A version of this article was first published by People Management on 1 April 2011.
Employers have in the past been able to use a compulsory retirement age, quite legitimately, to manage changing needs. When the Age Regulations 2006 came in, employers were still able to retire employees at 65 because of the existence of the statutory default retirement age (DRA).
However, the DRA was abolished from 6 April 2011. Employers will still be able to retain a company retirement age if it can be objectively justified as a legitimate aim and is achieved by proportionate means. How tribunals will decide questions of objective justification is debatable.
In the Seldon case, a law firm successfully justified compulsorily retiring its partners at 65 as a means of succession planning and providing aspiring partners with a career path. It was crucial that the retirement age applied to all partners; the relevant partner had not previously tried to change the retirement date and had presumably benefited from older partners retiring before him.
Likewise, in the Bloxham case, a tribunal dismissed age discrimination claims arising out of changes to a pension scheme designed to make it more financially sustainable. The arrangements discriminated against older partners but the tribunal held they were justified because they made the division of the firm’s annual profits fairer on younger partners. The firm was also able to show that extensive consultation had been entered into with the partners before changing the scheme.
However, these were law firm partners, who mutually agree their own arrangements. Tribunals may not follow these examples in a compulsory retirement of an employee. The Ministry of Justice, for example, failed to convince a tribunal that the compulsory retirement of judges at 65 was justified. The aim – ensuring a reasonable flow of new judges – was legitimate, but the ministry’s evidence did not support the argument that retirement at 65 was reasonably necessary in order to achieve it.
Similarly in Martin, a tribunal decided that retiring assistant football referees at 48 was direct age discrimination that could not be justified. The tribunal found there were alternative means of achieving the aim that were less discriminatory. The company also could not explain why it had set a retirement age of 48 rather than any other age.
With an ageing workforce, employers face a difficult task in justifying forced retirements. Attempts to dress up the removal of an older employee on performance management grounds so an employer can secure a younger employee, regarded as being of longer-term use, will get short shrift from tribunals. Given that discrimination claims are uncapped, older, better-paid employees who may never work again could have significant compensation claims.
Employers need to address succession planning as part of a long term strategy with all relevant employees and, as far as possible, encourage employees to discuss their future plans. For example, incorporating discussions about future aspirations and plans into the appraisal process with all employees (rather than focusing just on older employees) may help to assist in ascertaining plans for retirement. However, such discussions will need to be handled sensitively.