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Frettens Update: Q&A – Repealing the default retirement age

  13th April 2011      
 Company News, Employment Law

1 April 2011

This month we focus on the new Regulations which have now been published abolishing the default retirement age (The Employment Equality (Repeal of Retirement Age Provision) Regulations 2011 (“the Regulations”)). We look at what they do and how you should prepare for them.

Q: What do the Regulations do?

A: The inclusion of a default retirement age of 65 in the anti-age discrimination regulations back in 2006 has always been contentious, with such organisations as Age Concern bringing court proceedings to test its legality. The Regulations will mean that employers will no longer be able to lawfully force employees to retire at the age of 65. They also abolish the right for employers to refuse to employ applicants within 6 months of turning 65. Retirement will disappear as a potentially fair reason for dismissal and employers will only be able to terminate the employment of older employees fairly for one of the other statutory reasons: misconduct, redundancy, capability, illegality or some other substantial reason.

It will be direct age discrimination for an employer to dismiss an employee simply because of their age unless the employer can objectively justify having a compulsory retirement age. Any dismissal relying on a compulsory retirement age will be a “some other substantial reason” dismissal.

The Regulations do not alter an employee’s existing right to decide when they want to leave employment, the principle being that retirement should be a choice, not a compulsion.

Q: When will the Regulations come into force?

A: The Regulations are due to come into force on 6 April 2011. This means that in order to give the required minimum six months’ notice, the last date notice under the default retirement age procedure can be given is 30 March 2011. Employers can give short notice to employees between 30 March 2011 and 5 April 2011, but up to 8 weeks’ pay may be awarded if this “short notice” procedure is followed. No new notifications of retirement can be issued under the old regulations from 6 April 2011.

Q: What happens to those individuals who are given notice on or before the 5 April 2011, but are working out their notice after 6 April, when the ability to serve notice of retirement is repealed?

A: There are some transitional arrangements, which potentially allow for employers to retire employees up until April 2012, but these will only apply where notice is served before 6 April 2011, and the employee attains the age of 65 (or any higher normal retirement age) before 1 October 2011.

Q: Anything else I should be aware of?

A: The Regulations include a new exemption, which allows employers not to provide insurance benefits where an employee has reached 65. This means that employers do not have to offer, for example, private health insurance to employees who have reached 65 (or, in the future, whatever age the State Pension Age increase to).

The drafting of the Regulations has been a source of criticism and it is still possible that, even though we are only a few days from them coming into force, there may be further amendments.

Q: Any practical advice?

A: Employers need to decide whether they will abolish retirement ages in their organisations and amend their contractual documents and retirement policies accordingly. If employers decide to keep a compulsory retirement age it must be objectively justified, which for a lot of industries is likely to be difficult to do. To be able to objectively justify a compulsory retirement age, employers must show that the retirement age is a proportionate response to a legitimate aim. The employer must be able to:

  • Establish a legitimate aim (such as workforce planning/succession);
  • Establish why that aim is necessary;
  • Establish evidence to support that the compulsory retirement age will meet that aim; and
  • Establish that there is no alternative/less discriminatory way of achieving that aim.

We would encourage all employers to seek legal advice from us in relation to any compulsory retirement age they wish to impose from 6 April, in order to avoid age discrimination claims.

We would also encourage employers to ensure that notices of intended retirement that can be issued under the old regulations are issued prior to 6 April 2011 and that contracts of employment and handbooks are updated to reflect the change in the law.

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