According to figures recently released by the ONS, the number of workers over 65 has increased by 85% in the UK over the past 20 years, from 753,000 in 1993 to 1.4 million in 2011. This is not surprising: it has been recognised for some time that people are living longer, and therefore need to work for longer to save for retirement. This is coupled with the fact that people are healthier and want to remain an active role in society which, for many, is done through work. Whilst increasing numbers are working past normal retirement age (which may soon be an archaic concept), the majority are working part-time resulting in a shift towards a gradual and less abrupt departure from the workforce.
The government has dealt with our ageing population in two ways. Having initially forced employers to give active consideration to an employee’s request to work beyond retirement, the government has now abolished an employer’s automatic right to force an employee to retire at 65 altogether. Whilst employees of course remain free to retire voluntarily at any time, an employer can no longer force them to retire at 65 (or any other age) unless that forced retirement can be objectively justified. If an employer chooses retain a standard age at which it forces employees to retire, a Tribunal must be satisfied that there is a good reason for enforcing retirement at all, and that the particular age chosen is both appropriate and necessary. If they are not, the employee will have a valid age discrimination claim.
The government is also introducing pensions auto-enrolment later this year, so that employers must compulsorily opt their workers into a pension scheme in order that they save for retirement.
Working without the default retirement age
The abolition of a statutory retirement age leaves employers with a number options. They may decide to continue to force retirement at a fixed age, selecting an age which they consider appropriate and justifiable. Whilst it’s clear that forced retirement can still be justified in principle, the reality is that proving objective justification is far from straightforward. Firstly the employer must show that it had a legitimate aim. That aim cannot be a purely “private” aim specific to the employer (such as a desire to promote competition or save money), but must also be consistent with social policy aims such as “inter-generational fairness” or “dignity” (Seldon v Clarkson Wright and Jakes (2012)). Secondly, and crucially, the employer must show that the aim was actually relevant in their specific circumstances. That means generalised assumptions that a particular retirement age can be justified because the employer is trying to achieve a legitimate aim will be very dangerous. For example, if an employer says that retirement at 70 is necessary to enable it to continue to employ young employees and achieve a balanced workforce, a Tribunal will scrutinise whether that employer does in fact have any problems recruiting younger employees and whether there is in fact an imbalance in the workforce. This makes adopting a fixed retirement age difficult because, even if the employer had a legitimate aim at the time the retirement age was adopted, whether the aim is in fact achieved by retirement will depend on the circumstances at that time, which are somewhat unpredictable. Once an employer has shown that it had a legitimate aim in principle, and that aim was actually achieved by retirement in practice, it must go on to show that retirement was a proportionate way of achieving the aim, and that there was no less discriminatory alternative (for example, careful regular health checks or effective performance management).
Another option is for employers to retain the concept of “retirement”, but only decide when to retire employees on a case-by-case basis.
Since “retirement” is no longer technically one of the potentially fair reasons for dismissal, an employer who forces employees to retire at a fixed or non-fixed age will have to rely on “some other substantial reason” as the reason for dismissal
If the employer drops the concept of “retirement” altogether, then an employer wishing to dismiss an older worker will probably, unless there is a clear conduct issue, rely on capability as the potentially fair reason.
Dismissing older workers – capability?
As well as identifying a fair reason, an employer must be able to show that it has undergone a fair procedure in effecting a dismissal. An employer must therefore be able to show that there is a real capability issue and that the decision to start a performance management process is not tainted in any way by age discrimination. Employers should assume that all workers, regardless of age, will make a valuable contribution to the business and should deal with any performance or health issues consistently. In practice this means being able to demonstrate that a younger employee with the same performance issues has been or would be treated in exactly the same way. If an employer can show that it had genuine concerns about capability/performance, and it was fair and reasonable to take action for capability in the circumstances, it must then show that it followed a fair performance management process with the employee, including clear warnings as to the employee’s deficient performance and improvement required, before dismissing. Treating an older employee any more leniently or more harshly during any performance management process may in itself be discriminatory towards younger or older workers.
The risks of avoiding performance/capability issues
Employers should not avoid dealing with performance or capability issues in order to preserve older workers’ “dignity”. For example, in the case of Newey v Sainsbury’s Supermarkets (which was decided under the then Age Regulations) the employer suggested early retirement to an older under-performing employee as an alternative to undergoing a capability procedure, and this constituted age discrimination.
If an employer doesn’t adequately deal with a capability/performance issue for an older worker, this could also result in an employee’s disability being overlooked, meaning that the possibility of the employer’s duty to make reasonable adjustments could also be overlooked.
Talking about the future
The abolition of a statutory retirement age and a duty to consider an employee’s request to work beyond retirement means that there is no longer an obvious or appropriate time at which to discuss whether an older worker may wish to retire, and even broaching the subject on the assumption that the employee may wish to retire in the near future may well be discriminatory in itself.
Acas has produced guidance for employers on Working without the default retirement age (http://www.acas.org.uk/CHttpHandler.ashx?id=2976) which advises employers to build discussions about future plans into an appraisal system and ensuring those discussions happen annually, asking open questions about an employee’s future plans for the short, medium and longer term. Employers should also ensure that any discussions which might normally take place about an employee’s future career aspirations are not ignored for older workers.
The guidance also recommends:
- Workplace discussions should be built into the appraisal system for all employees and should be conducted at least annually. This will also help the employer to identify any training or development needs or any requirement for reasonable adjustments to be made.
- Establish reasons for poor performance. Avoid falling into the stereotype that poor performance is more likely to be associated with older workers.
- Avoid asking questions which could be seen as discriminatory, such as indicating that the employee is preventing younger workers form progressing. Ask all employees open questions about their future plans for the short, medium and long term.
- Address poor performance consistently for employees of all ages.
- Older employees can still voluntarily retire at a time of their choice and draw any occupational pension they are entitled to, in accordance with the scheme rules.
Senior Associate, Charles Russell LLP