It is fashionable, in Employment Law and HR circles, to predict that the abolition of the Default Retirement Age will have a profound and lasting effect on the labour market and that from 1st October 2011 chaos and uncertainty will reign supreme. Many say that the effect of the Equality Act will be to prevent dismissal when an employee attains a certain age.
But will that really be the case? I contend that the real hurdle for employers who wish to dismiss at a certain age is likely to be the existing legislation on unfair dismissal, not legislation on age discrimination. I would actually go so far as to predict that if the hurdle of unfair dismissal legislation can be overcome, then once the dust has settled life will return to very much what it is today and the vast majority of people will still retire (voluntarily or not) at 65 years of age.
“But” I hear you cry, “surely the abolition of the Default Retirement Age is specifically designed to enable employees to work beyond 65 years of age to supplement whatever meagre pensions they are able to draw down?”
Here are three good reasons why I might just be right:-
1. Seldon v Clarkson, Wright & Jakes;
2. Rosenbladt v Oeller King GEB šudereinigungsges; and
3. Petersen v Berufungsausschuss fur Zahnarzte
The first of these cases concerned the compulsory retirement of a partner within a legal firm at the age set out in the partnership contract; the Default Retirement Age never applied to partners (it only applied to employees) and therefore there was never a statutory entitlement on the legal firm to compulsorily retire the partner.
In this case the retiring partner brought proceedings alleging discrimination on the grounds of age. Clearly a decision to retire a partner because he has reached a certain age is age-related and discriminatory.
The legislation provides a potential defence of justification and in this case the law firm sought to rely upon this.
The law firm’s defence of justification relied upon a number of grounds. These grounds included succession planning and sharing out partnership opportunities effectively amongst employees of the firm who had not yet achieved partnership status. The Court of Appeal held that the “collegiality ground” (avoiding the need to “performance manage” partners out of the business as their performance deteriorates as they get older) could be a legitimate aim.
Significantly, the Court of Appeal also upheld that a discriminatory act could be justified on grounds not actually contemplated at the time of the act itself. Thus, circumstances thought of post-compulsory retirement could be founded upon.
In the second case I mention, Mrs Rosenbladt was a cleaner who worked part-time. She was compulsorily retired at 65 years of age. She sought to challenge this decision to retire her on the grounds that it amounted to age discrimination.
The European Court of Justice (ECJ) upheld the automatic termination of her employment on the grounds that it was a long-established feature of employment law and that it represented a proportionate mechanism for striking a balance between political, economic, social, demographic and budgetary considerations and the choice to be made between prolonging people’s working lives or conversely providing for early retirement. A central consideration for the ECJ was that an automatic retirement date guaranteed workers a certain stability of employment and in the longer term the promise of foreseeable retirement whilst at the same time offering employers a certain amount of flexibility in managing their staff. The ECJ relied upon the fact that national law protected Mrs Rosenbladt from discrimination if she wished to re-enter the labour market. Critically, it noted that automatic retirement offered the possibility of sharing employment opportunities between generations.
That theme of sharing opportunities between generations was also present in the ECJ’s decision in the third case of Petersen (in the slightly different context of defending a retirement age imposed by statute). In respect of dentists working on a panel for the German equivalent of the National Health Service it was held that an automatic retirement age of 68 could be justified on the grounds of sharing out employer opportunities and making access to employment easier for graduate dentists.
Although in the case of Petersen the ECJ did not specifically uphold the “collegiality” argument, it is considered that the collegiality ground may still be relevant in light of the Seldon case. The very specific reason why the ECJ rejected the collegiality argument in this particular case was that dentists working elsewhere were able to work beyond 68. A central consideration for the ECJ was the fact that dentists who were retired from the panel at 68 would still be entitled to work outside that particular system if they wished.
Hopefully, you can see how the cumulative effect of these three cases establishes that a decision to retire somebody automatically could be justified if the reason for the termination is to ensure succession planning and job sharing opportunities amongst generations or to ensure collegiality and avoid the need to performance manage. Under UK law, people over the age of 65 are still protected by discrimination legislation. So the rationale behind the decision in the case of Mrs Rosenbladt, the part-time cleaner, for example, would be equally applicable to employment in the UK.
I would not like to suggest for a moment that setting up the defence of justification is an easy task. I do think, however, that it is interesting to observe that it has technically already been done and that we have pointers to how it might be done in the future. Assuming sufficient thought is given to the justification defence there is no reason why employers should not successfully defend automatic retirement decisions in the future in proceedings brought on the grounds of discrimination. There may already be a sufficiently well developed body of case law on justification to succeed in such cases. Of course employers will still need to be prepared to defend a claim for unfair dismissal and should, in advance of applying their contractual retirement age, consider whether there is a potentially fair reason. Time will tell whether any of the strands of the justification defence might also amount to some other substantial reason of a kind to justify dismissal. But if there is merit in the succession planning ground in relation to age discrimination why should that ground not also be a legitimate ground upon which to base a “some other substantial reason” defence? Time will tell whether the concerns fashionable today will be proved to have been legitimate.