The removal of the default retirement age will create uncertainty for employers. Some already have no retirement age, but others will have to decide to set their own compulsory retirement age. However, if they do, they will need to justify it by showing it as a proportionate means of achieving a legitimate aim. While the current regulations with the default retirement age of 65 have allowed employers to dismiss employees when they reach 65, without having to pay redundancy or make any other payments, the current regulations do allow employers to plan their workforce requirements with some certainty and encourage younger employees to stay in order to obtain promotion.
The retirement age also avoids the potentially unpleasant task of managing older employees who are becoming less capable in their roles. For these reasons, many employers will want to have their own compulsory retirement age.
little time to prepare
Employers do not have that much time to prepare for the proposed changes. Although the government plans for the default retirement age to be abolished in October 2011, it will also be abolishing the current statutory retirement procedures that require an employer to give an employee six months' notice of their impending retirement. This means there will need to be transitional arrangements in place by April 2011. The government is consulting on what procedures, if any, to put in place of the current statutory retirement procedures.
In the consultation paper, the government seems to accept that it is a difficult task to demonstrate that a retirement age is objectively justified. Helpfully, the Court of Appeal has very recently given its decision in a retirement case Seldon v Clarkson, Wright & Jakes which sets out some interesting guidelines. It does not concern the retirement of an employee, but of a partner in a firm of solicitors.
Partners are not subject to the default retirement age and, therefore, partnerships under the current regulations already face similar challenges to those that employers will face once the default retirement age is abolished. Mr Seldon, under the partnership agreement, agreed that partners would be compulsorily retired at 65. Yet when it came to his own retirement, Mr Seldon wanted to work beyond 65. Having been retired, he brought a claim for age discrimination. To defend the claim successfully, the partnership had to show they were justified in having a compulsory retirement age of 65.
The case was first heard at an Employment Tribunal. The tribunal decided in the partnership's favour and held that the compulsory retirement age had three legitimate aims which were:
1. Ensuring associates (senior solicitors who were not yet partners) were given the opportunity of partnership after a reasonable period.
2. Facilitating the planning of the partnership and workplace by having a realistic long-term expectation of when vacancies would arise.
3. Limiting the need to expel partners through performance management, thus contributing to the congenial and supportive culture in the firm.
Mr Seldon appealed to the Employment Appeals Tribunal (EAT), which upheld the original Tribunal's decision on the first two aims.
Mr Seldon then appealed to the Court of Appeal. The Court of Appeal upheld all three points.
Many employers will want to have a compulsory retirement age. The government proposal creates great uncertainty for them and the prospect of expensive disputes, with employees challenging the employer's choice of retirement age and the decision to retire them, which will be a dismissal and open to challenge, like any other dismissal. But the Seldon case does provide some useful pointers for employers, including the need to allow employees to step into dead men's shoes, the need to create a happy workplace and allow people to retire with dignity.
We do not yet know precisely what procedure the employer will need to follow in place of the Statutory Retirement Procedure if the employer decides to have a compulsory retirement age. The procedure will undoubtedly have to be fair, but we await guidelines on the likely timetable that should be followed and the points to be considered in any consultation with the individual retiring employee.
This is an important change in the law for employers and, to take part in the government's consultation, you can reply online at www.surveymonkey.com/s/2VWVDND.
l Gareth Edwards is a partner in the employment team at Veale Wasbrough Vizards. email@example.com.