the change would be implemented as forecast. Those doubts have now been resolved as a result of the government’s announcement on 13 January that employers will no longer be able to force staff to retire at 65 from this October. Employment relations minister Ed Davey said that it was “great news” for older people, businesses and the economy.

The change means that from 6 April employers will no longer be able to issue notifications for compulsory retirement at the age of 65 using the default retirement age procedure. The current regulations require such notifications to be issued and for the employer to discuss the proposed retirement with the employee. However, the retirement can be imposed by the employer even if the employee disagrees.

Only one third of employers still apply compulsory retirement at age 65 but many have expressed concern about loss of the opportunity to implement retirements without the risk of facing claims for unfair dismissal and age discrimination. Interviewed on Radio 4′s Today programme Mr Davey sought to allay those fears by saying that guidelines would be issued to reassure employers that they can still conduct performance appraisals and fairly dismiss staff who are no longer able to perform their duties effectively. Of course, that means that there is room for uncertainty about capability and whether the determination is really age related. There also remains a good deal of concern about how employers will in practice demonstrate that unlawful discrimination is being avoided by using a proportionate means to achieve a legitimate aim.

John Cridland, director general designate of the CBI has highlighted the concerns. He said:

“The impact on employers, especially smaller ones, will be considerable. There is not enough clarity for employers on how to deal with difficult questions on performance. Less than three months is not enough time for businesses to put in place new procedures. The outcome will be more unpleasant and costly legal action.
“Employers accept that more people will want to work beyond 65 as the population ages, but the government has not recognised the fundamental question, which is how should employers manage retirement on the basis of a performance appraisal. This will be particularly acute in physically demanding sectors.”

So what does the change mean in practice for employers?

  • Employers must change their policies and procedures to remove those which rely on or refer to the default retirement age at 65.
  • Employers who want to retain a retirement age will have to give careful consideration to how it can be objectively justified. In most cases a blanket policy will fall foul of this requirement.
  • The “duty to consider” procedure needs to be phased out. From October this will play no part in arrangements for retirement.
  • Any employers who wish to rely on the current arrangements must start the process on or before 6 April.
  • Employers who wish to “retire” an employee will have to show a fair reason for dismissal.
  • Consideration needs to be given to reviewing and if necessary amending arrangements for performance appraisals and taking appropriate action where necessary. Confining appraisals and any corresponding dismissals to those around the current default retirement age is likely to be regarded as discriminatory.
  • There will inevitably be a significant increase in the number of employment tribunal claims resulting from the termination of employment of older employees.

As ever, our subscribers are more than welcome to contact us for advice and to make sure that all necessary changes are implemented in good time.

Newsletter – retirement age

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As pensions and retirement usually go together there is much scope for muddling the rules relating to them. Adding to possible confusion, two government consultations on related matters are both being headed by eminent men with the same surname. Former Labour Minister John Hutton is to chair a commission on public service pensions while economist Will Hutton is to head up a review of fair pay in the public sector.

Leaving aside anything to do with occupational pension schemes, there are three separate topical hot potatoes which are sometimes confusingly rolled into one. They are: (i) the “default retirement age”; (ii) raising the age at which a person is entitled to the State Retirement Pension; and (iii) equalising the age at which men and women become entitled to the State Retirement Pension.

The “default retirement” age is 65. For practical purposes this simply means that an employer can require an employee to stop work because he or she has reached age 65 without fear of being sued for unfair dismissal or unlawful age discrimination. Proper procedures must be followed. If they are followed an employee can generally be required to retire even if he or she would prefer to continue to work. The previous government had announced a review of the “default retirement age” which could lead to increasing it or even abolishing it altogether and the current government is committed to continue that process (and indeed following the 2009 judgment in the much publicised “Heyday” case would have found it very difficult not to do so).

Separately, the age at which a person can become entitled to the State Retirement Pension is being reviewed. Currently it is 65 for men and 60 for women. The previous government set out that the State Pension age would gradually increase to 68 for both men and women over a period of 22 years from 2024 to 2046. The proposal was that it would go up to 66 between April 2024 and April 2026, then to 67 between April 2034 and April 2036 and to then to 68 between April 2044 and April 2046. This process is now to be accelerated. On 24 June 2010 the new coalition government issued a consultation paper entitled “When should the state pension age increase to 66?“. The consultation will close on 6 August 2010.

Finally, there is the question of equalising the age at which men and women become entitled to the State Retirement pension. Different pension ages for men and women are of course contrary to sex discrimination rules but are temporarily allowed under a special EC/EU exemption which applies to the State Retirement Pension – not to occupational pensions. The State Pension age for women born after 6th April 1950 is already being gradually increased from 60 to 65, with the phasing in having already started (in April 2010 and due to be completed by 2020). A State Pension age calculator which takes account of this phasing in is available on the DWP website .

Clearly the above three matters (“the default retirement age”, raising the State Pension age and equalisation of State Pension age for men and women) are interrelated. Thus for example the consultation document noted above on raising the State Pension age states that “Under current legislation, introduced in 1995, the state pension age for men and women will not be equalised until April 2020. This is an important consideration in framing any options for increasing the state pension age, particularly any option which looks at making such a change before 2020“.

Questions concerning retirement and pensions will undoubtedly become increasingly important subjects for public discussion over the next few months and years. We believe that it will generally be helpful to bear in mind that the three matters noted above are in fact, and in law, separate matters even though interrelated so that changes to one can have a knock on effect on the others.

Yet more age discrimination developments

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In last month’s newsletter we reported on proposals to abolish the state retirement age of 65. This view has been reinforced by a policy briefing paper published by the Equality and Human Rights Commission on 25 January which proposes total abolition and a statement to Parliament made by the Solicitor-General on 28 January in which it was indicated that the default retirement age is “probably past its sell-by date”.

There is still a great deal of misunderstanding about the operation of the default retirement age under the current law, even among employment lawyers. In reality “default retirement age” is a misnomer because it is no longer enough to terminate employment merely because someone has reached age 65. Rather, there is a procedure to be followed which requires a “constructive dialogue” to take place between employer and employee before retirement is implemented. If an employer has a standard procedure which provides that employees will usually retire at age 65 there is still a requirement to follow the consultation process but, in general, retirements implemented within the standard procedure will not be unfair. However, it is vital to remember that you get one bite at the cherry. For example, it would be quite wrong to be selective in deciding to whom the “default” retirement age applies. It takes only a little thought to realise how vulnerable such an approach is to accusations of unfairness. Similarly, considerable caution has to be exercised when implementing retirements for those above 65. While retirement dismissals for those aged under 65 are in most circumstances automatically unfair, those in respect of employees over 65 remain potentially unfair. Take the example of an employee who has requested to work beyond 65 and the request has been granted. How will the employer be able to say that it has acted fairly in requiring retirement at, say, 66 or 67 if there has been no material change in employment circumstances so that the only relevant change is that the employee is a year or two older? – age discrimination on a plate! It is also worth bearing in mind that these claims can be horrendously expensive. The employee will no doubt argue that, given the chance, they would have gone on working for years and, of course, since we are dealing with discrimination there is no limit on the amount which can be awarded. Equally, other than in cases of sudden degeneration, it would be a brave employer who takes action to terminate employment based on incapacity if, only a year or so earlier, the employer and employee have agreed that the employee is fit to carry on working.

The removal of a “default retirement age” will certainly not make matters easier for employers but there are a few precautions which can be taken with a view to minimising risk. It is sensible to have a policy or at least a commentary in the staff handbook which deals with retirement in general terms. As long as the principles outlined are adhered to this will encourage consistency. Employers should also take the opportunity of consultation with a view to encouraging employee initiated retirement. Few employees want to carry on working indefinitely and there is nothing wrong with agreeing well in advance with an employee that he or she will continue working until aged, say, 67 or 68, or even older. If employment is terminated in accordance with an agreement made with the employee it is very unlikely to be considered unfair. Above all, employers must avoid knee-jerk decisions and attempts to use retirement as a cover for dismissal for other reasons. We frequently encounter situtations in which an instruction is issued at board level to retire Mr X or Mrs Y as part of a restructure or just to reduce wage costs (older and long-serving employees are generally higher paid). Any dismissals prompted by such an instruction are very likely to result in unfair dismissal as well as discrimination.

In the meantime it is worth considering that age discrimination is age discrimination even if the person subjected to the discrimination is not “old” and there is an age gap of only a few years as demonstrated in the recent case of Achim Beck reported here.

Another example of the potential for confusion has been demonstrated by an MP’s question in Parliament concerning whether a golf club in the questioner’s constituency was right to propose to stop offering reduced rates for pensioners on the basis of its understanding of the Equality Bill. The Solicitor-General’s reply was clear enough: “No…take it from me – it has got it wrong”.

Meanwhile, according to a report in The Sun, the boss of a hairdressing salon in Newcastle has been told that she cannot advertise for a “junior stylist” because this would discriminate against the elderly. Michelle Hilling, 39, commented, “This country has gone completely mad”.