Court of Appeal ruling may provide retirement guidance for
employers post DRA
Following our article in
last month's Employment law news on the Government's
intention to phase out the Default Retirement Age (DRA), a key age
discrimination case involving partners (not employees) in a law
firm has been decided by the Court of Appeal, giving helpful
guidance as to what might be considered "objective justification"
in compulsory retirement cases. The existing statutory retirement
procedures do not apply to partnerships and therefore Mr Seldon
brought a claim of direct age discrimination when he was retired
aged 65.
The Court of Appeal held that it could be a
legitimate aim to produce a happy workplace by allowing people to
"retire with dignity" rather than confront and dismiss them for
poor performance after the age of 65. It could also be a legitimate
aim to ensure jobs and promotion prospects for younger employees
and for workforce planning purposes. These aims were consistent
with the UK's aims when it introduced the DRA exception to age
discrimination. The case also held that once it was established
that a compulsory retirement age was justified, it will normally
also be justified when applied to a particular individual. However,
permission is being sought to appeal to the Supreme Court and it is
important to note that the case involved a compulsory retirement
age that had been agreed in a partnership deed between partners of
equal bargaining power, as distinct from a company employee.
With the removal of the DRA and the statutory
retirement procedures, the options for employers wanting to dismiss
employees over 65 are essentially:
- operate a compulsory contractual retirement
age, but since it would be direct age discrimination this would
have to be 'objectively justified' – that is, be a proportionate
means of achieving a legitimate aim. Employers would also need to
follow a fair procedure and have a potentially fair reason for
unfair dismissal purposes, eg "some other substantial reason"
(SOSR)
- retire employees on a case by case basis, but
again this would have to be both individually 'objectively
justified' to avoid age discrimination, and also be with a fair
procedure and for a potentially fair reason (SOSR). The
Government's consultation clearly envisages that 'retirement'
will no longer be one of the potentially fair reasons for
dismissal
- simply dismiss for one of the other
potentially fair reasons (capability, conduct, redundancy,
illegality) under the usual dismissal procedures
Employers now have a huge, but not unexpected,
challenge in their approach to workplace practices and the
management of older workers. It is not anticipated that there will
be any significant changes to the substantive proposals, and so
early preparation will be crucial in deciding which approach to
take.
