Age discrimination proposals
The government's latest consultative plans for age discrimination legislation1 are more radical than might have been anticipated, but leave many key questions unanswered.
On the central issue of mandatory retirement, older workers at the very least will gain the right to work on until age 70 and to be able to bring unfair dismissal complaints if they are dismissed before then. A somewhat more likely scenario is that there will be no default retirement age, and employers will have to justify by evidence the need for a mandatory retirement age for particular posts. Age discrimination will also be prohibited in respect of recruitment, selection, promotion and terms and conditions, subject only to fairly narrowly-defined justifications. If the government does not backtrack, the UK is likely to end up with a statutory age discrimination framework that will be among the most comprehensive, not just in the EU, but in the world.
Timetable
The current consultation will end on 20 October 2003. Consultative draft Regulations will then be issued in the spring or summer of 2004. The government intends to have the final Regulations laid before parliament by the end of 2004, with guidance accompanying them.
The government is now committed to bringing changes to employment legislation into effect only twice a year, on 1 April and 1 October. This means that age discrimination will come into force in October 2006, rather than December 2006 as originally proposed.
Cross-cutting issues
As foreshadowed in Equality and diversity: the way ahead (See Implementing the Employment and Race Directives ), where appropriate, a similar approach will be adopted in respect of age discrimination as has been taken as regards the other strands of employment discrimination - race, sex, disability, religion or belief, and sexual orientation. Thus, there will be similar definitions of indirect discrimination, harassment and victimisation, and a similar structure for bringing complaints.
Justifying direct age discrimination
Both direct and indirect age discrimination will be unlawful, unless justified by the employer.
The special feature of age discrimination, as regards the legislative framework, is that direct discrimination on grounds of age is capable of being justified by the employer in certain circumstances. Article 6(1) of the Framework Employment Directive stipulates: "Member states may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary."
The consultation paper makes clear that: "Age discrimination will be outlawed. We expect decisions on selection, recruitment, promotion, training needs etc to be made on the basis of merit and competence, not because the person has reached an arbitrary chronological age."
The government says: "We recognise that there might be exceptional circumstances when differences of treatment - or exceptions to the general rule of non-discrimination on the grounds of age - might be able to be justified."
However, there are unlikely to be any blanket exemptions: "Employers and others with obligations under the Directive who, exceptionally, wish to adopt an age-based approach, will have to be able to justify it - at an employment tribunal, if challenged. It will not simply be a matter of asserting that their age-based policy is necessary. In line with Article 6 of the Directive, they will have to justify it, with evidence, by reference to:
(a) specific aims; and
(b) the particular circumstances that make the practice appropriate and necessary."
The consultation paper lists some possible aims that might justify a difference in treatment, and these are set out in box 1 below. What is important to emphasise, however, is that any difference which is directly age-related, including retirement ages, as we discuss below, will have to be justified not just by reference to the specific aim, but to the particular circumstances of the case.
Indirect discrimination
With the exception of retirement age issues, most age-discriminatory practices will be indirectly discriminatory, rather than direct discrimination. This is particularly likely to be the case as employers audit their policies and practices in anticipation of the new legislation, and replace any explicitly age-based policies with service-related ones.
The definition for indirect discrimination will parallel that used in the religion and sexual orientation Regulations. This would mean a definition that would say:
"A person ('A') discriminates against another person ('B') if . . . A applies to that B a provision, criterion or practice which he applies or would apply equally to persons not of the age as B, but -
(i) which puts or would put persons of the same age as B at a particular disadvantage when compared with other persons;
(ii) which puts B at that disadvantage; and
(c) which A cannot show to be a proportionate means of achieving a legitimate aim."
Comparisons are somewhat trickier in the case of age than they are in respect of sexual orientation or religion, but there is nothing in the consultation paper to suggest that any limitation will be placed on the applicant's choice of the age for comparison, or indeed how they define their own age group. A 57-year-old who thinks they have been treated less favourably on grounds of age than a 32-year-old will presumably be able to make that comparison, subject to the proviso that the relevant circumstances as between the two groups must not be materially different, and it is hard to see how an employer will be able to say that what really should be compared are 50 to 58-year-olds with 30 to 38-year-olds, or whatever.
The government's approach to indirect discrimination will once again place the onus on the employer to justify any particular indirectly discriminatory practice as being "a proportionate means of achieving a legitimate aim". Accordingly, a mere assertion that a practice serves a legitimate aim will not suffice. It will require evidence to substantiate that the aim will be achieved by the means, and that there is not a less age-discriminatory way of achieving the same aim.
One rule will not fit all
It is implicit in the concepts of "appropriate and necessary", for justifying direct discrimination, and "proportionate", in respect of indirect discrimination, that cases will vary enormously both as between organisations and, more importantly, within organisations. A particular age-related practice, whether it be mandatory retirement or loyalty bonuses etc, may be empirically capable of justification as regards one group of workers and not for another. On that basis, the only organisations that are likely to be able to justify organisation-wide mandatory retirement ages are the very rare ones where all the workers do essentially the same work.
Retirement age
The government says that it is seeking views on whether "employers should be able to retire their employees compulsorily at or after age 70 without having to justify their decision" - a "default age".
Article 6(1) of the Framework Employment Directive specifies: "Member states may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary."
If the government was minded to opt for a default retirement age, it is by no means clear how this would fit within the requirements of Article 6(1). It is probable that a "legitimate aim" of employment or labour market policy could be put forward, but the means of achieving any such aim - in this context, the imposition of a default retirement age - must be "appropriate and necessary", ie proportionate.
The difficulty here, as noted above, is that the concept of proportionality is inimical to a "one rule fits all" approach. There are many organisations and many posts where whatever "aim" is put forward for a default retirement age is unlikely to be relevant. This must be particularly so when some major employers have already abolished mandatory retirement altogether, and others are certain to follow suit in the run-up to age discrimination legislation.
The first consultation showed that 43% of respondents were in favour of employers being able to require employees to retire at a certain age, and 57% against. Even of those in favour, a majority thought that legal limits should be placed on an employer's right to do so. The new consultation is specifically focusing attention on whether there should be a default retirement age. If the response is of a similar nature, it is improbable that the government would be able to justify imposing a default retirement age, although the qualitative nature of particular respondents' submissions also has to be taken into account.
Even so, it seems inevitable that some employers will consider that abolishing mandatory retirement will present few problems, and others will claim that it will pose great difficulties. Of course, many of the reasons given by employers as to why their business needs to maintain mandatory retirement, such as the need for succession planning, would also operate as potential justifications for that employer to maintain its own retirement age even if there is no default age. Other reasons reported in the consultation document, such as that "some businesses have argued that staff appraisal systems may not be sufficiently sensitive or objective to be able to tackle effectively the declining performance and productivity of some older workers", seem a pretty poor policy justification for limiting the right not to be discriminated against on grounds of age. The better solution is for those employers to introduce adequate performance management for all workers.
Account also needs to be taken of Rutherford v Towncircle Ltd and Secretary of State for Trade and Industry (No.2) (EOR 111). A decision by the EAT in this case is expected shortly. If the claim succeeds and it is held that an upper age limit on the right to claim unfair dismissal is indirect sex discrimination against men contrary to EU law, the upper age limit on claiming unfair dismissal will be ineffective. That might make it impossible for the government to then impose a default retirement age - and prevent claims of unfair dismissal based on retirement at that age - when implementing the age strand of the Framework Employment Directive. It would be strongly arguable that would be in breach of the Directive's non-regression provisions.
In the absence of a default retirement age - and the odds given here are slightly against one - retirement ages will be unlawful unless they can be objectively justified by the employer. The consultation document suggests that legislation will "provide for employers, exceptionally, to be able to justify mandatory retirement ages by reference to certain aims set out in the implementing legislation, and according to their own circumstances".
The government is consulting on what those aims should be, although they are likely to include those set out in box 1. Health and safety is one potential justification, although most employers will run into the evidential problem that age is not necessarily an accurate proxy for health, that health varies greatly between individuals of a given age, and that it is illogical that someone should be regarded as fit for work at age 64 and 364 days, but not so on the day following. This is acknowledged in the consultation paper, which says: "The evidence that we have currently suggests that the health, welfare, and safety aim would only very rarely justify the use of a mandatory retirement age by employers."
Again, it needs to be stressed that if there is no default retirement age, not only is it likely that many employers will not be able to justify any mandatory retirement age, but even those employers who can justify a mandatory retirement age for some workers will not be able to justify the same, or any, mandatory retirement age for other groups of workers. Every employer will have to look at the particular factual situation affecting each group of workers.
Unfair dismissal
The government is proposing that the upper age limit on making an unfair dismissal complaint will be removed. Employees will be able to complain of unfair dismissal at any age, but "retirement at a justifiable retirement age will be a fair reason for dismissal".
The consultation paper proposes that the Employment Rights Act will be amended accordingly. "However, changes must also be consistent with:
(a) a default retirement age of 70, if we decide to proceed with it; and
(b) employers' ability to specify a different retirement age if justified."
Accordingly, the government proposes that "an employer who dismisses employees on grounds of retirement if they have reached or exceeded:
(a) the employer's normal retirement age, which would have to be justified if under 70; or
(b) in the absence of a normal retirement age, the age of 70
should be able to defend the dismissal as fair."
Insofar as it relates to employees who have "exceeded" the normal retirement age, we understand that it is not intended to exclude all employees over normal retirement age from claiming unfair dismissal, and that this exclusion would be limited to cases where a later retirement age was agreed at the time of the normal retirement age, perhaps in order to allow the employee to finish a particular project or to work part time in the run-up to retiring completely. In other cases, where the employee has, by agreement, worked on past the retirement age, by definition, the dismissal would not be on grounds of "retirement", but must be for some other reason. If so, the employer should have to justify it.
The consultation paper also refers to employees being able to bring a claim "where the procedure for dismissal on the grounds of retirement was not fair". This ties in with the one of the government's overall objectives in this context: that retirement should be "managed" between employer and employee. As such, it is intended that dismissals on retirement should be subject to the Employment Act 2002's three-stage statutory dismissal and disciplinary procedures, which will come into force in October 2004. Thus, there will have to be a meeting with the employee before a retirement dismissal to discuss the matter, even where the retirement is in accordance with a justifiable mandatory retirement age for the employee's position.
Unfair dismissal compensation
Unfair dismissal compensation is to be altered by removing the age-related aspects of the basic award. In future, the basic award would consist of one week's pay per year of service, subject to a maximum of 20 years.
Statutory redundancy payments
It is proposed that the statutory redundancy payments scheme would be amended so that service below the age of 18 will count for qualification purposes, and will be included in the calculation.
As with the basic award of unfair dismissal compensation, age-related aspects would be removed from the payment calculation, and payment would be calculated on the basis of one week's pay for each year of service irrespective of age, subject to the existing maximum of 20 years' service.
There will also be changes to the upper age for entitlement to a statutory redundancy payment, although their nature will depend on whether there is a default retirement age. If there is no default age, entitlement would continue indefinitely, unless there was a normal retirement age for the job.
Age rules in legislation
The consultation paper notes that the Directive exempts state benefits or similar schemes. The government's view is that some other legislation containing age-related limits and rules can be objectively justified under the Directive, including provisions in the national minimum wage and the Working Time Regulations.
The document goes on to say: "Where other legislation necessarily continues to specify age limits, we intend to provide an exemption for employers and others with obligations under the Directive so that they can continue to comply with the provisions of the other legislation. This might apply, for example, to a road haulage contractor whose lower age limit for employing lorry drivers is linked to the age limits for obtaining a large goods vehicle (LGV) licence." Perhaps the operative word in that paragraph is "necessarily". The Road Traffic Act allows people aged 18 to drive Category C1 vehicles, and people aged 21 to drive Category C+E vehicles, but it is hard to see why someone of the requisite proficiency who was aged 20, for example, should not satisfy the latter requirement.
The consultation paper does not suggest that there will be a blanket exemption for complying with pre-existing statutory requirements, and such a provision might not be appropriate.
There are a number of other legislative limits which must be of questionable validity. It is understood that these are currently being reviewed by the government.
Recruitment, selection and promotion
The consultative document takes a much harder line on age discrimination in recruitment, selection and promotion than it does in respect of retirement. It says: "There is a widespread acknowledgment that there is no room for age-based recruitment practices. These simply perpetuate inaccurate stereotypes . . . Neither should promotion depend on age: the crucial factor is the person's ability to do the job at the higher level." This primarily relates to direct discrimination on grounds of age.
The Directive allows for the possibility of justifying "the fixing of a maximum age for recruitment which is based on the training requirements of the post in question or the need for a reasonable period of employment before retirement." The consultation paper gives as an example of a potential justification the extreme case of not recruiting someone "near to retirement age who, on the completion of training, would have reached the company's retirement age."
Employers are also likely to attempt to justify graduate recruitment schemes, which indirectly discriminate against older workers.
The consultation paper proposes that employers should be able to justify an upper age limit by reference to the aims set out in para. 3.15, and asks whether there are other aims that might justify setting an upper age limit on recruitment.
A strict line is also taken with potential genuine occupational requirement exclusions from age discrimination legislation. The government says: "We expect there to be very few cases where age is genuinely a requirement . . . Consultation to date has only identified acting as an occupation where this flexibility is needed. But there might be others - for example, modelling clothes aimed at specific age groups."
Insurance
The consultation paper notes that most insurance schemes, such as employers' liability insurance, do not use age as a requirement. "However, there could be a small number of occupations whose insurance provision might be based on age. We believe that where compulsory insurance is not available because of the applicant's age, employers would be justified in not recruiting him or her. Equally, employers would be justified in dismissing employees when they reach the age where such insurance is unavailable, if suitable alternative employment is either unavailable or rejected by the employee."
In practice, this is not expected to affect many positions, and a distinction is drawn between cases where insurance is not available and cases where insurance is more expensive for older (or younger) employees. In the latter case, the consultation paper says "employers would have to refer to a real business need before they could justify discrimination on the basis of increased cost."
Because the Directive does not extend beyond the employment field, age discrimination by insurers is not directly covered. Nevertheless, it is arguable that employers should not be allowed to hide behind what might amount to arbitrary discrimination by their insurance company. On the contrary, it might be thought that there should be a duty on employers in such cases to seek to fund insurance cover and to absorb any increased costs.
It would be unthinkable for an employer to dismiss a woman because of the increased insurance costs of employing her, and insurance companies would not dream of charging employers differently according to their proportion of ethnic minority employees, even though that might make good actuarial sense. In the absence of any special dispensation in the Regulations, employers would have to defend taking decisions on the basis of the availability or cost of insurance, and insurance companies might find themselves potentially liable under the age Regulations for "aiding" an unlawful act of discrimination by the employer.
Pay and non-pay benefits
The government is proposing that the Regulations should allow employers to provide pay and non-pay benefits based on length of service or experience, which might otherwise amount to unlawful discrimination, if they can justify doing so.
Unlike age discrimination in recruitment, there is a widespread consensus in favour of determining pay and benefits on the basis of length of service or experience, including practices such as additional annual leave, long service awards, trainee pay, incremental pay and redundancy pay. The consultation paper points out: "Employers and employees alike want to retain such practices. Unions and lobby organisations also generally support them. The Directive itself provides for the possibility of justifying the fixing of minimum conditions of age, professional experience or seniority in service for access to employment or to certain advantages linked to employment."
This leads the government to set out the following as its proposed approach: "The benefits of many seniority provisions are widely accepted. The Directive clearly envisages that where such arrangements amount to direct discrimination they can be justifiable. Therefore, we propose to make specific provision for employers to be able to justify seniority conditions by reference to the aims set out in para. 3.15 - specifically, encouraging and rewarding loyalty.
"Seniority practices which are indirectly discriminatory will also be able to be justified . . ."
There is a lack of clarity as to what is proposed here. As the consultation document recognises, seniority provisions pose indirect rather than direct discrimination issues. It is thus unclear, at least in the absence of further elaboration, how the proposal to allow employers to justify seniority practices as direct discrimination would be of relevance.
The problem is not addressed in respect of indirect discrimination either. All that is proposed is that employers will be able to justify the practice. But this is the case with any indirectly discriminatory policy, and there is no special provision as yet proposed to take account of the consensus in favour of service-based practices. That having been said, it is certainly arguable that employers should have to examine on a case-by-case basis the use - and defendability - of basing pay and non-pay benefits on seniority.
1 Equality and diversity: age matters. Age consultation 2003. Available from the DTI Publications Orderline, 0870 1502 500 or www.dti.gov.uk/er/equality/age.htm.