Background/facts

As many of you will realise, since 2006 and the introduction of the Age Discrimination Regulations, it has been lawful to retire employees at 65, provided certain criteria are met, most notably: that an employee is over 65, that the normal retirement age for an employee is 65 or over and finally that the employer follows the set statutory retirement procedure set down by the Government since 2006. Despite legal challenges in the Courts, the law protecting enforced retirement has survived to date, however the Government has now announced its intention to phase out default retirement from 11 April 2011 onwards. This will require you to review your present policies and amend accordingly, because the processes that you have been following for the last few years will soon render you liable for claims.

The key proposals are as follows:

• Retirement under the present Regulations will cease completely on 1st October 2011 and no new notices of intended retirement may be issued after 6th April 2011.
• Retirement dismissals will still be permissible after 1st October 2011 but only if objectively justified (likely to be a tough test).
• “Transitional arrangements” will apply to retirements that have been notified before 6th April 2011 to take effect before 6th October 2011 note however, that retirements notified before 6th April 2011 but intended to take effect after 1st October 2011 will not be valid (unless objectively justified).
• The procedural requirements applicable to a retirement dismissal, currently set out in Schedule 6 of the Age Regulations, will be abolished.

Comment

The changes to the law were always expected because of the Government’s need to increase revenue and keep people working longer, given the greater gap between the retirement and the grave. The cold economics aside however, this change will create further litigation risks for employers who fail to comply with the change in the law, an inevitable procedural and administrative cost changing the policies/procedures and (more importantly) greater difficulty for employers getting rid of older employees who may not be performing as well as they used to.

Importantly the proposals above are presently only just that (“proposals”) and are subject to consultation, so details will not be known for a few months. The test of objective justification under the new law is a difficult test for employers to meet and it is to be hoped that where health issues are causing problems for some employees (as the ageing process continues) the new Regulations (or the Tribunal’s subsequent interpretation of those Regulations) will give some further leeway to employers when faced with capability dismissals.