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Changes In Retirement 2011 – What Next?

Tuesday April 5, 2011 was the last day an employer could give an employee notice that they intend to retire them. This means the timing of retirement is now a matter of choice rather than compulsion. Retirement will no longer be a potentially fair reason to dismiss in its own right. In addition, it will no longer be lawful for an employer not to recruit someone who is within six months of reaching 65 on the basis of their age.

Scrapping of Default Retirement Age – transitional arrangements

Employers can still compulsorily retire an employee who is 65 on or by September 30, 2011 as long as they gave notification of retirement before April 6, 2011 in accordance with the Age Regulations.

Compulsory retirement

Despite the end of the Default Retirement Age, compulsory retirement might still be possible if it can be objectively justified by the employer as “a proportionate means of achieving a legitimate aim”.

Employers will not have a problem meeting this standard where employees are in jobs requiring a high level of physical fitness, such as fire fighters, or a high level of mental agility, such as air traffic controllers.

The Acas guidance is cautious and states: “The test of objective justification is not an easy one to pass and it will be necessary to provide evidence if challenged; assertions alone will not be enough.”

A helpful decision on the issue of objective justification is Seldon v Clarkson, Wright & Jakes where the Court of Appeal suggested a compulsory retirement age could be justified for partners in a law firm. The partners had approved a Partnership Agreement provision requiring partners to resign at 65 to facilitate sufficient opportunities for promotion and to enable succession planning. Lord Justice Elias remarked that a partnership seeking to conduct matters so as to “achieve a congenial relationship amongst the partners is a perfectly legitimate aim“. He also stressed that equality laws were “not designed to determine for companies what might be appropriate objectives”.

However, a decision in Hampton v Ministry of Justice does show that the Employment Tribunal will not necessarily take it as a given that enforced retirement has an important role in creating promotion prospects. The Department for Business Innovation & Skills’ Impact Assessment pointed out that most employees leave well before retirement age.

Therefore, to justify compulsory retirement on the grounds of creating promotion opportunities, an employer would have to show that forcible retirement was necessary to create a promotion opportunity which would not exist within their business without an older employee leaving.

Employee retirement after the removal of the Default Retirement Age

So, a case by case approach will be needed as a blanket policy may not bear up to scrutiny of the factual evidence.

There is useful guidance on the Department for Business, Innovation & Skills’ website. Phasing Out the Default Retirement Age Government response and the BIS Impact Assessment reflect current thinking on the management of older employees and are likely to influence future decision making in the Employment Tribunals.

A statutory code of practice would have been helpful to give greater guidance to employers. Without it the upshot is no doubt going to be a greater number of age discrimination claims and a reluctance by employers to retire older employers for fear their arguments on implementing a proportionate means to achieve a legitimate aim will be rejected.

The consequences will be potentially high value claims for losses that flow from the discrimination, such as loss of earnings. Older employees will find it harder to secure alternative employment in the current market and may succeed in obtaining generous loss of earnings awards which compensate them right up to their intended date of retirement.

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