Retirement

Employers are no longer allowed to force employees to retire at 65 (or any other age). The only exception is where there is a contractual retirement age in place that is capable of justification as a proportionate means of achieving a legitimate aim. Compulsory retirement amounts to direct and indirect age discrimination and must be justified objectively.

Until 6 April 2011 there was a “default retirement age” (DRA) in place. This allowed employers to force employees to retire at 65 as long as they followed a statutory procedure. The DRA has been abolished and, as a result, employers who want to forcibly retire employees at a particular age must be able to point to a valid contract term containing a contractual retirement age. This will be in the written contract document, incorporated from a policy or collective agreement, or more rarely, established through custom and practice (see Chapter 3).

A contractual retirement age is both directly and indirectly age discriminatory. This means that to be lawful, the employer must be able to justify it as a “proportionate means of achieving a legitimate aim”, given the particular context of the employer’s business.

Only broad social policy and public interest objectives, such as aims linked to employment policy, the labour market or vocational training, can be relied on to justify direct age discrimination, including compulsory retirement. An employer is not allowed to justify direct age discrimination by relying on “purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness” (Seldon v Clarkson Wright and Jakes No.1 [2012] UKSC 16).

In Seldon No.1, the Court identified two potential categories of “public interest” aim capable of justifying forced retirement. These are:

• aims that promote intergenerational fairness: making it easier for young people to access the workforce and progress, enabling older workers to remain in the workforce or plan properly for retirement, sharing limited promotional opportunities between generations, promoting diversity and the exchange of ideas and experience and recognising that older workers themselves benefited from the rule when younger; and

• aims that promote dignity: avoiding the need to dismiss older workers on grounds of incapacity or under-performance, or to engage in expensive disputes. As national charity Age UK has pointed out, this “aim” is itself based on outmoded stereotypical assumptions about the performance of older workers.

Other job-specific legitimate aims can include demands for physical strength or alertness. However, employers should not make stereotypical assumptions about physical and mental capability based on age where there is a viable alternative available, in the form of periodic risk assessments and health checks.

In Seldon v Clarkson Wright & Jakes (No.2) [2014] IRLR 748, the EAT upheld an employment tribunal ruling that the law firm’s compulsory retirement age of 65 was a proportionate means of achieving three legitimate aims:

• retaining associate solicitors by offering a chance of partnership after a reasonable time;

• facilitating workforce planning across departments; and

• avoiding the need to expel partners.

A retirement age of 65 was legitimate, said the EAT, even though Mr Seldon’s employer could have chosen a later age within the same age range, for example 66 or 67. Despite this conclusion, it is worth remembering that at the time of Seldon’s forced retirement, there was still a default retirement age of 65. By contrast today, lots more people work beyond age 65.

It is not enough for an employer just to assert the aims it wants to achieve with its retirement age. Instead the employer must prove, using proper evidence, that a compulsory retirement age is both appropriate and necessary to meet the needs of their particular workforce. Here are some important factors for reps to bear in mind when negotiating over a contractual retirement age:

• an employer who argues that promotional opportunities for younger workers are held back by the presence of older workers should be able to back this up with hard evidence. If they have never had a problem recruiting and promoting young people, they will struggle to justify this aim;

• the needs of the disadvantaged group must be taken into account. For example, a change to the retirement age is more likely to be reasonable where those affected are given enough advance notice of change to be able to plan (European Commission v Hungary [2012] EUECJ C-286/12);

• a collectively negotiated retirement policy is more likely to be judged proportionate and reasonable than one that has been imposed (Seldon No.1, Loxley v BAE Systems (Munitions & Ordinance) Limited [2008] ICR 1348);

• the availability of a pension income can be relevant (Rosenbladt v Oellerking Gebaudereinigungsges mBh [2010] EUECJ C-45/09); and

• a reasonable policy should provide a right to request not to be compulsorily retired.

Reps also need to be alert to the risk that some employers will use formal capability and performance review processes to force out older workers who can no longer be retired.

“Flexible retirement” is supported by the TUC and the Chartered Institute of Personnel Development. In some workplaces unions have negotiated flexible retirement agreements. For examples, see the LRD booklet Representing older workers — a guide for trade union negotiators www.lrdpublications.org.uk/publications.php?pub=BK&iss=1676

On 30 June 2014, the right to request flexible working was extended to all employees with 26 weeks’ service. This new right may be particularly useful to workers planning retirement. For details, see Chapter 8, page 244.