Contractual retirement ages following abolition of the DRA

With the abolition of the default retirement age (DRA), employers who want to forcibly retire employees once they reach a particular age must rely on a contractual retirement age. For most jobs, a contractual retirement age is likely to become quite rare. Instead, employers will be expected to approach retirement consensually where possible, and in any event on a case-by-case basis. Reps need to be alert to the risk of employers using formal capability and performance review processes inappropriately to force out older workers who can no longer be retired. This would be unlawful age discrimination.

A compulsory retirement age is both direct and indirect age discrimination. This means that to be lawful, the employer must be able to justify it as a “proportionate means of achieving a legitimate aim”.

A number of European Court cases have identified the factors likely to justify a fixed retirement age in any particular case. These were examined in a key decision of the Supreme Court: Seldon v Clarkson Wright and Jakes (a partnership) ([2012] UKSC 16). In this case, the Supreme Court decided that only aims that are based on social policy and public interest objectives — such as employment policy, the labour market or vocational training — can be used to justify direct age discrimination. It is not possible to justify direct age discrimination by relying on “purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness”.

In Seldon, the Court identified two potentially legitimate categories of “public interest” aim that can be used to justify forced retirement. These are:

• Aims that promote intergenerational fairness: including 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: This includes avoiding the need to dismiss older workers on grounds of incapacity or under-performance, or to engage in expensive disputes. However, as national charity Age UK has pointed out, suggestions that older workers should be spared the “indignity” of performance appraisal are themselves based on out-dated stereotypical assumptions.

Other job-specific legitimate aims can include demands for physical strength or alertness. However, even here there is a risk, except in the most obvious cases, of stereotyping by making generalised age-based assumptions about physical and mental capability, instead of carrying out periodic risk assessments and health checks.

To succeed, the employer must prove, with proper evidence, that in its particular business, the need for a contractual retirement age is both based on one of the reasons set out above and is appropriate and necessary to the employer’s particular requirements, taking into account the impact on the disadvantaged group.

Relevant issues include the following:

• Does the employer have proper evidence to back up its claims? For example, can it show that promotional opportunities for younger workers really have been inhibited by the continued presence of older workers? An employer who has never had a problem recruiting and promoting young people will struggle to show this.

• A retirement age is more likely to be lawful if it has been negotiated, for example by a recognised union. In Seldon, the retirement age had recently been re-negotiated between the partners, weakening his claim.

• The implementation of a retirement age is more likely to be lawful where older workers had been given enough notice to be able to prepare financially for retirement.

Just because employer can justify a compulsory retirement age, it does not follow that it will be able to force retirement at 65, as opposed to some later age.