The default retirement age is abolished … and comes back again

by Laurie Anstis on January 18, 2011

The government has confirmed its plans to abolish the exemption from age discrimination and unfair dismissal law for retirement at 65 or above – the so-called default retirement age.

I had made this my number one employment law issue for 2011, seeing it as a major challenge to the way in which employers had operated in the past.

There is as yet no draft legislation for the abolition of the default retirement age, but the government’s response to the consultation (pdf) makes it clear that employers can still operate compulsory retirement ages, provided they can be justified under normal discrimination law principles. The classic example that is usually given is the emergency services, where physical fitness is paramount and where retirement ages of below 65 have been the norm.

The question of justifying compulsory retirement was the key issue in the case of Seldon -v- Clarkson Wright and Jakes, which I have previously commented on. In that case, in the context of the compulsory retirement of a partner from a partnership, the Court of Appeal found that the compulsory retirement was justified on the basis of the need for succession planning and giving career opportunities to junior employees (the so-called “dead man’s shoes” argument) and removing the need for distasteful performance management of older workers (the so-called “collegiality” argument). Sir Mark Waller drew support for his judgment from the fact that there was a compulsory retirement age for employees, but the continued existence of a compulsory retirement age did not seem essential to the judgment. In my comment at the time, I suggested that this judgment had the potential to seriously undermine the plans for abolition of the default retirement age, as it seemed that many employers could deploy the “dead man’s shoes” and “collegiality” arguments as justification for compulsory retirement.

The government’s response to the consultation does envisage retirement being justified in the “dead man’s shoes” case, but only in “limited cases where retirements are an essential part of succession planning“, and goes on to say “It is not the case that older people in work block jobs for younger people.“. There is no mention of the “collegiality” argument, with the government instead saying “… there are still many myths about older people’s capabilities which must be challenged – in particular, the view that there is a strong link between someone’s age and their ability to do a job. For most types of work this is simply not the case.

The tone of the government’s response stands in contrast to the tone of the Seldon judgment.

The age discrimination rules derive from EU law, and as such the Court of Justice of the European Union has the final say. In the past, the Court of Justice has been a staunch defender of the rights given by EU law to employees and workers. The Court of Justice had the opportunity to consider the question of retirement in the case of Rosenbladt -v- Oellerking.

This case concerned Mrs Rosenbladt, a cleaner, whose contract of employment provided for automatic termination when she reached the age of 65. This provision derived from the collective agreement which applied to cleaners. On being served with notice of her retirement, Mrs Rosenbladt brought a claim alleging age discrimination. The national court referred the case to the Court of Justice, asking whether such a provision was compatible with EU law on age discrimination.

The Court of Justice held that (1) compulsory retirement of this nature was capable of being justified and, as such, could be compatible with EU law on age discrimination, and (2) on the facts of that particular case, was justified.

The court’s decision on why compulsory retirement was, in this case, justified, is complex, drawing on such matters as the ability of the employee to claim a pension after 65, and the fact that this was an agreed term of the contract and part of a collective agreement. However, the general tone was remarkably consistent with the Seldon decision, and none of the factors that were cited by the Court of Justice in support of justification were particularly exceptional. For instance, para 43 of the judgment the court notes the general consensus that has existed regarding the legitimacy of retirement, and comments:

That consensus is based primarily on the notion of sharing employment between the generations. The termination of the employment contracts of those employees directly benefits young workers by making it easier for them to find work, which is otherwise difficult at a time of chronic unemployment. The rights of older workers are, moreover, adequately protected as most of them wish to stop working as soon as they are able to retire, and the pension they receive serves as a replacement income once they lose their salary. The automatic termination of employment contracts also has the advantage of not requiring employers to dismiss employees on the ground that they are no longer capable of working, which may be humiliating for those who have reached an advanced age.

As Michael Rubenstein comments in his forward to the IRLR report of the case: “Each of these propositions is, in truth, questionable, but the Court thus far, in the purported name of inter-generational fairness, has given little weight to the indignity of arbitrary discrimination on reaching a given age.”

It remains to be seen what view the UK courts and tribunals will take of justification of compulsory retirement after the abolition of the default retirement age, but the Rosenbladt judgment seems to give encouragement for an employer’s prospects of justifying compulsory retirement, using Seldon-type arguments.

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