Age Regulations 2006: Part 3 - Retirement and dismissal

The third and final part of our guide to the Employment Equality (Age) Regulations 2006 focuses on the new rules relating to retirement on grounds of age, and the changes to be made to unfair dismissal and redundancy payments legislation.

This is the part of the Regulations that can be expected to generate the most case law.

Applicants and employees

7. - (2) It is unlawful for an employer, in relation to a person whom he employs at an establishment in Great Britain, to discriminate against that person -

…

(d) by dismissing him, or subjecting him to any other detriment.

The general rule is that a dismissal that is directly or indirectly discriminatory on grounds of age will be prima facie unlawful from 1 October 2006. There is a major exception for dismissals by reason of retirement at or after the default retirement age of 65. This is discussed below.

Many claims, however, can be expected from employees dismissed at an age under either the default retirement age or their employer's own retirement age, but who consider that age played a part in their dismissal. If there is prima facie evidence suggesting that the dismissal was tainted by considerations of age, employers will be faced with either proving that age played no part in the dismissal or that dismissal for an age-related reason was objectively justified.

The stakes will be high. There is no statutory upper limit on compensation for age discrimination. Successful claimants will not only be eligible for damages for injury to feelings, they will also be awarded compensation based on their loss of earnings flowing from the dismissal. Like any other award of compensation, this will be subject to a duty to mitigate loss (ie earnings from new employment that the claimant obtained, or could reasonably be expected to obtain, will be deducted from the assessment of future loss). However, in the case of someone dismissed from a well-paid position in their late 40s or early 50s, unless and until the age Regulations themselves produce a major social change, the chances of their obtaining new and equally well-paid employment will be slim. Future loss of earnings, therefore, could be extremely high. Moreover, in almost all cases where dismissal is found to be age discriminatory, it is likely to be held to be an unfair dismissal as well.

Exception for retirement

30. - (1) This regulation applies in relation to an employee within the meaning of section 230(1) of the 1996 [Employment Rights] Act, a person in Crown employment, a relevant member of the House of Commons staff, and a relevant member of the House of Lords staff.

(2) Nothing in Part 2 or 3 shall render unlawful the dismissal of a person to whom this regulation applies at or over the age of 65 where the reason for the dismissal is retirement.

(3) For the purposes of this regulation, whether or not the reason for a dismissal is retirement shall be determined in accordance with sections 98ZA to 98ZF of the 1996 Act.

The Regulations introduce the concept of a default retirement age of 65. Dismissal of an employee for the reason of "retirement" will not constitute age discrimination if employers retire employees at or over the age of 65. Whether or not the reason for dismissal is retirement will be determined in accordance with the amended s.98Z of the Employment Rights Act, discussed below. As will be seen, this is a deeming provision, and its effect is that if the employer has failed to comply with the new procedural rules, it will not be able to rely on "retirement" as the reason for dismissal, either for unfair dismissal purposes or for age discrimination purposes. In the latter case, that will leave the employer vulnerable to a finding of age discrimination, since age will have played a part in the dismissal, and the retirement exception will not be available. The employer will face the uphill struggle of justifying the age-related dismissal.

Even if no age discrimination claim can be made in respect of a retirement dismissal in accordance with the default retirement age, that dismissal can still be unfair if proper procedures are not followed. The selection of an employee for retirement - or not allowing the employee to work on past a normal retirement age - can also be challenged as discriminatory on other grounds. The exclusion applies only to age discrimination claims. If, for example, a disabled employee's request to work beyond normal retirement is rejected, and this is for a reason related to their disability, they may be able to bring a successful claim under the Disability Discrimination Act.

Employees only

Note that the default retirement age exception applies only to an "employee" (and a person in Crown employment or a parliamentary staff member).

The exception does not apply to all the categories of "worker" covered by the Regulations. In particular, it does not apply to those employed as contractors under a contract for services. It does not apply to "partners" in a partnership, such as in a law firm or an accountancy practice. It does not apply to office-holders, such as employment tribunal members or judges.

In any of these cases, any mandatory retirement age - including retirement at age 65 - will have to be objectively justified, ie it will have to be shown that operating a retirement age represented "a proportionate means of achieving a legitimate aim". We discussed what this might entail in general terms in the first part of our guide. Employers wanting to justify mandatory retirement for non-employee groups may seek to rely on some of the justifications put forward by the government for the national default retirement age, which are set out below.

This will be a matter of evidence in the particular case. Some major London firms of solicitors, for example, have a normal retirement age of 50 for partners. Will they be able to justify this on grounds that it is needed for workforce planning? In this context, attention should be drawn to Schedule 5 of the Regulations. This provides that a term of a contract is legally void insofar as it provides for the doing of an act that is unlawful by virtue of the Regulations. Therefore, it will not be open to a law firm merely to rely on the retirement clauses in a partnership deed in order to enforce, or justify, a mandatory retirement age for partners.

If partnerships seek to continue to enforce a mandatory retirement age, it is inevitable that there will be legal challenges. In the US, the Equal Employment Opportunity Commission (EEOC) last year brought proceedings against Sidley Austin Brown & Wood, a large Chicago-based international law firm, alleging that it violated the US Age Discrimination in Employment Act when it selected partners for dismissal on account of their age or forced them to retire.

Default retirement age

Mandatory retirement is directly age discriminatory, and therefore the default retirement age will have to fall within the exceptions allowed by the Framework Employment Directive in order to be lawful. If challenged, this means that the government will have to show that the blanket exclusion from age discrimination rights is "objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and [that] the means of achieving that aim are appropriate and necessary".

In its notes on the Regulations, the Department of Trade and Industry (DTI) seemingly tries to anticipate a legal challenge to the default retirement age. It says: "This exception for retirement ages of 65 and over is considered to be within the exemption contained in art. 6(1) of the Directive as being justified by reference to a legitimate aim of social policy in accordance with the test in R v Secretary of State for Employment ex parte Seymour-Smith & Perez. The legitimate aim of social policy has two main elements - they are to meet the concerns of employers in relation to:

(a) workforce planning; and

(b) avoiding an adverse impact on the provision of occupational pensions and other work-related benefits."

As far as occupational pensions are concerned, the notes say: "The need to avoid an adverse impact on the provision of occupational pensions and other work-related benefits stems from concern that if all employers only had the option of individually objectively justified retirement ages, this could risk adverse consequences for occupational pension schemes and other work-related benefits. Some employers would instead simply reduce or remove benefits to offset the cost of providing them to all employees, including those over 65."

Most of the explanation relates to workforce planning. According to the DTI: "What is meant by workforce planning in this context can be summarised as including the following:

workforce planning means that a retirement age is a target age against which employers can plan their work and employees can plan their careers and retirement;

for employers, being able to rely on a set retirement age allows the recruitment, training and development of employees, and the planning of wage structures and occupational pensions, against a known attrition profile. This is indirectly recognised in the Directive itself, where art. 6(1)(c) lists as a justifiable difference of treatment: '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'. While other events may give rise to employees leaving the workforce, the age of retirement is nevertheless a significant element in employers' workforce planning;

for both employers and employees, being able to rely on a set retirement age avoids the blocking of jobs (and often the more senior jobs) from younger workers; [and]

for employees, knowing there is a set retirement age means they cannot be certain that they will be in work after that time. This will encourage employees to save now and make provision for their retirement, and avoid them putting off career and pension planning on the assumption that they will be able to continue working indefinitely. This ties in with the government's policy of encouraging employees to save more for retirement."

These "aims" are doubtless "legitimate" for the purposes of the Directive. The real question is whether the means of achieving the aims - the total exclusion of all those aged 65 and over from the right not to be forced out of their job because of their age, whatever their personal circumstances and whatever the business context in which they work, is proportionate; especially in light of the judgment of the European Court of Justice in Mangold v Helm (see Age Regulations 2006: Part 1 - Key general principles), which would require convincing empirical evidence to justify the DTI's assertions and that evidence continues to be lacking.

This is apparent from the DTI's own Regulatory Impact Assessments (RIAs) of the age discrimination Regulations. These make a number of points that limit, or even contradict, the justification for a default retirement age set out in the DTI's notes on the Regulations. For example, it is reported that "a majority of the UK workforce retire before they reach the normal retirement age in their employment", thereby diminishing the force of the argument relating to an "attrition profile".

As far as the job "blocking" argument is concerned, "at the level of the economy, job blocking is less likely to be a problem as there will also be a decrease in the proportion of 16- to 49-year-olds who will be looking to take on these senior posts."

On the pension planning point, unlike in its notes, the DTI admits in the RIA that there are two sides to the argument: "Working for longer means running down retirement savings later, which would have a positive impact on the overall stock of savings. However, knowing that there is no longer a normal retirement age, or one that is higher than previously, may act as a disincentive to savings, as workers would have more flexibility. The net impact is therefore uncertain."

The default retirement age is to be reviewed in 2011. Before then, the European Court of Justice will be ruling on the validity of comparable provisions in the Spanish law implementing the age strand of the Framework Employment Directive. The case mentioned in Age Regulations 2006: Part 1 - Key general principles has now been joined by a second reference on similar lines from a Madrid court, García v Confederación Hidrográfica del Duero.

Retirement ages under 65

Employers wishing to operate mandatory retirement ages under 65 for their undertaking as a whole, or for particular groups, will have to objectively justify this if challenged on grounds that it is age discriminatory.

In this context, the RIA indicates that evidence to justify this on grounds that the performance of older workers deteriorates will be hard to find. Acknowledging that some workers are currently being forced to retire "when they are still capable and willing to do a good job", the RIA suggests that "this could be because employers are negatively stereotyping older workers as incompetent, or as having deteriorating competence. In fact, there is no evidence that workers' productivity does generally decline with age, at least not before the age of 70." The DTI adds: "The evidence on the productivity of older workers shows that they are no less productive than younger workers, except in a limited range of jobs. This is because their better experience, interpersonal skills and motivation offset their loss of speed, strength and memory."

It is hard to think of any case where an employer is likely to be able to justify a retirement age under 65 for all posts. The circumstances that might be convincing in respect of a manual worker's position are unlikely to be applicable in the same way to a clerical post or a managerial job.

Retirement after age 65

In principle, the default retirement age of 65 is not a one-off window of opportunity for employers. If an employee is permitted to continue to work after reaching the age of 65 and is subsequently dismissed, they will not be able to claim that the dismissal is age discriminatory provided that the reason for dismissal is "retirement". The DTI consultation said "keeping employees on past the national default retirement age does not prejudice employers' rights to retire employees at or after the retirement age. If employers do not retire employees at the retirement age, they can still do so later if necessary."

As a matter of practice, however, this might present some evidential problems for an employer where the employee is being "retired" at an age other than the normal retiring age.

Unfair dismissal and retirement

Clause 23 of Schedule 8 inserts the following after section 98 of the Employment Rights Act 1996:

Retirement

No normal retirement age: dismissal before 65

98ZA. - (1) This section applies to the dismissal of an employee if -

(a) the employee has no normal retirement age, and

(b) the operative date of termination falls before the date when the employee reaches the age of 65.

(2) Retirement of the employee shall not be taken to be the reason (or a reason) for the dismissal.

No normal retirement age: dismissal at or after 65

98ZB. - (1) This section applies to the dismissal of an employee if -

(a) the employee has no normal retirement age, and

(b) the operative date of termination falls on or after the date when the employee reaches the age of 65.

(2) In a case where -

(a) the employer has notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, and

(b) the contract of employment terminates on the intended date of retirement,

retirement of the employee shall be taken to be the only reason for the dismissal by the employer and any other reason shall be disregarded.

(3) In a case where -

(a) the employer has notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, but

(b) the contract of employment terminates before the intended date of retirement,

retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

(4) In a case where -

(a) the employer has not notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, and

(b) there is an intended date of retirement in relation to the dismissal, but

retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

(5) In all other cases where the employer has not notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, particular regard shall be had to the matters in section 98ZF when determining the reason (or principal reason) for dismissal.

Normal retirement age: dismissal before retirement age

98ZC. - (1) This section applies to the dismissal of an employee if -

(a) the employee has a normal retirement age, and

(b) the operative date of termination falls before the date when the employee reaches the normal retirement age.

(2) Retirement of the employee shall not be taken to be the reason (or a reason) for the dismissal.

Normal retirement age 65 or higher: dismissal at or after retirement age

98ZD. - (1) This section applies to the dismissal of an employee if -

(a) the employee has a normal retirement age,

(b) the normal retirement age is 65 or higher, and

(2) In a case where -

(a) the employer has notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, and

(b) the contract of employment terminates on the intended date of retirement,

retirement of the employee shall be taken to be the only reason for the dismissal by the employer and any other reason shall be disregarded.

(3) In a case where -

(a) the employer has notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, but

(b) the contract of employment terminates before the intended date of retirement,

retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

(4) In a case where -

(a) the employer has not notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, and

(b) there is an intended date of retirement in relation to the dismissal, but

retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

Normal retirement age below 65: dismissal at or after retirement age

98ZE. - (1) This section applies to the dismissal of an employee if -

(a) the employee has a normal retirement age,

(b) the normal retirement age is below 65, and

(2) If it is unlawful discrimination under the 2006 Regulations for the employee to have that normal retirement age, retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

(3) Subsections (4) to (7) apply if it is not unlawful discrimination under the 2006 Regulations for the employee to have that normal retirement age.

(4) In a case where -

(a) the employer has notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, and

(b) the contract of employment terminates on the intended date of retirement,

retirement of the employee shall be taken to be the only reason for dismissal by the employer and any other reason shall be disregarded.

(5) In a case where -

(a) the employer has notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, but

(b) the contract of employment terminates before the intended date of retirement,

retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

(6) In a case where -

(a) the employer has not notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, and

(b) there is an intended date of retirement in relation to the dismissal, but

retirement of the employee shall not be taken to be the reason (or a reason) for dismissal.

(7) In all other cases where the employer has not notified the employee in accordance with paragraph 2 of Schedule 6 to the 2006 Regulations, particular regard shall be had to the matters in section 98ZF when determining the reason (or principal reason) for dismissal.

Reason for dismissal: particular matters

98ZF. - (1) These are the matters to which particular regard is to be had in accordance with section 98ZB(5), 98ZD(5) or 98ZE(7) -

(a) whether or not the employer has notified the employee in accordance with paragraph 4 of Schedule 6 to the 2006 Regulations;

(b) if the employer has notified the employee in accordance with that paragraph, how long before the notified retirement date the notification was given;

(c) whether or not the employer has followed, or sought to follow, the procedures in paragraph 7 of Schedule 6 to the 2006 Regulations.

(2) In subsection (1)(b) "notified retirement date" means the date notified to the employee in accordance with paragraph 4 of Schedule 6 to the 2006 Regulations as the date on which the employer intends to retire the employee.

Retirement dismissals: fairness

98ZG. - (1) This section applies if the reason (or principal reason) for a dismissal is retirement of the employee.

(2) The employee shall be regarded as unfairly dismissed if, and only if, there has been a failure on the part of the employer to comply with an obligation imposed on him by any of the following provisions of Schedule 6 to the 2006 Regulations -

(a) paragraph 4 (notification of retirement, if not already given under paragraph 2),

(b) paragraphs 6 and 7 (duty to consider employee's request not to be retired),

Interpretation

98ZH. - In sections 98ZA to 98ZG -

"2006 Regulations" means the Employment Equality (Age) Regulations 2006;

"intended date of retirement" means the date which, by virtue of paragraph 1(2) of Schedule 6 to the 2006 Regulations, is the intended date of retirement in relation to a particular dismissal;

"normal retirement age", in relation to an employee, means the age at which employees in the employer's undertaking who hold, or have held, the same kind of position as the employee are normally required to retire;

"operative date of termination" means -

(a) where the employer terminates the employee's contract of employment by notice, the date on which the notice expires, or

(b) where the employer terminates the contract of employment without notice, the date on which the termination takes effect.

The Regulations amend the Employment Rights Act to provide for an additional potentially fair reason for dismissal: retirement. As can be seen, these provisions are extremely complicated. Whether or not the reason for dismissal is retirement is crucial both for unfair dismissal and for age discrimination purposes. If the reason is found not to be retirement, the dismissal can be both age discriminatory and unfair.

If the reason for dismissal is retirement, an employer can still be liable for unfair dismissal compensation and for compensation for failure to comply with the duty to consider procedure.

From an employer's standpoint, the optimum position is that (a) the employee's retirement date will be at age 65 or later; (b) the employer will have given the employee written notice of the intended retirement date between six and 12 months in advance; (c) the employer will have informed the employee that they have a right to make a request to work beyond the retirement date; and (d) the employer will have held a meeting with the employee to consider the request and considered any appeal against that decision. If those conditions are satisfied, the retired employee cannot claim age discrimination, unfair dismissal or breach of the duty to consider procedure. The complications arise where one or more of those conditions are not satisfied.

Where dismissal is deemed to be by reason of retirement

The Regulations set out a series of circumstances in which retirement is deemed to be the only reason for dismissal. These are linked to giving appropriate notice of the "intended date" of retirement to the employee under the new "duty to consider" procedure discussed below. Retirement will be taken to be the only reason for dismissal where:

the employee has no normal retirement age, the employer gives the required notice, and the dismissal takes effect on or after the employee becoming 65 and on the intended date of retirement;

the employee has a normal retirement age which is over the age of 65, the employer gives the required notice, and the dismissal takes effect on or after the employee has reached the normal retirement age and on the intended date of retirement; or

the employee has a normal retirement age which is under the age of 65, that retirement age does not amount to unlawful age discrimination, the employer gives the required notice, and the dismissal takes effect on or after the employee has reached the normal retirement age and on the intended date of retirement.

In all three cases, therefore, notice of retirement must have been given and the dismissal must take effect on the intended date of retirement.

Where dismissal is deemed not to be by reason of retirement

Conversely, the Regulations set out a series of circumstances in which the employer will not be able to claim that retirement was the reason for dismissal. These are:

where the employee has no normal retirement age, but the dismissal takes effect before the employee reaches the default retirement age of 65;

where the employee has no normal retirement age, the employer gives the required notice of retirement, but the dismissal takes effect before the intended date of retirement notified to the employee;

where the employee has a normal retirement age, but the dismissal takes effect before that age;

where the employee has a normal retirement age over the age of 65, the employer gives the required notice, but the dismissal takes effect before the intended date of retirement notified to the employee;

where the employer fails to comply properly with the notification requirements, but does notify the employee of an intended date of retirement, but the dismissal takes effect before the intended date of retirement;

where the employer has a normal retirement age under the age of 65, the dismissal takes effect after that age, but the retirement age is unlawful because it is not objectively justified; or

where the employer has a normal retirement age under the age of 65, that retirement age is objectively justified, the employer gives the required notice, but the dismissal takes effect before the intended date of retirement notified to the employee.

In all these cases, if the employer asserts that the reason for dismissal was retirement, it will be held not to have shown a valid reason for dismissal and the dismissal will be automatically unfair.

Where reason for dismissal will be determined by tribunal

Finally, the Regulations also provide for circumstances in which it will be left to the employment tribunal to determine whether or not the reason for dismissal is retirement. These are:

where the employer has not complied with the notification rules; or

where the employer has complied with the notification rules, but the dismissal takes effect after the intended date of retirement.

In the former case, the Regulations provide that the tribunal, in deciding the reason for dismissal, must take into account whether the employee was notified of the intended retirement date, when that notification was given, and whether the employer followed the duty to consider procedure. In the latter case, the tribunal may, but does not have to, take these matters into account.

Fairness of retirement dismissal

Where retirement is found to be the principal reason for dismissal, s.98ZG provides that the test of whether the dismissal is unfair is procedural. If the employer has complied with the duty to consider rules relating to notification, a meeting and an appeal in respect of the employee's request, then the dismissal will be deemed to be fair. If the employer has failed to comply with any of these duties, then the dismissal will be unfair.

There is an initially confusing overlap between s.98ZF and s.98ZG. The latter provision appears to render a dismissal by reason of retirement unfair if there is a failure to follow the duty to consider procedure, whereas the former says this failure to follow the procedure should be taken into account in determining the reason for dismissal. Presumably, the function of s.98ZF in this context relates more to age discrimination claims than to unfair dismissal. As noted, if the tribunal holds that retirement is not the reason for dismissal, the exception from the age discrimination Regulations for dismissals at or after the default retirement age no longer applies.

Other unfair dismissal changes

A number of other changes to unfair dismissal law are made to accord with the requirements of implementing age discrimination legislation.

The most important of these is that the upper age limit of 65 on bringing unfair dismissal claims will be abolished as of 1 October 2006. This overtakes, therefore, the recent judgment of the House of Lords in Rutherford v Secretary of State for Trade and Industry (No.2)[2006] IRLR 551 that the upper age limit is not unlawful on sex discrimination grounds. As discussed, however, it will only be in limited circumstances that it will be possible to bring an unfair dismissal claim where the reason for dismissal is retirement.

As a consequence of removing the upper age limit, the tapering of the basic award of unfair dismissal compensation after the age of 64 has been repealed.

Duty to consider working beyond retirement

Schedule 6

Interpretation

1. - (1) In this Schedule -

"dismissal" means a dismissal within the meaning of section 95 of the 1996 Act¹;

"employee" means a person to whom regulation 30 (exception for retirement) applies and references to "employer" shall be construed accordingly;

"intended date of retirement" has the meaning given by sub-paragraph (2);

"operative date of termination" means (subject to paragraph 10(3)) -

(a) where the employer terminates the employee's contract of employment by notice, the date on which the notice expires, or

(b) where the employer terminates the contract of employment without notice, the date on which the termination takes effect;

"request" means a request made under paragraph 5; and

"worker" has the same meaning as in section 230(3) of the 1996 Act.

(2) In this Schedule "intended date of retirement" means -

(a) where the employer notifies a date in accordance with paragraph 2, that date;

(b) where the employer notifies a date in accordance with paragraph 4 and either no request is made or a request is made after the notification, that date;

(i) the employer has not notified a date in accordance with paragraph 2,

(ii) a request is made before the employer has notified a date in accordance with paragraph 4 (including where no notification in accordance with that paragraph is given),

(iii) the request is made by an employee who has reasonable grounds for believing that the employer intends to retire him on a certain date, and,

(iv) the request identifies that date,

the date so identified;

(d) in a case to which paragraph 3 has applied, any earlier or later date that has superseded the date mentioned in paragraph (a), (b) or (c) as the intended date of retirement by virtue of paragraph 3(3);

(e) in a case to which paragraph 10 has applied, the later date that has superseded the date mentioned in paragraph (a), (b) or (c) as the intended date of retirement by virtue of paragraph 10(3)(b).

Duty of employer to inform employee

2. - An employer who intends to retire an employee has a duty to notify the employee in writing of -

(a) the employee's right to make a request; and

(b) the date on which he intends the employee to retire,

not more than one year and not less than six months before that date.

(1) The duty to notify applies regardless of -

(a) whether there is any term in the employee's contract of employment indicating when his retirement is expected to take place,

(b) any other notification of, or information about, the employee's date of retirement given to him by the employer at any time, and

3. - This paragraph applies if the employer has notified the employee in accordance with paragraph 2 or 4 or the employee has made a request before being notified in accordance with paragraph 4 (including where no notification in accordance with that paragraph is given), and -

(a) the employer and employee agree, in accordance with paragraph 7(3)(b) or 8(5)(b), that the dismissal is to take effect on a date later than the relevant date;

(b) the employer gives notice to the employee, in accordance with paragraph 7(7)(a)(ii) or, where the employee appeals, paragraph 8(9)(a)(ii), that the dismissal is to take effect on a date later than the relevant date; or

(1) This Schedule does not require the employer to give the employee a further notification in respect of dismissal taking effect on a date -

(a) agreed as mentioned in sub-paragraph (1)(a) or notified as mentioned in sub-paragraph (1)(b) that is later than the relevant date and falls six months or less after the relevant date; or

(b) agreed as mentioned in sub-paragraph (1)(c) that is earlier than the relevant date.

(2) If -

(a) a date later than the relevant date is agreed as mentioned in sub-paragraph (1)(a) or notified as mentioned in sub-paragraph (1)(b) and falls six months or less after the relevant date, or

(b) a date earlier than the relevant date is agreed as mentioned in sub-paragraph (1)(c),

the earlier or later date shall supersede the relevant date as the intended date of retirement.

(3) In this paragraph, "the relevant date" means the date that is defined as the intended date of retirement in paragraph (a), (b) or (c) of paragraph 1(2).

Continuing duty to inform employee

4. - Where the employer has failed to comply with paragraph 2, he has a continuing duty to notify the employee in writing as described in paragraph 2(1) until the fourteenth day before the operative date of termination.

Statutory right to request not to retire

5. - An employee may make a request to his employer not to retire on the intended date of retirement.

(1) In his request the employee must propose that his employment should continue, following the intended date of retirement -

(a) indefinitely,

(b) for a stated period, or

and, if the request is made at a time when it is no longer possible for the employer to notify in accordance with paragraph 2 and the employer has not yet notified in accordance with paragraph 4, must identify the date on which he believes that the employer intends to retire him.

(2) A request must be in writing and state that it is made under this paragraph.

(3) An employee may only make one request under this paragraph in relation to any one intended date of retirement and may not make a request in relation to a date that supersedes a different date as the intended date of retirement by virtue of paragraph 3(3) or 10(3)(b).

(4) A request is only a request made under this paragraph if it is made -

(a) in a case where the employer has complied with paragraph 2, more than three months but not more than six months before the intended date of retirement, or

(b) in a case where the employer has not complied with paragraph 2, before, but not more than six months before, the intended date of retirement.

An employer's duty to consider a request

6. - An employer to whom a request is made is under a duty to consider the request in accordance with paragraphs 7 to 9.

Meeting to consider request

7. - An employer having a duty under paragraph 6 to consider a request shall hold a meeting to discuss the request with the employee within a reasonable period after receiving it.

(1) The employer and employee must take all reasonable steps to attend the meeting.

(2) The duty to hold a meeting does not apply if, before the end of the period that is reasonable -

(a) the employer and employee agree that the employee's employment will continue indefinitely and the employer gives notice to the employee to that effect; or

(b) the employer and employee agree that the employee's employment will continue for an agreed period and the employer gives notice to the employee of the length of that period or of the date on which it will end.

(3) The duty to hold a meeting does not apply if -

(a) it is not practicable to hold a meeting within the period that is reasonable, and

(b) the employer complies with sub-paragraph (5).

(4) Where sub-paragraph (4)(a) applies, the employer may consider the request without holding a meeting provided he considers any representations made by the employee.

(5) The employer shall give the employee notice of his decision on the request as soon as is reasonably practicable after the date of the meeting or, if sub-paragraphs (4) and (5) apply, his consideration of the request.

(6) A notice given under sub-paragraph (6) shall -

(a) where the decision is to accept the request, state that it is accepted and -

(i) where the decision is that the employee's employment will continue indefinitely, state that fact, or

(ii) where the decision is that the employee's employment will continue for a further period, state that fact and specify the length of the period or the date on which it will end,

(b) where the decision is to refuse the request, confirm that the employer wishes to retire the employee and the date on which the dismissal is to take effect,

and, in the case of a notice falling within paragraph (b), and of a notice referred to in paragraph (a) that specifies a period shorter than the period proposed by the employee in the request, shall inform the employee of his right to appeal.

(7) All notices given under this paragraph shall be in writing and be dated.

Appeals

8. - An employee is entitled to appeal against -

(a) a decision of his employer to refuse the request, or

(b) a decision of his employer to accept the request where the notice given under paragraph 7(6) states as mentioned in paragraph 7(7)(a)(ii) and specifies a period shorter than the period proposed by the employee in the request,

by giving notice in accordance with sub-paragraph (2) as soon as is reasonably practicable after the date of the notice given under paragraph 7(6).

(1) A notice of appeal under sub-paragraph (1) shall set out the grounds of appeal.

(2) The employer shall hold a meeting with the employee to discuss an appeal within a reasonable period after the date of the notice of appeal.

(3) The employer and employee must take all reasonable steps to attend the meeting.

(4) The duty to hold a meeting does not apply if, before the end of the period that is reasonable -

(a) the employer and employee agree that the employee's employment will continue indefinitely and the employer gives notice to the employee to that effect; or

(5) The duty to hold a meeting does not apply if -

(a) it is not practicable to hold a meeting within the period that is reasonable, and

(b) the employer complies with sub-paragraph (7).

(6) Where sub-paragraph (6)(a) applies, the employer may consider the appeal without holding a meeting provided he considers any representations made by the employee.

(7) The employer shall give the employee notice of his decision on the appeal as soon as is reasonably practicable after the date of the meeting or, if sub-paragraphs (6) and (7) apply, his consideration of the appeal.

(8) A notice under sub-paragraph (8) shall -

(a) where the decision is to accept the appeal, state that it is accepted and -

(i) where the decision is that the employee's employment will continue indefinitely, state that fact, or

(ii) where the decision is that the employee's employment will continue for a further period, state that fact and specify the length of the period or the date on which it will end,

(b) where the decision is to refuse the appeal, confirm that the employer wishes to retire the employee and the date on which the dismissal is to take effect.

(9) All notices given under this paragraph shall be in writing and be dated.

Right to be accompanied

9. - This paragraph applies where -

(a) a meeting is held under paragraph 7 or 8, and

(b) the employee reasonably requests to be accompanied at the meeting.

(1) Where this paragraph applies the employer must permit the employee to be accompanied at the meeting by one companion who -

(a) is chosen by the employee;

(b) is a worker employed by the same employer as the employee;

(d) is to be permitted to confer with the employee during the meeting.

(2) If -

(a) an employee has a right under this paragraph to be accompanied at a meeting,

(b) his chosen companion will not be available at the time proposed for the meeting by the employer, and

the employer must postpone the meeting to the time proposed by the employee.

(3) An alternative time must -

(a) be convenient for employer, employee and companion, and

(b) fall before the end of the period of seven days beginning with the first day after the day proposed by the employer.

(4) An employer shall permit a worker to take time off during working hours for the purpose of accompanying an employee in accordance with a request under sub-paragraph (1)(b).

(5) Sections 168(3) and (4), 169 and 171 to 173 of the Trade Union and Labour Relations (Consolidation) Act 1992² (time off for carrying out trade union duties) shall apply in relation to sub-paragraph (5) above as they apply in relation to section 168(1) of that Act.

Dismissal before request considered

10. - This paragraph applies where -

(a) by virtue of paragraph 6 an employer is under a duty to consider a request;

(b) the employer dismisses the employee;

(d) the operative date of termination would, but for sub-paragraph (3), fall on or before the day on which the employer gives notice in accordance with paragraph 7(6).

(1) Subject to paragraph (4), the contract of employment shall continue in force for all purposes, including the purpose of determining for any purpose the period for which the employee has been continuously employed, until the day following that on which the notice under paragraph 7(6) is given.

(2) The day following the day on which that notice is given shall supersede -

(a) the date mentioned in sub-paragraph (1)(d) as the operative date of termination; and

(b) the date defined as the intended date of retirement in paragraph (a), (b) or (c) of paragraph 1(2) as the intended date of retirement.

(3) Any continuation of the contract of employment under sub-paragraph (2) shall be disregarded when determining the operative date of termination for the purposes of sections 98ZA to 98ZH of the 1996 Act.

Complaint to employment tribunal: failure to comply with paragraph 2

11. - An employee may present a complaint to an employment tribunal that his employer has failed to comply with the duty to notify him in paragraph 2.

(1) A tribunal shall not consider a complaint under this paragraph unless the complaint is presented -

(a) before the end of the period of three months beginning with -

(i) the last day permitted to the employer by paragraph 2 for complying with the duty to notify, or

(ii) if the employee did not then know the date that would be the intended date of retirement, the first day on which he knew or should have known that date; or

(b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three months.

(2) Where a tribunal finds that a complaint under this paragraph is well-founded it shall order the employer to pay compensation to the employee of such amount, not exceeding eight weeks' pay, as the tribunal considers just and equitable in all the circumstances.

The Regulations set out a new procedure that will have to be used for any mandatory retirement dismissal - the "duty to consider" procedure - in order for the dismissal to be considered to be on the grounds of retirement. Under this procedure, an employer that wishes to retire an employee has a duty to notify the employee in writing not more than 12 months, and not less than six months, before the intended date of retirement. At the same time, the employee must be told that they have a right to request to work beyond the intended date of retirement.

If the employer fails to notify the employee six months in advance, it will have an ongoing duty to do so, which lasts up to two weeks before the intended retirement date. Failure to notify up to two weeks before the intended retirement date will make the dismissal automatically unfair.

The express notification must be given regardless of whether the relevant information is laid down in contractual documents or other documents. The employer cannot rely on a procedure set out in an employee handbook, for example, as a substitute for expressly notifying the employee of their right when giving notice of intended retirement.

The duty to consider is procedural, not substantive. The minimal requirement in the draft Regulations that an employee could complain if the employer failed to consider the request "in good faith" was removed from the final Regulations. There is no requirement on the employer to give a reason for refusing a request, and an employee has no express right to challenge the validity of the employer's reason in a tribunal. Acas recommends that in the notification employers should tell the employee how the retirement process will be managed. "Remind them of your obligation to give consideration to any request to work after the normal retirement age and in order not to raise the expectations of the employee, explain that you are entitled to refuse the request."

Nevertheless, it is arguable that the duty to consider procedure is legally a statutory minimum and does not override any contractual rights, in the same way that the statutory grievance procedure is subject to more favourable contractual terms. Unless precluded by the procedure itself, an employee may be able to bring an internal grievance concerning the decision to require them to retire. If the employer's grievance procedure requires reasons to be given, failure to do so could be regarded as a breach of contract, and an egregious breach could give rise to a claim of constructive dismissal.

The employee will trigger the procedure by making a written request to the employer. Where the employer has complied with the notice requirement, the employee's request must be made more than three months, but not more than six months, before the intended date of retirement. The request must specify whether the employee wants their employment to continue indefinitely, for a stated period, or until a stated date.

The procedure

The Regulations lay down a fairly detailed procedure that must be followed to consider a request. This is broadly patterned on the procedure for the right to request flexible working.

The employer must hold a meeting with the employee within a "reasonable" period, although the Regulations say nothing about the discussion that should take place at the meeting. After this, the employer must then inform the employee by written notice whether or not the request has been accepted. If it is not, the notice must confirm that the employer wishes to retire the employee and confirm the date on which the dismissal is to take effect.

The employee has a right of appeal from the employer's decision, and the procedure to be followed is the same as that to be followed when considering an initial request. The employee also has a right to be accompanied by a fellow employee at the meeting and at an appeal.

If the employer agrees to the employee's request to continue working and the date of intended retirement is postponed, the duty to consider procedure must be followed again before a new retirement date unless the new date of intended retirement is six months or less from the original date.

Remedy

The new procedural right is underpinned by an award of a maximum of eight weeks' pay, with a week's pay defined in accordance with the usual statutory upper limit, now £290. Therefore, the maximum awardable for a failure to notify the employee of his or her right is £2,320. In itself, this is unlikely to have much impact. The real deterrent for employers will lie in the potential consequence of such a failure on unfair dismissal claims: failure to notify the employee of the intended date of retirement and of their right to request to stay may result in a finding of unfair dismissal.

Duty to consider: transitional provisions

12. - In paragraphs 2 to 6 -

(a) "the expiry date" means the date on which notice of dismissal given by an employer expires; and

(b) words and expressions shall have the same meanings as they do in Schedule 6.

13. - This paragraph applies in a case where -

(a) an employer has given notice of dismissal to the employee before the commencement date of -

(i) at least the period required by the contract of employment; or

(ii) where the period required by the contract exceeds four weeks, at least four weeks;

(b) the expiry date falls before 1 April 2007; and

(c) the employer has made the employee aware, before the commencement date, that the employer considers that the employee is being retired on the expiry date.

(1) Where this paragraph applies and the employer, on or as soon as is practicable after the commencement date, notifies the employee in writing of the employee's right to make a request under paragraph 5 of Schedule 6 -

(a) the employer shall be treated as complying with the duty in paragraph 2 of Schedule 6;

(b) a request shall be treated as being a request made under paragraph 5 of Schedule 6 provided it -

(i) is made after the employer notified the employee of his right to make a request;

(ii) satisfies the requirements of sub-paragraphs (2) and (3) of paragraph 5 of Schedule 6; and

(iii) is made -

(aa) where practicable, at least four weeks before the expiry date; or

(bb) where that is not practicable, as soon as reasonably practicable (whether before or after the expiry date) after the employer notified the employee of his right to make a request, but not more than four weeks after the expiry date.

(2) Where this paragraph applies and the employer does not, on or as soon as is practicable after the commencement date, notify the employee in writing of the employee's right to make a request under paragraph 5 of Schedule 6 -

(a) the duty to notify in accordance with paragraph 2 of Schedule 6 does not apply;

(b) the duty to notify in accordance with paragraph 4 of Schedule 6 applies as if -

(i) the employer had failed to notify in accordance with paragraph 2 of that Schedule; and

(ii) the duty was one to notify at any time before the expiry date;

(c) a request shall be treated as being a request made under paragraph 5 of Schedule 6 if it satisfies the requirements of sub-paragraphs (2) and (3) of that paragraph and is made -

(i) before any notification given in accordance with paragraph 4 of Schedule 6; or

(ii) after such notification and -

(aa) where practicable, at least four weeks before the expiry date; or

14. - This paragraph applies in a case where the employer has given notice of dismissal to the employee before the commencement date and -

(a) the expiry date falls before 1 April 2007, but

(b) the period of notice given is shorter than the minimum period of notice required by paragraph 2(1)(a) or the employer has not complied with paragraph 2(1)(c).

(1) Where this paragraph applies -

(a) the duty to notify in accordance with paragraph 2 of Schedule 6 does not apply;

(b) the duty to notify in accordance with paragraph 4 of Schedule 6 applies as if -

(i) the employer had failed to notify in accordance with paragraph 2 of that Schedule; and

(ii) the duty was one to notify at any time before the expiry date;

(c) a request shall be treated as being a request made under paragraph 5 of Schedule 6 if it satisfies the requirements of sub-paragraphs (2) and (3) of that paragraph and is made -

(i) before any notification given in accordance with paragraph 4 of Schedule 6; or

(ii) after such notification and -

(aa) where practicable, at least four weeks before the expiry date; or

15. - This paragraph applies in a case where -

(a) notice of dismissal is given on or after the commencement date of at least -

(i) the period required by the contract of employment; or

(ii) if longer, the period required by section 86 of the 1996 Act; and

(b) the expiry date falls before 1 April 2007.

(1) Where this paragraph applies and the employer notifies the employee in writing of the employee's right to make a request under paragraph 5 of Schedule 6 before, or on the same day as, the day on which notice of dismissal is given -

(a) the employer shall be treated as complying with the duty in paragraph 2 of Schedule 6;

(b) a request shall be treated as being a request made under paragraph 5 of Schedule 6 provided it -

(i) is made after the employer notified the employee of his right to make a request;

(ii) satisfies the requirements of sub-paragraphs (2) and (3) of paragraph 5 of Schedule 6; and

(iii) is made -

(aa) where practicable, at least four weeks before the expiry date; or

(2) Where this paragraph applies but the employer does not notify the employee in writing of the employee's right to make a request under paragraph 5 of Schedule 6 before, or on the same day as, the day on which notice of dismissal is given -

(a) the duty to notify in accordance with paragraph 2 of Schedule 6 does not apply;

(b) the duty to notify in accordance with paragraph 4 of Schedule 6 applies as if -

(i) the employer had failed to notify in accordance with paragraph 2 of that Schedule; and

(ii) the duty was one to notify at any time before the expiry date;

(c) a request shall be treated as being a request made under paragraph 5 of Schedule 6 if it satisfies the requirements of sub-paragraphs (2) and (3) of that paragraph and is made -

(i) before any notification given in accordance with paragraph 4 of Schedule 6; or

(ii) after such notification and -

(aa) where practicable, at least four weeks before the expiry date; or

16. - This paragraph applies in a case where -

(a) notice of dismissal is given on or after the commencement date and is for a period shorter than -

(i) the period required by the contract of employment; or

(ii) if longer, the period required by section 86 of the 1996 Act; and

(b) the period of notice expires on a date falling before 1st April 2007.

(1) Where this paragraph applies -

(a) the duty to notify in accordance with paragraph 2 of Schedule 6 does not apply;

(b) the duty to notify in accordance with paragraph 4 of Schedule 6 applies as if -

(i) the employer had failed to notify in accordance with paragraph 2 of that Schedule; and

(ii) the duty was one to notify at any time before the expiry date;

(c) a request shall be treated as being a request made under paragraph 5 of Schedule 6 if it satisfies the requirements of sub-paragraphs (2) and (3) of that paragraph and is made -

(i) before any notification given in accordance with paragraph 4 of Schedule 6; or

(ii) after such notification and -

(aa) where practicable, at least four weeks before the expiry date; or

The age discrimination Regulations come into force on 1 October 2006. As of that date, the employer has a legal obligation to notify the employee of an intended retirement date and of their right to request not to be retired. Complicated but important transitional provisions relating to the duty to consider procedure apply where the employer gives notice of termination before 1 October 2006 and the dismissal is to take place after the 1 October 2006 commencement date.

Where the notice is given before 1 October with an expiry date before 1 April 2007, in order to comply with the duty to consider, the employer must give the employee their contractual notice or, where the contractual period is longer than four weeks, at least four weeks' notice of the intended date of retirement. On 1 October, or as soon as practicable thereafter, the employer must write to the employee notifying them of their right to request to work for longer. The employee can make a request not to be retired after their contract has been terminated, but must do so within four weeks. The duty to consider rules then apply.

Where the notice is given on or after 1 October with an expiry date before 1 April 2007, the employer must write to the employee notifying them of the intended retirement date, giving the longer of either statutory or contractual notice and informing the employee that they have a right to request to work longer. The employee who wants to exercise this right should make a written request, where practicable, four weeks before the intended retirement date, or as soon as is reasonably practicable after being notified of the right to make the request. The duty to consider rules then apply.

If the date of retirement is on or after 1 April 2007, the normal retirement procedure will apply.

Statutory redundancy payments

The current statutory redundancy payments scheme provides for half a week's pay for each year's service between the ages of 18 and 21, one week's pay for each year's service between 22 and 40, and one-and-a-half week's pay between 41 and 65. The number of years' service is limited to 20 and weekly pay is subject to a maximum of £290.

This scheme is directly age discriminatory and the government originally took the view that the age bands and multipliers would have to be removed. In the event, following consultations, only relatively minor changes have been made:

the age 18 lower limit on service taken into account has been removed;

the upper age limit on entitlement has been removed; and

the provision under which the amount of payment is tapered between the ages of 64 and 65 has been removed.

However, the government has decided to keep the age bands and multipliers, which provide greatest financial support to older workers. The trade and industry minister, Gerry Sutcliffe, told parliament: "Older workers are much more likely to become long-term unemployed, and to experience a substantial fall in pay when finding a new job … A system using a single multiplier would leave a significant group of older workers substantially worse off than at present, and we believe this would be unacceptable … The Directive provides for the possibility of member states providing for different treatment on the grounds of age, where this difference of treatment is objectively and reasonably justified by a legitimate aim, including employment policy. We have looked at this question very closely and are confident that retaining the age bands is permitted by the Directive."

Redundancy selection

Taking service into account as a redundancy selection criterion will be indirectly age discriminatory against younger workers. Does this mean that service-based criteria need to be eliminated? The Acas guide is unequivocal: "Check that your selection processes for redundancy are free of age discrimination. This means that practices such as last in first out (LIFO), and using length of service in any selection criteria are likely to be age discriminatory."

The Acas statement is too dogmatic. Service may be necessary to build up a full range of experience. Even if the employee's performance does not improve beyond a certain point as a result of length of service, seniority is a transparent and objective criterion. Although it is by no means as important as it once was, it is still often a component of redundancy selection criteria, especially where these are collectively agreed. It is by no means clear that a tribunal will say that such a criterion should be abandoned in favour of a selection system based on performance appraisal or other criteria, which in themselves may be prone to discrimination on age or other grounds such as gender.

¹ Employment Rights Act 1996 (c. 18); s.95 has been amended by s.57 of, and by Sch. 1, para. 29, and Sch. 2 to, the Employment Relations Act 2004 (c. 24), and by reg. 11 of, and paras. 3(1) and (7) of Part 1 of Sch. 2 to, SI 2002/2034.

² 1992 c. 52; ss.171 and 173 have been amended by s.1(2)(a) of the Employment Rights (Dispute Resolution) Act 1998 (c. 8). There are other amendments to these provisions that are not relevant for the purposes of these Regulations.

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Age Regulations 2006: Part 3 - Retirement and dismissal

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Age Regulations 2006: Part 3 - Retirement and dismissal