Abolition of the default retirement age: frequently asked questions

Elizabeth Stevens of Steeles (Law) LLP concludes a series of articles on the abolition of the default retirement age with some frequently asked questions. Employers will no longer be able to retire employees compulsorily once the default retirement age is abolished unless they can objectively justify their retirement age. 

When is the default retirement age being abolished?

The default retirement age is being abolished with effect from 1 October 2011. The draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 will, when enacted, abolish the default retirement age. Employers will not be able to retire employees compulsorily using the existing statutory retirement procedure under the Employment Equality (Age) Regulations 2006 (SI 2006/1031) if they reach the age of 65 on or after 1 October 2011.

Transitional provisions set out in the draft Regulations will apply from 6 April 2011. Under the transitional provisions, the last date that employers can issue notices of retirement is 5 April 2011. Retirements issued by this date will be lawful provided that the employer follows the statutory retirement procedure (including giving the right to request to remain at work) and the employee reaches the age of 65 (or the employer's normal retirement age, if older) by 30 September 2011. However, in their current form, the draft Regulations state that a notice of retirement will be effective only if the employee reaches the age of 65 "during the period" between 6 April 2011 and 30 September 2011. This would seem to mean that anyone who is already 65 prior to 6 April 2011 cannot be lawfully retired during the transitional period. This does not appear to reflect the Government's original intention in its response to the consultation about the abolition of the default retirement age (Phasing out the default retirement age: Government response to consultation (PDF format, 111K) (on the BIS website)), and is not reflected in the Acas guidance (Working without the default retirement age (PDF format, 856K) (on the Acas website)). It is hoped that this discrepancy will be clarified before 6 April 2011.

Under the draft Regulations, a retirement notice can expire after 30 September 2011, provided that the employer gives at least six and no more than 12 months' notice of retirement by 5 April 2011 and the employee reaches retirement age before 1 October 2011. It should be noted that this differs from the original statement in the Acas guidance that "the last day that employees can be compulsorily retired under the default retirement age is 30 September, so the last day to provide six months' notice required by the DRA provisions is 30 March 2011" and "employers can still use the DRA between 30 March 2011 and before 6 April 2011 but if they do they must use the short notice provisions". The Acas guidance has been amended to reflect the draft Regulations on this point.

Will employers be able to force employees to retire once the default retirement age is abolished?

No. Although employees can opt to retire by giving proper notice, employers will not be able to force employees to retire once the default retirement age has been abolished unless they have their own retirement age, which must be objectively justified (see the next question). From 6 April 2011, retirement will no longer be included as one of the potentially fair reasons for dismissal under s.98 of the Employment Rights Act 1996, unless the transitional provisions apply and the employee has already been given notice of retirement in accordance with the statutory retirement procedure. A forced retirement after this date could potentially lead to a successful claim for unfair dismissal and/or age discrimination. Unless the employee wants to retire voluntarily, the employer will have to have a fair reason for dismissal, such as redundancy or capability, and follow a fair procedure before it dismisses him or her, or risk liability in a claim for unfair dismissal and/or age discrimination.

In what circumstances will employers be able to justify compulsorily retiring employees?

To be able to retire employees compulsorily, employers will have to be able to demonstrate that the retirement age is objectively justified. To establish objective justification, an employer will need to be able to show that it has a legitimate aim and that the retirement age selected is a proportionate means of achieving that aim. This is likely to be difficult for most employers to do.

To be proportionate, the discriminatory effect of the retirement age should be significantly outweighed by the importance and benefits of the legitimate aim and the employer must consider whether or not there are alternative, less discriminatory methods of achieving that aim.

The Acas guidance includes information on employer justified retirement ages and suggests that preserving health and safety could be a legitimate aim. It also gives the example of workforce planning as another potentially legitimate aim, meaning the need for businesses to recruit, retain and provide promotion opportunities and effectively manage succession. This might be easier for some employers to establish as a legitimate aim, compared with health and safety. However, the guidance makes clear that, to satisfy the test of objective justification, it is necessary for an employer to show clear evidence rather than unsupported assertions that the retirement age is justified.

What are the risks to employers that dismiss employees who have reached 65?

Once the default retirement age has been abolished, the dismissal of an employee because he or she has reached the age of 65 will be discriminatory on the ground of age and an unfair dismissal. A dismissal at or after that age will be potentially fair (and non-discriminatory) only if the employer can show that it is for one of the potentially fair reasons for a dismissal under s.98 of the Employment Rights Act 1996, namely conduct, capability, redundancy, statutory ban or some other substantial reason. In addition, the employer will have to follow a fair procedure before dismissing the employee, to reduce the risk of a successful claim of unfair dismissal.

We have an employee who will be 65 after 1 October 2011, but whose performance has deteriorated recently. How should we deal with this situation?

In the event that the work performance of an employee who is 65 on or after 1 October 2011 deteriorates, the employer should deal with the situation in the same way as it would in relation to any other under-performing employee. If an employer is concerned about an employee's performance, it should follow a performance management procedure, issue the employee with warnings and give him or her the opportunity to improve, before considering whether or not to dismiss (with notice) on capability grounds.

When the default retirement age is abolished, what will we need to do if an employee who is over 65 is on long-term sickness absence?

Following the abolition of the default retirement age, employees aged 65 or over who are absent due to long-term sickness should be subject to the employer's normal sickness absence policy (where one exists). Depending on the circumstances, the employer should obtain a medical report and hold a meeting with the employee before considering dismissal on the ground of incapability.

An employee who is over the age of 65 will be entitled to be paid sick pay in accordance with the employer's usual contractual arrangements or statutory sick pay where the employer does not pay contractual sick pay. However, employers should be aware that there is an exemption under the draft Regulations in respect of group risk insured benefits such as income protection, life assurance, private medical cover and sickness insurance. Employers will be permitted to exclude employees from access to these benefits once they reach the age of 65, without it amounting to unlawful age discrimination. This age will increase in line with the state pension age (see the Pensions section of the XpertHR employment law manual for more details). Employers that offer these benefits but that wish to exclude employees who have reached the state pension age from being entitled to them should amend their existing contracts and policies to make clear that these benefits will cease once the employee reaches the state pension age.

How will the abolition of the default retirement age affect recruitment practices?

Employers may need to adjust their recruitment practices, to ensure that the number of new employees recruited is proportionate to the number of retirements. This is likely to be less predictable once the default retirement age has been abolished.

In addition, the current exemption from the age discrimination provisions that allows employers to reject an applicant who has reached, or is within six months of reaching, the retirement age of 65 or older, will no longer apply from 6 April 2011. Employers will need to ensure that they consider applications from candidates of any age on the basis of merit and suitability for the job in question rather than their age.

Next week's topic of the week article will be the first in a new series on positive action in recruitment and promotion and will be published on 8 March.

Elizabeth Stevens is a professional support lawyer in the employment team at Steeles (Law) LLP (estevens@steeleslaw.co.uk).

Further information on Steeles (Law) LLP can be accessed at www.steeleslaw.co.uk.