With effect from 26 June 2020, the Corporate Insolvency and Governance Act 2020 (CIGA) affects the ability of Contractors to terminate on grounds that the Employer has entered a formal...
Is there still a default retirement age?
The default retirement age was abolished with effect from 6 April 2011. The effect of this is that employers can no longer follow procedure to compulsorily retire their employees at 65, safe in the knowledge that they will be protected from age discrimination and unfair dismissal claims.
Can I still require my employees to retire at the age of 65?
An employer may still want to compulsorily retire employees once they reach 65 (or another age). However, any such dismissal will be an act of unlawful age discrimination unless the employer can objectively justify its action by demonstrating that it was a proportionate means of achieving a legitimate aim. This is not an easy hurdle to overcome and any reasoning put forward by an employer will be subjected to close scrutiny by an employment tribunal.
Some examples of “legitimate aim” that an employer may try to rely on/include the following:
- Workforce planning
- Promoting the recruitment and retention of young employees
- Protecting the dignity of the older workforce by not requiring them to undergo performance management procedures
- Protecting against incompetence
- Having an age-balance workforce in order to promote the exchange of experience and innovation
However, it is likely to be much more difficult to show that compulsory retirement in a “proportionate means” of achieving that aim. For an age-discriminatory practice to be proportionate, the employer has to satisfy a tribunal not only the strategy is effective but also that there were not any other less discriminatory ways of achieving that aim. Proportionality may be assessed in terms of:
- Whether what the employer is doing actually achieves their aim
- Whether the benefits of the aim significantly outweigh the discriminatory effect
- Whether there is no reasonable alternative the employer can take
- Economic factors and the needs of the business
- Health, safety and welfare of the individuals involved
- The training requirement of the job
For example, if the argument is health and safety, it is a legitimate aim to ensure that people whose jobs are safely critical, such as train drivers and surgeons, are fit to do their jobs. However, it is quite another thing to satisfy an employment tribunal that automatically dismissing everybody over a particular age is a proportionate means of achieving this. For example, what about employees whose health deteriorates (possibly without being obvious) before retirement age? Why is it not possible simply to use careful medical checks – possibly more frequent for older employees – to ensure safety? In this case, before deciding that automatic retirement on the grounds of age is justified, a tribunal is likely to want evidence to show that the risk of unexpected and catastrophic sickness is more likely above the employer’s normal retirement age and would not be detected by adequate medical assessment.
It is important to remember that in the event that an employer avoids a finding of age discrimination by being able to objectively justify the compulsory retirement, the dismissal will still be found to be unfair if a fair process was not followed. Now that “retirement” is not a potentially fair reason under the legislation.
What other options do I have?
If the employer has performance or capability concerns, he will need to deal with these concerns in accordance with his normal performance/capability procedures. However, most organisations find fair performance dismissals hard to achieve. It is often hard to define what is and what is not adequate performance, and to set clear standards for failing employees which they can understand and which can be demonstrably achieved or failed.
Many managers shy away from effective performance management – or at least from the formal parts, which will build the necessary evidence to justify dismissal. Employers concerned about these factors should ensure that their performance management systems are clear and effective and that managers have the training and confidence to use them.
Can I ask an employee when he is intending to retire?
It seems likely that increasing numbers of people will want to remain at work for longer than at present, but quite possibly in less demanding roles. Reducing the duties of responsibility of the hours of work of older employees may be of great benefit to both them and the employer.
The concern of some employers is how to have discussions about this topic without being regarded as discriminating against employees simply by raising the subject. On the part of the employees, there is often a matching concern that if they make the suggestions of going part time or taking a demotion they will be seen to be admitting they are no longer capable of doing their current role. The Government has indicated that workplace discussions are to be encouraged, rather than regulated against, and as long as employers hold discussions on a routine basis with all older employees and do so in good faith, the legal risk created by raising an issue is low. Another way forward would be to ensure that you have a discussion with all your employees, possibly as part of your annual appraisal process, whereby you discuss future aspirations within the organisation. This may well lead to an employee then raising with you their intention to plan for retirement.
The cost of providing some benefits to employees over the age of 65 is becoming prohibitive – do I still need to provide them?
The legislation provides an exemption which enables employers to not offer or to withdraw benefits (such as life assurance, health insurance and medical insurance) for employees at the point when they reach the age of 65 (although this will rise in line with the state pension age) without the risk of being found to have discriminated on the grounds of age.
However, this does not give employers the right to unilaterally withdraw those benefits and simply withdrawing them is likely to give rise to claims for breach of contract and constructive dismissal.
What steps can I take to help manage these situations?
- Whether you need to adopt a compulsory retirement age for all of any part of your workforce. If so, you should prepare your objective justification now. This will mean a lot of work collecting and collating evidence to demonstrate that the compulsory retirement age is necessary
- Reviewing and amending your contracts of employment and any retirement policy and formally notify/consult staff of any changes
- Reviewing capability procedures and ensure your managers are competent and have the tools to manage performance pro-actively
- Training your managers and ensure that have regular updates
- The introduction of a formal discussion of retirement winding-down plans in appraisal discussions with employees and look at other measures to encourage employees to be realistic and flexible about retirement
Please contact us to discuss how we can help you or your business with any of your employment law needs.
This information has been prepared for general interest and it is important to obtain professional advice on specific issues. We believe the information contained in it to be correct at the time of publication. While all possible care is taken in the preparation of this, no responsibility for loss occasioned by any person or refraining from acting as a result of the material contained herein can be accepted by the firm or the authors.