One of the biggest legal changes employers will have to contend with in 2011 is the abolition of the default retirement age (DRA). Although the DRA will not be completely abolished until 1 October 2011, transitional arrangements will come into force from 6 April 2011.
During the six-month transitional period, (April – October 2011) employers will be unable to issue new notifications of retirement but those issued before 6 April 2011can continue through to completion if:
a notification of retirement has been issued by the employer prior to 6 April 2011;
the date of retirement is before 1 October 2011; and
the requirements of the statutory retirement procedure are met.
The default retirement age will be completely abolished on 1 October 2011 and employers will be prohibited from retiring employees by means of the default retirement age from that date onwards.
Employers can stop using a compulsory retirement age, and decide individual retirements on a case-by-case basis. (The Government intends to issue guidance on managing without a retirement age and we will bring you this when it is published). Again, the employer will have to show that the decision to retire someone is objectively justified.
An employer that wishes to retire an employee will also have to follow a fair procedure under the ordinary unfair dismissal rules and rely on one of the potentially fair reasons for dismissal set out in s.98 of the Employment Rights Act 1996 (capability, conduct, redundancy, illegality or Some Other Substantial Reason).
Employers will still be able to operate a compulsory retirement age, provided that they can objectively justify it. The Government’s proposals call these "employer-justified retirement ages" (EJRAs). To justify a compulsory retirement age, the employer must be able to show that it is a proportionate means of achieving a legitimate aim.
"Proportionate" means that:
what the employer is doing is actually achieving its aim;
the discriminatory effect should be significantly outweighed by the importance and benefits of the legitimate aim; and
the employer should have no reasonable alternative to the action that it is taking.
An aim could be "legitimate" if it relates to:
economic factors such as the needs of and the efficiency of running a business;
the health, welfare and safety of the individual (including protection of young people or older workers); or
the particular training requirements of the job.
The aim of saving money by getting rid of older workers (who might, for example, be paid more than a younger worker for doing the same job) is definitely not by itself a legitimate aim.
Employers will also not be able to rely on generalised assumptions that lack any factual foundation as sufficient evidence of justification. They will have to provide valid evidence if their retirement ages are challenged.
Most employers have a compulsory retirement age of 65 that they do not currently have to justify and case law exploring how individual employers can objectively justify retirement has been rare.
However, a Court of Appeal case involving partners (rather than employees) in a law firm who were forced to retire, Seldon v Clarkson Wright and Jakes and Secretary of State for Business, Innovation and Skills [2010] IRLR 865 CA, gives employers an idea of what might constitute objective justification. The Court of Appeal said that it could be legitimate aim to avoid forcing an assessment of a person’s falling off in performance, thus maintaining a confrontation-free workplace.
The Employment Appeal Tribunal in the same case had earlier held that that ensuring that associates have the opportunity to become a partner after a reasonable period and facilitating the planning of the partnership and workforce across individual departments could also be legitimate aims.