The Employment Equality (Age) Regulations were introduced in 2006. One of the most significant changes introduced by the regulations was that of a Default Retirement Age (“DRA”) which made it possible for an employer to fairly dismiss an employee on the ground of retirement once they reached the age of 65. So long as the employer complied with the statutory procedure, any dismissal on the ground of retirement would be fair.
This law has been under constant scrutiny since its introduction, even leading to Age Concern raising a legal action against the UK Government which was pursued all the way to the European Court of Justice. Whilst the (then Labour) Government successfully resisted this action, they did give an indication that the DRA would be reviewed in 2011. This is a nettle which has been firmly grasped by the new coalition Government who have now announced plans to phase out the DRA by 1 October 2011.
At the beginning of the month the Government launched a consultation following its proposal that the DRA be abolished. The specific details of the Government’s intentions are:
- Employers will be able to rely on the DRA and the related statutory retirement procedure where any retirement takes effect before 1 October 2011. If retirement is due to take place after this date the DRA will not apply and the employer will need to “objectively justify” (see below) the retirement.
- The last date on which employers will be able to give notice of retirement to an employee under the current statutory procedure will be 6 April 2011. After this date employers will be unable to provide an employee with the minimum period of notice required to allow the retirement to take effect before 1 October 2011.
The consultation seeks views on whether the proposed timetable for the removal of the DRA strikes the right balance of allowing the Government to achieve its policy aim and the needs of employers to have time to adapt to the changes. Further details of how to respond to the consultation can be found here.
It is almost inevitable that the DRA will be removed. This will create potential problems for employers in attempting to manage succession planning in the workplace. Rather than being able to rely on the DRA employers will, in all likelihood, have to consider each position and each employee on a case by case basis when contemplating retirement. If the Government’s intentions are carried through this will require employers to “objectively justify” any decision to retire an employee. This means employers will have to establish that a decision was a proportionate means of achieving a legitimate aim and produce evidence to support such a conclusion. The consequences of failing to properly carry out this exercise could be expensive and leave a business open to the risk of being on the wrong side of both unfair dismissal and age discrimination claims.
It is to be hoped that further guidance will be produced by the Government in the fullness of time. Employers of a notably aged workforce may, however, wish to take advantage of the favourable statutory procedure currently in place while they still have the opportunity to do so and avoid some potentially difficult decisions from April next year.
If you are concerned about the impact this change may have on your business or for more information on the DRA generally please contact Stephen Connolly.