Draft age discrimination Regulations: An EOR guide
The government's long-awaited final consultation on the draft age discrimination Regulations* and consultative draft Regulations† make clear that there will be major differences between age discrimination law and other forms of unlawful discrimination. Michael Rubenstein presents a detailed analysis.
The consultation ends on 17 October. The final Regulations are expected to be laid before parliament "early" next year, and will come into force on 1 October 2006. The Regulations will implement the age strand of the EU Framework Employment Directive . The final consultation follows proposals set out in Age Matters (See Age discrimination proposals) and the government's announcement that there will be a national default retirement age .
Key parts of the age discrimination Regulations will include:
All direct discrimination on grounds of age will be capable of being objectively justified by an employer.
Employers will have to justify both direct and indirect discrimination by establishing that they had a legitimate aim and that the means of achieving it were proportionate.
There will be no list of "legitimate aims". There will be specific exemptions as regards service-related pay and benefits in respect of practices during the first five years of employment.
Most age-related aspects of occupational pension schemes will be excluded.
There will be a national default retirement age of 65 and retirement in accordance with it will not be discriminatory.
Those aged 65 and over will have no rights to claim age discrimination in recruitment.
The upper age limit for unfair dismissal will be removed. Employers will have a duty to consider requests from employees to work past retirement age.
Failure to comply with the duty-to-consider procedure will render a dismissal automatically unfair.
Discrimination on grounds of age
3.(1) For the purpose of these Regulations, a person ("A") discriminates against another person ("B") if -
(a) on grounds of B's age, A treats B less favourably than he treats or would treat other persons, or
(b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but -
(i) which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons, and
(ii) which puts B at that disadvantage, and A cannot show the treatment or, as the case may be, provision, criterion or practice to be a proportionate means of achieving a legitimate aim.
(2) Without prejudice to paragraph (1)(a), the following are examples of treatment which, depending on the circumstances of the case, an employment tribunal or, as the case may be, a county or sheriff court may find to be a proportionate means of achieving a legitimate aim -
(a) the setting or requirements as to age in order to ensure the protection or promote the vocational integration of people in a particular age group;
(b) the fixing of a minimum age to qualify for certain advantages linked to employment or occupation in order to recruit or retain older people;
(c) the fixing of a maximum age for recruitment or promotion which is based on the training requirements of the post in question or the need for a reasonable period in post before retirement.
(3) A comparison of B's case with that of another person under paragraph (1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other.
(4) In this regulation -
(a) "age group" means a group of persons defined by reference to age, whether by reference to a particular age or a range of ages; and
(b) the reference in paragraph (1)(a) to B's age includes B's apparent age.
The same basic definition of direct and indirect discrimination is used for age discrimination as for race, religion or belief and sexual orientation. This is to comply with the requirements of the Framework Employment Directive. The distinctive feature of the proposed age Regulations, however, is that direct, as well as indirect, discrimination will be capable of being objectively justified, and the same test will apply to both forms of discrimination.
Direct discrimination
Justification of discrimination directly on grounds of age is permitted by the Directive. Article 6(1) stipulates that: "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."
Direct discrimination on the basis of chronological age is, of course, completely inconsistent with the principle that people of all ages have a right not to be discriminated against merely because of their age. The government originally proposed to restrict the legitimate aims that could be used to justify discrimination to a list that would be set out in the Regulations, and was contained in Age Matters. Even though only a minority of respondents to the consultation considered that the list was too restrictive, the government has decided to allow any direct age discrimination to be potentially justifiable. According to the Department of Trade and Industry (DTI) consultation: "We considered the responses to Age Matters, and have concluded that an exhaustive list of legitimate aims for direct discrimination would be too restrictive and prescriptive. We would not want to prevent employers or providers of vocational training from demonstrating that age-related practices could be justified by reference to aims other than those in such a list."
Draft reg. 3(2) sets out examples of situations in which less favourable treatment on grounds of age may be considered to be a proportionate means of achieving a legitimate aim. However, the regulation makes clear that this is not an exemption, and whether it will be regarded as a defence will depend on the "circumstances of the case".
Employers seeking to defend direct age discrimination, therefore, will have to establish both a legitimate aim and that direct age discrimination was a proportionate means of achieving that aim. The consultation emphasises that "in most situations, it will be unlawful to treat people differently on the grounds of age. However, employers and others with obligations under the age Regulations will be able to justify doing so, but only by reference to specific aims and only if it is appropriate and necessary in the particular circumstances ('objective justification'). They will have to produce supporting evidence if challenged: assertions will not be enough." The DTI's Partial Regulatory Impact Assessment (www.dti.gov.uk/er) adds: "We are of the view that because of the requirement to justify this objectively, if challenged, only essential practices will be retained where they are appropriate and necessary."
What will be considered as "legitimate aims"? The consultation says that "the aim must correspond with a real need on the part of the employer … Economic factors such as business needs and considerations of efficiency may also be legitimate aims. However, discrimination will not be justified merely because it may be more expensive not to discriminate." How this issue is viewed by the tribunals and courts will be of particular importance in terms of the ultimate reach of age discrimination law. Profitability is likely to be considered a legitimate aim but, conversely, much age discrimination is based on cost to the employer. The DTI view expressed above is arguably slightly more stringent than that set out by the Employment Appeal Tribunal (EAT) in Cross v British Airways plc (EOR 142), which held that an employer can put cost into the balance, together with other justifications if there are any.
As noted above, it is proposed that the Regulations will emulate the Directive by setting out examples of what might be considered legitimate aims. The consultation lists others:
health, welfare and safety (including protection of young or older people);
facilitation of employment planning;
particular training requirements;
encouraging and rewarding loyalty;
the need for a reasonable period of employment before retirement; and
recruiting or retaining older people.
Will customer preference be a "legitimate" aim? Along with cost, this is one of the wellsprings of discrimination and, if it is allowed, would drive a coach-and-horses through the legislation. The consultation says that the legitimate aim cannot be related to age discrimination itself. The following example is then given: "A retailer of trendy fashion items wants to employ young shop assistants because it believes that this will contribute to its aim of targeting young buyers. Trying to attract a young target group will not be a legitimate aim, because this has an age-discriminatory aspect."
This is a puzzling statement. Why does "trying to attract a young target group" have any more of an "age-discriminatory aspect" than "recruiting or retaining older people" or "fixing a maximum age for recruitment" in order to get a sufficient payback from training? This is the kind of problem that results from the government's decision not to place a limit on the potential justifications for direct age discrimination.
So far as the other limb of the definition is concerned, the consultation makes the point that "the provision, criterion or practice must actually contribute to the pursuit of the legitimate aim." It illustrates this as follows: "For instance, if an employer or provider of vocational training wishes to use an age-related provision, criterion or practice in order to encourage loyalty, he must be satisfied that it actually does so." Is it sufficient that the employer is "satisfied"? This is indeed the correct criterion, as discussed below, as regards some service-related benefits, but the general principle is that the test for justification is an objective one. It is the tribunal that must be satisfied, rather than the employer.
The DTI also makes the following points in respect of proportionality: "The importance of the legitimate aim that is being pursued should be weighed up against the discriminatory effects. For instance, if the legitimate aim is the protection of people's lives and safety, it is likely that a bigger discriminatory effect will be permissible than where the legitimate aim is rewarding employees' loyalty.
"Where the legitimate aim can be achieved equally well by a measure that has a big discriminatory effect and a measure that has a small discriminatory effect (or that does not discriminate at all), the latter should be used. In other words: one should not discriminate more than necessary."
The latter point emphasises that discrimination is not proportionate if the aim can be achieved by a less discriminatory means. Leaving retirement to one side, employers very rarely have an aim in discriminating that is directly based on age. Age is more frequently used as a proxy for an employer's policy aim. For example, an employer has safety concerns about the health of its employees and uses an age limit for a particular job as a cut-off point. In this example, the employer's aim is not based on an animus against people over that cut-off age, but on a concern as to the safety of its operations. In our view, the tribunals should interpret this provision, in general terms, as meaning that the employer will have to show why it was proportionate to use overt age barriers rather than age-neutral - albeit potentially indirectly discriminatory - policies, such as, in our example, carrying out medical screening for all employees.
Perceived discrimination
Draft reg. 3(4)(b) will make it unlawful to discriminate on grounds of someone's "apparent" age. This means that if someone is discriminated against because they look too young, or too old, for a particular job, they will be able to complain successfully even if the discriminator is wrong about their actual age.
Indirect discrimination
The definition of indirect discrimination is the same as is found in other discrimination legislation.
Claimants will have to show that the relevant circumstances in their case are not materially different than in the case of their comparator. It is trite law, however, that the impugned characteristic - age in this case - can never be a "relevant" circumstance for this purpose.
The interesting wrinkle in the indirect discrimination definition is that comparison is to be made between persons of the claimant's "age group" and persons "not of the same age group". Draft reg. 3(4)(a) gives a broad definition of "age group", as a group defined "by reference to age, whether by reference to a particular age or a range of ages".
Essentially, this suggests that it will be up to the claimant to frame their complaint. For example, the claimant might say that they are aged 38 and the particular policy under attack places employees who are 38 at a disadvantage compared with employees age 50 and over. In this illustration, the impact on employees between 39 and 49 would become irrelevant.
Harassment
6.(1)For the purposes of these Regulations, a person ("A") subjects another person ("B") to harassment where, on grounds of age, A engages in unwanted conduct which has the purpose or effect of -
(a) violating B's dignity; or
(b) creating an intimidating, hostile, degrading, humiliating or offensive environment for B.
(2) Conduct shall be regarded as having the effect specified in paragraph (a) or (b) only if, having regard to all the circumstances, including in particular the perception of B, it should reasonably be considered as having that effect.
The definition of harassment is the same as that now applying to race, disability, religion or belief and sexual orientation, and the same as has been proposed for sex discrimination with effect from 1 October. As such, it suffers from the same deficiency as we identified in the proposed amendments to the Sex Discrimination Act relating to sexual harassment: instead of using the Directive's language "related to" the ground in question, the Regulations require that the conduct is "on the ground of", in this case, age. If this is interpreted as meaning that a claimant must not only show that there was age-related conduct that created an offensive working environment, but also that the reason that they were subjected to such conduct was because of their age, it is strongly arguable that this would not properly implement the Directive, which deems harassment to be unlawful discrimination without the need for a comparator.
As with the other definitions of harassment, the ageist conduct in question must be "unwanted" by the person affected. The DTI consultation points out: "This does not mean that the person at whom the behaviour is directed has to make it explicit that the behaviour is unwanted - in many cases this will be perfectly clear. However, it may not be considered harassment if, for instance, a person makes lighthearted jokes about his own age, and another person simply repeats those comments to him in the same context."
If the ageist harassment has the purpose of violating the recipient's dignity or creating an intimidating or hostile environment, it will be automatically unlawful. If it does not have that intention, but is said to have that effect, draft reg. 6(2) specifies that it will only be unlawful if the tribunal finds that "it should reasonably be considered as having that effect."
In many workplaces, ageist harassment is probably viewed in much the same way as was sexual or racial harassment 20 years ago. The perpetrators regard it as "just good fun" and the recipients feel obliged to join in for fear of appearing lacking in a sense of humour. Experience suggests that some people will have no problem with age-related teasing or jokes, but others will.
Age-based harassment will be unlawful if it has created an offensive working environment. In this context, there is no reason for thinking that proof of an offensive environment will be limited to the workplace as it exists after 1 October 2006. An ageist culture prior to the law coming into force is likely to be regarded as probative evidence of the working environment after 1 October 2006. The implications of this for employers are clear. Harassment policies should be modified now to incorporate age discrimination, rather than waiting until October 2006.
Genuine occupational requirement
8.(1) In relation to discrimination falling within regulation 3 (discrimination on grounds of age) -
(a) regulation 7(1)(a) or (c) does not apply to any employment;
(b) regulation 7(2)(b) or (c) does not apply to promotion or transfer to, or training for, any employment; and
(c) regulation 7(2)(d) does not apply to dismissal from any employment, where paragraph (2) applies.
(2) This paragraph applies where, having regard to the nature of the employment or the context in which it is carried out -
(a) possessing a characteristic related to age is a genuine and determining occupational requirement;
(b) it is proportionate to apply that requirement in the particular case; and
(c) either -
(i) the person to whom that requirement is applied does not meet it, or
(ii) the employer is not satisfied, and in all the circumstances it is reasonable for him not to be satisfied, that that person meets it.
The government has taken a consistent line that "age will only be a genuine occupational requirement [GOR] in very few cases. It could be used for acting jobs, for instance. Where this is the case, it would still have to be established that the use of the age requirement is proportionate."
Whether the GOR will be interpreted so narrowly by the tribunals remains to be seen, however. The language used in the draft regulation is comparatively broad. Whereas the sexual orientation Regulations, for example, refer to circumstances where "being of a particular sexual orientation is a genuine and determining occupational requirement", the age GOR is not limited to cases where "being of a particular age" is determining. Instead, the formulation used is the much wider one of "possessing a characteristic related to age". An employer will be entitled to discriminate on the basis of a "characteristic related to age" where it is a "determining" occupational requirement and it is "proportionate" to apply the requirement in the particular case. Take the DTI's example, referred to above, of the clothing shop whose customers are teenage girls. Will the shop be able to argue that having someone with a "youthful image" is a "determining" requirement for its sales staff, and that it is proportionate to apply the requirement? We have little judicial authority on what "determining" means in this context.
Discrimination against applicants and employees
7. (1)It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to discriminate against a person -
(a) in the arrangements he makes for the purpose of determining to whom he should offer employment;
(b) in the terms on which he offers that person employment; or
(c) by refusing to offer, or deliberately not offering, him employment.
(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 -
(a) in the terms of employment which he affords him;
(b) in the opportunities which he affords him for promotion, a transfer, training, or receiving any other benefit;
(c) by refusing to afford him, or deliberately not affording him, any such opportunity; or
(d) by dismissing him, or subjecting him to any other detriment.
(3) It is unlawful for an employer, in relation to employment by him at an establishment in Great Britain, to subject to harassment a person whom he employs or who has applied to him for employment.
(4) Paragraphs (1)(a) and (c) do not apply in relation a person who has attained the age of 65 and who, if recruited, would be an employee or in Crown employment (as those expressions are defined for the purposes of regulation 29).
As with other forms of unlawful discrimination, the prohibition on age discrimination will apply to recruitment, selection or promotion in employment, dismissal or subjecting to another detriment. The Regulations will cover all employers and all age groups.
The DTI's Partial Regulatory Impact Assessment says that "evidence suggests that those affected most by age discrimination tend to be older workers (about 50 years old or over) and young workers (up to about 25 years old)." The DTI consultation sets out the general principle that "decisions about recruitment, selection and promotion should not normally be based on age, but rather on the skills required for the job." This laudable sentiment is watered down considerably as regards age discrimination against older workers.
Draft reg. 7(4) completely excludes those who have reached age 65 from the right not to be discriminated against on grounds of age in respect of selection arrangements or recruitment. The result of this is that those age 65 and over have the right not to be discriminated against in terms of recruitment on grounds of sex, race, disability, religion or belief, or sexual orientation, but not age.
Does the Framework Employment Directive allow the UK government to treat those aged 65 and over as second-class citizens in respect of age discrimination rights? As we have seen, article 6 of the Directive specifies that "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." This makes it clear that the member state must have an empirical basis for an exclusion, and that it must be proportionate. As the DTI itself puts it in the context of discrimination by employers: "They will have to produce supporting evidence if challenged: assertions will not be enough."
The government's reasoning is that the exclusion of those aged 65 and over from recruitment rights flows from their exclusion from the right to complain about being compulsorily retired. Presumably, the concern is that otherwise, someone retired because they reached aged 65 could apply for the resultant vacancy on the basis that they were the best person for the job. Yet whatever tenuous evidence there is to support the need for mandatory retirement, (see box 1) no empirical evidence is put forward to justify the need for excluding those age 65 and over from the right to complain of discrimination in selection arrangements and recruitment. Nor does it seem proportionate to exclude everyone who is age 65 and over from the right not to be discriminated against in respect of recruitment for all jobs from every employer in order to avoid problems if they re-apply for the one job they held. A far more narrowly tailored approach must be possible. This is likely to be one of the areas in which the government may face a legal challenge over its implementation of the Directive.
The DTI's decision to impose a default retirement age will both inspire and permit age discrimination against those approaching retirement age. Thus, the age Regulations will also mention upper age limits for recruitment of those under 65 in the list of examples of potentially justified direct discrimination. According to the consultation: "This is to indicate that, depending on the circumstances, it is possible to justify upper age limits if, for example, they are necessary because of the training requirements of the post in question or the need for a reasonable period of employment before retirement." This is intended to allow an employer to recoup its training and/or recruitment costs. No further elaboration is given, however, and what is justifiable here will be left to the tribunals to determine according to the circumstances of each case.
It would seem to us, however, that in order to be able to justify an upper age limit for recruitment or promotion for these reasons, an employer should be expected to show that the payback on investment would be less than it would normally expect for other age groups. For example, an employer seeking to impose an upper age limit of 60 for a particular job on the basis of its normal retiring age of 65 might find it hard to justify if the average period of employment in the same job for someone in their 20s was two years. Moreover, by inference, a maximum age for recruitment that was not based on the training requirements of the post in question or the need for a reasonable period of employment before retirement, or which was not objectively justifiable on grounds of similar weight, will not be permissible.
Interestingly, the DTI's Partial Regulatory Impact Assessment estimates that there will be 8,000 employment tribunal applications per year, "of which 75% might relate to recruitment, training and promotion". Many of these claims are likely to allege direct age discrimination, where an unsuccessful candidate will claim that they were rejected because of their age.
Service-related pay and benefits
32. (1)Nothing in Part 2 or 3 of these Regulations shall prevent an employer from awarding a benefit to a worker ("A") but not to another worker ("B") if and to the extent that -
(a) length of service is the criterion by reference to which the benefit is awarded;
(b) the benefit is awarded to all of the employer's workers who meet the length-of-service criterion and whose circumstances are not otherwise materially different; and
(c) B does not satisfy the length-of-service criterion.
(2) Under this regulation, in relation to the award of any particular benefit, the employer shall elect to treat length of service as meaning either -
(a) the length of time a worker has served the employer in a post or in posts carrying out work of like nature, or
(b) the length of time that the worker has worked for the employer.
(3) In calculating whether a worker satisfies a length-of-service criterion for the purposes of this regulation, the employer -
(a) shall take into account all of the worker's length of service up to a maximum of five years, but
(b) may, subject to any provision to the contrary in the worker's contract or terms of service, ignore any period of time during which the worker was absent from work.
(4) For the purposes of this regulation, workers shall be treated as carrying out work of like nature where they are doing -
(a) work of the same or a broadly similar nature (and where any differences in that work are not of practical importance in relation to their contract or terms of service), or
(b) work of equal value in terms of the demands made on them (for example, in terms of effort, skill and decision-making).
(5) For the purposes of paragraph (2)(a) of this regulation, service in different government departments shall be treated as work for different employers.
33. (1)Nothing in Part 2 or 3 of these regulations shall prevent an employer from awarding a benefit to a worker ("A") but not to another worker ("B") if and to the extent that -
(a) length of service is the criterion by reference to which the benefit is awarded;
(b) it reasonably appears to the employer that there will be an advantage to him from rewarding the loyalty, encouraging the motivation or recognising the experience of workers by awarding benefits on the basis of length of service;
(c) the benefit is awarded to all of the employer's workers who meet the lengt-of-service criterion and whose circumstances are not otherwise materially different; and
(d) B does not satisfy the length-of-service criterion.
(2) Under this regulation, in relation to the award of any particular benefit, the employer shall elect to treat length of service as meaning either -
(a) the length of time a worker has served the employer in a post or in posts carrying out work of like nature, or
(b) the length of time that the worker has worked for the employer.
(3) For the purposes of this regulation, workers shall be treated as carrying out work of like nature where they are doing -
(a) work of the same or a broadly similar nature (and where any differences in that work are not of practical importance in relation to their contract or terms of service), or
(b) work of equal value in terms of the demands made on them (for example, in terms of effort, skill and decision-making).
Length of service is used in a significant number of firms in determining pay, and some employers also provide benefits such as holiday entitlement, medical insurance, help with childcare costs and share schemes, with an entitlement depending on length of service. The consultation process showed that there was concern among employers that they would have to objectively justify using service-related benefits because they indirectly discriminate against younger workers.
The government's conclusion is that "whilst we do not believe that a blanket exemption is a proportionate means of achieving a social policy aim", there are specific areas where age-based requirements are justified, and "where it would not be helpful to make employers provide individual justification". Service-related pay and benefits is one of these areas. These provisions cover both pay and non-pay benefits, such as annual holidays or provision of a company car.
Draft reg. 32 provides a specific blanket exemption for any length-of-service requirement of five years or less. The DTI consultation explains: "We believe that in any case during the first few years of service, using length of service as a criterion for awarding or increasing benefits is justified - we consider five years a reasonable limit. The age Regulations will provide for a complete exemption for this period. This is because it would be unnecessarily bureaucratic for employers to have to justify such benefits individually, and the risk of having to do so could lead some employers to withdraw them altogether." The exemption will only apply if the length-of-service criterion is applied to all staff doing similar work and it can only be used if it counts all years of service carried out in the range of posts to which the service criterion applies.
Draft reg. 33 provides a general exemption where length of service is used in respect of employment benefits so long as "it reasonably appears to the employer that there will be an advantage to him from rewarding the loyalty, encouraging the motivation or recognising the experience of workers by awarding benefits on the basis of length of service", and the length-of-service criterion is applied similarly to staff in comparable situations. Note that the threshold of proof here is extremely low. The employer does not have to prove by evidence that service-based benefits actually achieve any business advantage. It will suffice if it "reasonably appears to the employer" that there will be "an advantage" in awarding benefits on this basis. The consultation notes: "The general provision is specifically tailored towards employment benefits, so it is easier to use for employers than the general test of objective justification. However, it still requires the employer to make judgments on the aim and effect of the benefit."
Where neither of the exemptions apply, employers will have to attempt to defend age-related benefits by using the general test of objective justification. The consultation gives the example of an employer providing free private health insurance to employees who have two years' service, with a maximum age of 60. The five-year exemption will allow the employer to use the criterion of two years' service, but the use of a maximum age of 60 will only be lawful if the employer can objectively justify this.
National minimum wage
The national minimum wage legislation contains age bands for younger employees. There will be a special exemption in respect of these age bands. The government's view is that they are objectively justified in terms of the Directive because "many employers would be unwilling to pay younger employees the same (higher) minimum wage that employees over 21 are getting, so the age bands make it easier for younger workers to find employment and the age bands encourage young people to stay in full-time education."
The Regulations will allow employers to pay employees aged 22 and over more than those under 22, even where they are doing the same job, where those under 22 are paid less than the adult minimum wage rate. They will also allow employers to pay employees aged between 18 and 21 more than those under 18 even where they are doing the same job, where those under 18 are paid less than the adult minimum wage rate.
However, firms that pay different rates to young workers doing the same job in the same national minimum wage band will have to satisfy the test of objective justification.
Occupational pensions
Non-discrimination rule
4. (1) Every occupational pension scheme shall be treated as including a provision ("the non-discrimination rule") containing a requirement that the trustees or managers of the scheme refrain from doing any act which is unlawful by virtue of regulation 11.
(2) The other provisions of the scheme are to have effect subject to the non-discrimination rule.
(3) The trustees or managers of an occupational pension scheme may -
(a) if they do not (apart from this paragraph) have power to make such alterations to the scheme as may be required to secure conformity with the non-discrimination rule, or
(b) if they have such power but the procedure for doing so -
(i) is liable to be unduly complex or protracted, or
(ii) involves the obtaining of consents which cannot be obtained, or can only be obtained with undue delay or difficulty,
by resolution make such alterations to the scheme.
(4) Alterations made by a resolution such as is referred to in subparagraph (3) may have effect in relation to a period before the alterations are made (but may not have effect in relation to any time before the coming into force of these Regulations).
General exception for ages for admission or entitlement and actuarial calculations
5. (1) Nothing in Part 2 or 3 shall render unlawful, in or in relation to an occupational pension scheme -
(a) the fixing of an age for admission to the scheme; or
(b) the fixing of an age for entitlement to benefits, including the fixing of different such ages for different employees or for different groups or categories of employees.
(2) Nothing in Part 2 or 3 shall render unlawful the use of age criteria in actuarial calculations in or relating to any scheme.
(3) The provisions of paragraph 9 to 16 of this Schedule are without prejudice to the generality of this exception.
Admission to schemes and entitlement to benefits
6. Nothing in Part 2 or 3 shall render unlawful -
(a) the setting of minimum or maximum ages for admission to a scheme, including the setting of different ages for admission to a scheme for different groups or categories of employees;
(b) the setting of a minimum period of employment for admission to a scheme, including the setting of different periods for admission to a scheme for different groups or categories of employees;
(c) the setting of a minimum level of remuneration for admission to a scheme, including the setting of different levels for admission to a scheme for different groups or categories of employees;
(d) the setting of an early retirement pivot age or a late retirement pivot age, including the setting of different such ages for different groups or categories of members.
The use of age criteria in actuarial calculations
7. Nothing in Part 2 or 3 shall render unlawful -
(a) the use of age criteria in the actuarial calculation of reduction or enhancement for receipt of benefits before early retirement pivot age or enhancement for receipt of benefits after late retirement pivot age;
(b) the use of age criteria in the actuarial calculation for calculating transfer payments out of the scheme or benefits to be credited in respect of payments into the scheme;
(c) the use of age criteria in the actuarial calculation of any additional voluntary contributions made by the member to the scheme;
(d) the use of age criteria in the actuarial calculation of contributions to a scheme or the benefits to be paid in respect of contributions made to a scheme; or
(e) the use of age criteria in the actuarial calculation of any lump-sum benefit or of the pension benefits commuted in exchange for the payment of a lump-sum benefit.
Contributions to a scheme
8. Nothing in Part 2 or 3 shall render unlawful -
(a) any difference in contributions to a scheme attributable to the age of the member;
(b) payment of equal contributions to a scheme irrespective of the age of the member;
(c) any difference in contributions to a scheme attributable to the length of pensionable service of the member;
(d) any difference in contributions to a scheme attributable to the seniority of the member; or
(e) any difference in contributions to a scheme attributable to the remuneration payable to the member.
Benefit from a scheme
9. Nothing in Part 2 or 3 shall render unlawful -
(a) any difference in the amount of benefit from scheme attributable to the years of pensionable service of the member;
(b) any difference in the amount of benefit from a scheme attributable to the contributions paid to the scheme;
(c) any difference in the amount of benefit from a scheme attributable to the seniority of the member;
(d) any difference in the amount of benefit from the scheme attributable to the remuneration at any time of the member;
(e) any limitation of the amount of benefit from the scheme made by reference to the remuneration at any time of the member;
(f) any limitation on the amount of benefit from the scheme made by imposing a minimum or maximum number of years of qualifying service; or
(g) any limitation on the amount of benefit from the scheme made by imposing a minimum or maximum level or type of remuneration by reference to which those benefits may be calculated.
Article 6 of the Directive allows member states to exempt from age discrimination legislation the fixing of ages for admission to occupational pensions and the use of age criteria in actuarial calculations.
The age discrimination Regulations will make it unlawful for trustees or managers of an occupational pension scheme, when carrying out their functions, to discriminate against a member or prospective member of the scheme on grounds of age.
However, the government "expect pension schemes to be able to operate largely as they do now" and the Regulations are intended to exempt "most age-related rules" in occupational pension schemes. These are set out in Schedule 2 and include:
closing pension schemes or parts of pension schemes to new members;
providing different pension schemes to employees of different ages or with different lengths of service;
the use of minimum and maximum ages for admission to pension schemes;
setting different ages of admission to a pension scheme for different groups of employees;
having a normal pension age in a pension scheme (ie the age at which a person normally becomes entitled to receive retirement benefits);
both age-related and flat-rate employer contributions into pension schemes;
the use of age criteria in actuarial calculations;
setting the level of pension benefits by reference to years of service;
adjustments to the level of pension benefits where there is a difference of more than a given number of years between the member and spouse; and
age limits on payments of pensions to dependant children.
The DTI's Partial Regulatory Impact Assessment points out: "Employers having to objectively justify all or many age-based rules in occupational pension schemes ... could result in considerable costs (through deciding on whether each age-based rule was objectively justified) and uncertainty for employers, as the only way to test whether those rules complied with the age legislation would be through the employment tribunal system, and claims could arise many years into the future."
The government's conclusion is that: "Since many rules in schemes are necessarily age-based, we consider the most sensible approach is to make use of the flexibility in the Directive to make clear that certain age-related rules in pension schemes are exempt. We think that this strikes the right balance between tackling unfair age discrimination and maintaining the integrity of occupational pensions."
Retirement and dismissal
29. (1) Nothing in Part 2 or 3 shall render unlawful the dismissal of an employee at or over the age of 65 where the reason for the dismissal is retirement.
(2) For the purpose of this regulation, whether or not the reason for a dismissal is retirement shall be determined in accordance with sections 98ZA to 98ZC of the Employment Rights Act 1996.
The Regulations introduce the concept of a default retirement age of 65. Dismissal of an employee by reason of "retirement" will not constitute age discrimination if employers retire employees at or above the age of 65. Conversely, employers will only be able to have retirement ages under 65 if they can objectively justify them.
The new provisions relating to age discrimination in dismissal and its effect on the right to claim unfair dismissal are extremely detailed and complicated. The government's overall intention is that there will be no right to claim either age discrimination or unfair dismissal in respect of a genuine retirement from age 65 onwards. There are safeguards, however, to assist in determining whether retirement is the genuine reason for dismissal and, in the case of unfair dismissal law, the impact of the duty-to-consider procedure has to be taken into account.
So far as age discrimination is concerned, the key issue for those dismissed from age 65 onwards will be whether the reason for dismissal was retirement. This will be determined in accordance with the new unfair dismissal provisions in the Employment Rights Act, set out in Schedule 6 to the Regulations. This is discussed below. For discrimination purposes, this specifies that dismissal on a planned retirement date will be taken to be the only reason for dismissal.
However, if the dismissal does not take place on a planned retirement date, the burden will be on the employer to show that the reason for it was retirement. As will be seen below, if the employer fails to discharge that burden, this may lead to a finding of unfair dismissal, but it would seem that it can only lead to a finding of age discrimination as well if the employee is able to establish that the dismissal was directly or indirectly on grounds of age. Thus, if the "true" reason for dismissal is that the employee is redundant, this may render the dismissal unfair but will only found an age discrimination claim if the employee can show that they would not have been made redundant had they been of a different age.
The Regulations exclude an employee from claiming discrimination as regards their dismissal, but they do not explicitly exclude a discrimination complaint concerning the process leading up to dismissal, including operation of the "duty-to-consider" procedure. Whether a separate claim will be permitted in respect of this remains to be seen.
Note that the default retirement age of 65 is not a one-off window of opportunity for employers to dismiss on grounds of age. As the DTI consultation explains: "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." In such a case, however, it might be more difficult for the employer to show that retirement was the reason for dismissal.
Neither the default retirement age nor the duty-to-consider procedure will apply to office holders (including the police). Therefore, retirement ages for office holders will only be lawful if they are objectively justified. No explanation for this is given in the consultation, but presumably the intention is to facilitate mandatory retirement age at an age lower than the default age of 65.
Justification for the default retirement age
A mandatory retirement age will contravene the Framework Employment Directive unless the government can establish that it falls within article 6, ie that the 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 if the means of achieving that aim are appropriate and necessary".
How has the government justified the exemption allowing employers to discriminate against those aged 65 and above? The main explanation given in the DTI consultation is as follows: "In setting the default age, we have taken careful note of a number of representations we received in the course of consultations, which made it clear that significant numbers of employers use a set retirement age as a necessary part of their workforce planning. Whilst an increasing number of employers are able to organise their business around the best practice of having no set retirement age for all or particular groups of their workforce, some nevertheless still rely on it heavily. This is our primary reason for setting the default retirement age."
"Our consultations have also shown that if at the time the legislation was introduced employers only had the option of individually justified retirement ages, this could risk adverse consequences for occupational pension schemes and other work-related benefits. Some employers would simply reduce or remove benefits they offer to employees to offset any increase in costs. If in future increasing numbers of firms no longer relied on the default retirement age, and increasingly devised age-neutral benefits packages, then this would be expected to be less of a problem." It is interesting that the government seemingly has not sought to rely on recital 14 to the Framework Employment Directive, which says: "This Directive shall be without prejudice to national provisions laying down retirement ages." It is questionable whether that provision applies where the retirement age is laid down at the same time that age discrimination law is brought into force.
The primary justification given, therefore, is that a significant number of employers use a set retirement age as a necessary part of their workforce planning. Alan Johnson's written statement launching the consultation says that "many businesses need it [a set retirement age] for workforce planning purposes", the consultation paper refers to "some" businesses relying on it "heavily". In fact, there is nothing in the DTI's statements to make clear just what "workforce planning" they are talking about, how many employers are estimated to use it, or the extent to which it would create a problem if there was no national default retirement age.
Set against this, consider the DTI's own Partial Regulatory Impact Analysis. This looked at four options for retirement, including having no national default retirement age and not allowing employers to set their own retirement ages (option A) and the option that the government has chosen - a national default retirement age of 65, allowing employers to set and justify a lower retirement age and allowing employees to request to work beyond retirement (called option D). The Impact Analysis says that the benefits to individuals, employees, employers, the Exchequer and gross domestic product would "tend to dwarf costs to employers", with option A - no national default retirement age - "showing higher benefits than the other options". Conversely, for option D to be equivalent, "we would have to assume that under option D virtually no employees retire against their will at 65 or over. This does not seem to be consistent with the behaviour of employers …" The Impact Analysis concludes: "Our sensitivity analysis suggests that in terms of benefits to the economy that arise because of changes to the labour supply, it is unlikely that option D is as favourable as the other options, although it may be in the short term. It is also very likely that in the long term, option A is the most favourable option."
In a similar vein, in June 2005, the DTI published research by Stephen McNair and Matt Flynn (The age dimension of employment practices: employer case studies. Employment Relations Research Series, no.42.) that noted that "in many sectors, the rapid turnover of employees makes it impossible for many employers to develop effective succession plans."
*The age dimension of employment practices: Relations Research Series, no.42.
Monitoring the default retirement age
The DTI consultation says that the government will review whether to maintain a national default retirement age of 65 in 2011, or whether to prohibit all retirement ages that are not objectively justified. Patricia Hewitt's announcement referred to a review in October 2011, five years after implementation. The consultation specifies that the review will consider "the evidence on longevity, and employment patterns of older workers in particular". Introducing the consultation, the Secretary of State for Trade and Industry, Alan Johnson, pledged that: "If the evidence shows that we no longer need the default retirement age, we will abolish it."
Since the review itself will only take place after five years, and time will have to be allowed for its results to be considered, for legislation to be introduced and for employers to prepare, it seems unlikely that the default retirement age would be abolished any time before 2014 at the earliest.
What is dismissal on grounds of retirement?
The DTI consultation distinguishes between retirement by mutual consent and retirement as dismissal. It claims that "most retirements within a company may be by mutual consent" and says: "If employer and employee agree about the retirement, there is of course no need to follow the procedures for retirement" laid down by the Regulations.
This seems simplistic. If an employee knows that they will be retired at age 65, whether or not they agree, what will be the factors that will determine whether the retirement is by mutual consent or is a dismissal? The DTI goes on to say: "If the employee does not agree to retirement, the employer can only retire the employee through dismissal." This, again, seems legally problematic, conjuring up the classic gun-to-the-head scenario that has always been regarded as a dismissal in law. Taking the DTI at its word, the new procedures will not have to be followed in the majority of cases. Our own view is that employers should assume the procedures have to be followed in all cases unless it is clear beyond doubt that the employee is voluntarily leaving.
The DTI acknowledges that "employers cannot simply use the retirement procedure for any and all dismissals of employees above the retirement age", and that "if the employer uses the retirement procedures to dismiss an employee, and the employee feels that the 'retirement' was for other reasons, the employee can challenge the retirement as being unfair dismissal."
98ZA Dismissal on planned retirement date
(1) Retirement of the employee shall be taken to be the only reason for a dismissal which takes effect on a planned retirement date (within the meaning of any of subsections (4) to (7)).
(2) But subsection (1) does not apply if the dismissal is an excluded dismissal by virtue of subsection (8) or (9).
(3) If subsection (1) applies, any other reason for the dismissal shall be disregarded.
(4) The date on which any employee reaches the age of 65 is a planned retirement date.
(5) In a case where there is a normal retirement age (whether this is above or below the age of 65) for a person -
(a) in the employer's undertaking,
(b) who holds the position held by the employee, the date on which the employee reaches that age is a planned retirement date.
(6) In a case where the employee has been given at least (six months') written notice that he would be retired on a particular date, that date is a planned retirement date.
(7) In a case where -
(a) the employer has complied with the duty under paragraph 5(2) of Schedule 7 to the 2006 Regulations, and
(b) but for compliance with that duty, the dismissal would have taken effect on a planned retirement date within the meaning of any subsections (4) to (6), the date on which the dismissal actually takes effect is a planned retirement date.
(8) The dismissal is an excluded dismissal if it amounts to unlawful discrimination under the 2006 Regulations.
(9) The dismissal is an excluded dismissal if the employee can show that the employer would not have dismissed the employee on the planned retirement date but for some reason other than retirement.
98ZB Dismissal on another date: retirement only reason for dismissal
(1) This section applies in relation to a dismissal if -
(a) the dismissal does not take effect on a planned retirement date, and
(b) retirement of the employee is shown to be the only potentially fair reason for the dismissal.
(2) The employer shall be regarded as having failed to fulfil the requirements of section 98(1) if -
(a) the dismissal amounts to unlawful discrimination under the 2006 Regulations, or
(b) the employer contemplated dismissing the employee at some time in the period of six months that ends with the day of the dismissal, for a reason other that retirement.
(3) The condition in subsection (2)(b) shall be presumed to be met unless the employer shows that it is not.
98ZC Dismissal on another date: retirement one of reasons for dismissal
(1) This section applies in relation to a dismissal if -
(a) the dismissal does not take effect on a planned retirement date, and
(b) retirement of the employee is shown to be one of two or more potentially fair reasons for the dismissal.
(2) Retirement of the employee shall be disregarded in determining which of the potentially fair reasons is the principal reason for the dismissal if the employer contemplated dismissing the employee at some time in the period of six months that ends within the day of the dismissal, for a reason other than retirement.
98ZD Fairness of retirement dismissal
(1) This section applies where the employer has fulfilled the requirements of section 98(1) by showing that a reason falls within section 98(2)(ba).
(2) If this section applies, the employee shall be regarded as unfairly dismissed for the purposes of this Part only if subsection (3) or (5) applies.
(3) The employee shall be regarded as unfairly dismissed if, in a case where paragraph 3 of Schedule 7 to the 2006 Regulations applies, the employer did not comply with the duty under that paragraph.
(4) But the employee shall not be regarded as unfairly dismissed by virtue of subsection (3) if, before the start of the period of 14 days that ends with the day of the dismissal, the employee knew of the right to make a request and the intended retirement date (within the meaning of Schedule 7 to the 2006 Regulations).
(5) The employee shall be regarded as unfairly dismissed if -
(a) the employee has made a request under paragraph 4 of Schedule 7 to the 2006 Regulations,
(b) the requirements of paragraph 5 to 7 of that Schedule have not been complied with, and
(c) that non-compliance is wholly or mainly attributable to failure by the employer.
(6) Any question whether [the requirements of paragraphs 5 to 7 of Schedule 7 to the 2006 Regulations] have been complied with shall be determined in accordance with those paragraphs.
A number of important changes will be made to unfair dismissal law to take account of age discrimination.
The current upper age limit of 65 on bringing unfair dismissal complaints will be removed. In summary, this will allow employees to claim unfair dismissal even though they are over the age of 65, if the dismissal was for a reason other than retirement or if the employer did not comply with the duty-to-consider procedure. In proposing to remove the upper age limit, the government has acknowledged that the limit is "unfair" and that it is not justifiable to prevent older employees from complaining about unfair dismissal on grounds other than retirement. The DTI's Partial Regulatory Impact Assessment on unfair dismissal says that two options were considered: (a) maintaining the upper age limit except for certain inadmissible reasons; and (b) removing the upper age limit. According to the Impact Assessment, the first option "would fail to meet the objective of treating those fairly irrespective of their age in the case of a dismissal and would carry a high risk of challenge, since it would directly discriminate against older employees".
Dismissal on grounds of retirement will be deemed to be a fair dismissal if it takes place at or after the national default retirement age of 65, or a lower retirement age that the employer can objectively justify, so long as the dismissal takes place in accordance with the new procedural requirements for mandatory retirement. As discussed below, the duty-to-consider procedure will have to be used for any compulsory retirement. It will require an employer to notify an employee in writing of their retirement between six and 12 months before the intended date. At the same time, the employee will have to be told that they have a right to request to work beyond the intended retirement date.
A dismissal on grounds of retirement will be automatically unfair if, prior to retiring the employee, the employer has not informed the employee of the right to request to continue working and of the intended retirement date, or the employer has informed the employee less than two weeks before the retirement date, or if the employer has failed to comply with the duty-to-consider procedure.
In line with the changes to the statutory redundancy payment scheme set out below, the age bands for the calculation of the basic award will be harmonised and the tapering-down provisions that reduce the award in the period leading up to the upper age limit will be removed.
Planned retirement
"Retirement" will not constitute unfair dismissal if it is at or after age 65 (or the employer's own lower retirement age, if this is objectively justified) and the employer has followed the duty-to-consider procedure.
A key new concept in the government's approach is "planned" retirement. As Alan Johnson said in his written statement introducing the consultation, "retirement should not come as an unexpected surprise." The Regulations distinguish, therefore, between a "planned" retirement dismissal and other retirement dismissals. Where a retirement is not "planned", the burden will be on the employer to show that the dismissal is a retirement and not a pretext for another reason.
In a case that meets the definition of a planned retirement, new s.98ZA(1) provides that "retirement of the employee shall be taken to be the only reason for a dismissal which takes effect on a planned retirement date." Thus, the dismissal will be assumed to be by reason of retirement - and hence immune from challenge - unless the employee can show that the employer would not have dismissed the employee on the planned retirement date were it not for some reason other than retirement.
A "planned" retirement must meet one of three conditions: it must take effect at the national default retirement age of 65; or it must take effect at the employer's normal retirement age; or the employer must have informed the employee of the retirement date at least six months in advance.
The DTI consultation explains the government's intention: "Where retirement takes place at the expected retirement date, or after the employer has planned for it and told the employee about it at least six months in advance, it is unlikely that the 'retirement' is in reality a redundancy, for example. If the employee feels differently, it is reasonable - in these situations - that he or she has to provide convincing proof … In other situations (a 'retirement out of the blue'), it is reasonable for the employer to have to explain why such a dismissal is a retirement (rather than, for instance, a covert dismissal on performance grounds)."
In contrast, in retirement situations other than a planned retirement, the burden of proof will be on the employer to show that the reason for dismissal was retirement. New sections 98ZB and 98ZC deal with the situation where the dismissal does not take effect on a planned retirement date.
If retirement is the only potentially fair reason for dismissal, the dismissal will be regarded as unfair unless the employer can prove that it did not "contemplate" dismissing the employee for some reason other than retirement in the six months preceding the date of dismissal. If the employer cannot, the dismissal will be unfair. If it can, the dismissal will be fair, by reason of retirement. This may be a difficult burden to discharge. Contemplation is a state of mind, and the employer will have to establish that no one with managerial authority considered dismissing the employee on grounds of poor performance or absence or redundancy, etc during the relevant time frame.
If the dismissal does not take effect on a planned retirement date and retirement is one of two or more potentially fair reasons for dismissal, retirement will be disregarded as a potentially fair reason if the employer contemplated dismissing the employee for some reason other than retirement in the six months preceding the date of dismissal.
A retirement dismissal that would otherwise be fair can be rendered unfair by failure to comply with the duty to consider requests to work beyond retirement. This is considered below.
Duty to consider working beyond retirement
Interpretation
1. (1) In this Schedule -
"dismissal" means a dismissal within the meaning of section 95 of the Employment Rights Act 1996 where the reason (or, if more than one, the principal reason) for the dismissal is retirement;
"intended retirement date" means the date notified to the employee in accordance with paragraph 2 or 3 disregarding any later changes to that intention as a result of a request made under paragraph 4, or where no such notification has been given it means the date of dismissal; and
"request" means a request made under paragraph 4.
Duty of employer to inform employee
2. (1) An employer who intends to dismiss an employee where the reason for the dismissal is retirement has a duty to notify the employee -
(a) of the employee's right to make a request; and
(b) of the date on which he intends the employee to retire.
(2) The notification under sub-paragraph (1) shall be given in writing (not more than one year and not less than six months) before dismissal.
Continuing duty to inform employee
3. 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 14th day before dismissal.
Statutory right to request not to retire
4. (1) An employee may make a request to his employer not to retire on the intended retirement date.
(2) A request under this paragraph must be in writing and state that it is such a request.
(3) An employee may make only one request under this paragraph.
An employer's duty to consider a request
5. (1) An employer to whom a request is made has a duty to consider the request in accordance with the following provisions of this Schedule:
(a) if the employer has not complied with paragraph 2, where the request is made before, but not more than [one year] before, the intended retirement date; and
(b) in any other case, where the request is made more than [six weeks] but not more than [one year] before the intended retirement date.
(2) Where, in accordance with sub-paragraph (1) the employer has a duty to consider a request, he also has a duty not to retire the employee until he has complied with the requirements of paragraph 6 in relation to the request.
Meeting to consider request
6. (1) Where an employer has a duty under paragraph 5 to consider a request, he shall do so in good faith.
(2) An employer shall hold a meeting to discuss the request with the employee.
(3) The employer and employee must take all reasonable steps to attend the meeting.
(4) Where a meeting is held to discuss the request, the employer shall give the employee notice of his decision on the request within 14 days after the date of the meeting.
(5) Sub-paragraphs (2) to (4) do not apply where -
(a) an employer agrees to the request and notifies the employee; or
(b) it is not reasonably practicable to hold the meeting within a period of two months from the date of the request, this is not due to a failure on the part of the employer, and the employer complies with sub-paragraph (6).
(6) In the circumstances described in sub-paragraph (5)(b), the employer may consider the request without holding a meeting provided he considers any representations made by the employee and he shall notify the employee of his decision on the request as soon as is reasonably practicable.
(7) A notice under sub-paragraphs (4) or (6) shall:
(a) be in writing;
(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 shall take effect, and set out the appeal procedure; and
(c) be dated.
Appeals
7. (1) An employee is entitled to appeal against his employer's decision to refuse a request by giving notice in accordance with sub-paragraph (2) within 14 days (or, if that is not reasonably practicable, within such further period (not exceeding three months) as is reasonable) after the date on which the notice of the decision is given.
(2) A notice of appeal under sub-paragraph (1) shall be in writing, set out the grounds of appeal and be dated.
(3) The employer shall hold a meeting with the employee to discuss an appeal made in compliance with sub-paragraph (1) within 14 days (or, if that is not reasonably practicable, within such further period (not exceeding three months) as is reasonable) after the employee's notice under that paragraph is given.
(4) The employer and employee must take all reasonable steps to attend the meeting.
(5) Where a meeting is held to discuss the appeal, the employer shall notify the employee of his decision on the appeal within 14 days (or, if that is not reasonably practicable, within such further period (not exceeding three months) as is reasonable) after the date of the meeting.
(6) Sub-paragraphs (3) to (5) do not apply where,
(a) within 14 days after the date on which notice under sub-paragraph (1) is given, the employer upholds the appeal and notifies the employee in writing of his decision; or
(b) it is not reasonably practicable to hold the meeting within a period of two months from the date of the appeal, this is not due to a failure on the part of the employer, and the employer complies with sub-paragraph (7).
(7) In the circumstances described in sub-paragraph (6)(b), the employer may consider the appeal without holding a meeting provided he considers any representations made by the employee and he shall notify the employee of his decision on the request as soon as is reasonably practicable.
(8) Notice under sub-paragraphs (5) and (7) shall:
(a) be in writing;
(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 shall take (or took) effect; and
(c) be dated.
(9) Consideration of the appeal, either in a meeting or under sub-paragraph (7), need not take place before the dismissal takes effect.
Remedies
8. (1) Where an employer fails to comply with paragraph 2, an employment tribunal may make an award of compensation to be paid by the employer to the employee.
(2) The amount of compensation shall be such amount, not exceeding eight weeks' pay, as the tribunal considers just and equitable in all the circumstances.
The Regulations will set out a new procedure that will have to be used for any mandatory retirement - the "duty-to-consider" procedure. Under this procedure, an employer that wishes to retire an employee will have a duty to notify that person 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 working beyond the intended date of retirement. The DTI consultation envisages that both the notice of "planned retirement" and initiating the duty-to-consider procedure can be complied with by a single notification from the employer.
The duty to consider is procedural, not substantive. There is no obligation on an employer to give an employee a reason for refusing a request and, even if the employer does so, it will not be possible for an employee to bring a claim challenging the adequacy of the employer's reasons for refusing a request. Thus, if the employee makes a request in writing to work beyond the retirement date, the employer has no duty to grant the request, but it does have a duty to follow the procedure laid down in the Regulations. The existing statutory dismissal procedure will not apply to retirement dismissals: only the duty-to-consider procedure will apply.
Paragraph 5 of Schedule 7 to the Regulations provides that where the employer has a duty to consider the request, it also "has a duty not to retire the employee" until the proper procedure has been followed. This is set out in para. 6 and requires the employer to hold a meeting with the employee to discuss the request. The employer has to give the employee its written decision as to the request within 14 days of the meeting.
An employee is entitled to appeal against the decision to refuse a request not to retire. Provided proper notice of an appeal has been given, the employer has a duty to have a further meeting with the employee to discuss the appeal.
The DTI consultation says: "The duty to consider will be modelled on the existing right to request flexible working, which applies to parents of young children. This has proved a successful and light-touch way of encouraging employers to think about whether a different pattern of work could be accommodated in the workplace." Introducing the consultation, the secretary of state claims: "We believe that the new duty to consider requests to continue working longer will have the same success as the existing right to request flexible working, and that it will further change the retirement culture in this country."
This is rather disingenuous. 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, £280. Therefore, the maximum awardable for a failure to notify the employee of his or her right is £2,240. Failure to comply with the right to request flexible working has the same remedy.
In the case of the right to request flexible working, however, this is underpinned, in the vast majority of cases, by a parallel indirect discrimination complaint under the Sex Discrimination Act, in respect of which there is no upper limit on compensation. Most observers would conclude that it is the prospect of an award of unlimited compensation, rather than the "light touch", that has encouraged employers to consider requests for flexible working.
Similarly, the remedy for a failure to consider a request not to retire - compensation of up to eight weeks' pay - is in itself unlikely to have huge impact. The real deterrent for employers will lie in the potential consequence of such a failure on unfair dismissal claims.
New s.98ZD of the Employment Rights Act provides that an employee will be regarded as unfairly dismissed if the employer did not notify the employee of his or her right to make a request not to retire on the intended retirement date, except where the employee knew of the right to make a request and of the intended retirement date more than 14 days before the day of the dismissal. The reason why the sanction of automatic unfair dismissal is only triggered if the employer fails to notify at least two weeks in advance of the retirement date is explained by the DTI as being that "it will still be reasonably possible for the employee to put in his request to continue working even if the employer notifies him or her less than six months in advance. If he does so, both parties can still complete the duty-to-consider procedure as normal. This is different if the notification is given less than two weeks in advance. In this case, the employee would not have a reasonable opportunity to make a request."
New s.98ZD also provides that if the employee has made such a request, failure to comply with the duty-to-consider procedure will be an automatic unfair dismissal if the non-compliance "is wholly or mainly attributable to failure by the employer".
Although the duty-to-consider procedure, therefore, will have some teeth, there is still a fundamental difference in practice between the proposed new right and the right to request flexible working. If an employee combines an indirect sex discrimination claim with a flexible working complaint, the reasonableness of the employer's refusal to allow flexible working will be considered by the tribunal under the Sex Discrimination Act. In contrast, there is no mechanism whereby an employee will be able to challenge the reasonableness of an employer's insistence on mandatory retirement and its refusal to allow a request to work past the planned retirement date. The government's "light touch" approach means that the employer's duty will be satisfied if it goes through the procedural hoops.
Statutory redundancy payments
The Regulations will make a number of changes to the statutory redundancy payment scheme, which will take effect in respect of redundancies occurring after 1 October 2006.
The lower age limit of 18 will be removed. The upper age limit of 65 will also be removed, notwithstanding the default retirement age. In the government's view, "the redundancy upper age limit does not form part of the default retirement age. We do not believe that there are legitimate aims supporting discrimination against older employees in the form of an upper age limit on redundancy payments." The Impact Assessment adds: "The rationale previously advanced for it was that on reaching the normal retirement age for his/her job, or age 65 if lower, an employee could no longer be said to have a legitimate expectation of continued employment. It was, therefore, justified for him/her to be denied entitlement if kept on by the employer and then made redundant … It would, however, be untenable, in the light of the new EU age discrimination requirements, to argue that it was actually to the benefit of employees over retirement age to deny them entitlement to a payment that would be due to younger colleagues in identical circumstances."
The Regulations will also remove the tapering-down rule, whereby the statutory redundancy payment gradually tapers down to zero for those employees who are within one year of the upper age limit.
The two-year qualifying period will not be altered and length of service will be maintained as a factor in the calculation of redundancy pay. The DTI consultation explains that: "This is justified because it ensures that the redundancy payment rewards past loyalty of the employee, expressed in the length of service."
The main controversial issue is the multiplier to be used. This is currently based on age bands, ranging from half a week's pay for younger workers to one-and a-half weeks' pay for older workers. The government has decided to remove the age bands, and originally proposed to make the multiplier one week. This has been strongly opposed by the TUC, which argues that this would be contrary to the Directive's principle of non-regression in that some employees would be worse off as a result. The consultation says that the level of the multiplier has yet to be determined. The Impact Assessment points out that equalisation can be achieved either by levelling up "or by raising the statutory upper limit for payments" (currently £280 per week). What the government will do on this remains to be seen.
* Equality and Diversity: Coming of age, available at www.dti.gov.uk/er/equality/age.htm.
† Employment Equality (Age) Regulations 2006.
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IRS and Lewis Silkin Solicitors will be presenting an important one-day conference on the new age discrimination Regulations in central London on Wednesday 19 October 2005. The conference is devised and chaired by EOR co-editor Michael Rubenstein, who will also be speaking on key principles of the Regulations. Patrick Grattan, chief executive of Third Age Employment Network, will be giving a keynote address. The other sessions will be taken by leading expert speakers from Lewis Silkin Solicitors: Emma Perera on recruitment and selection issues; Carolyn Soakell on terms and conditions of employment; James Davies on dismissal and retirement issues; and Russell Brimelow and Lucy Lewis on auditing for age discrimination. Further details from www.conferencesandtraining.com/age. |
