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Retirement
Employee Retirement and the Age Regulations
The new statutory retirement procedure is probably the most important aspect of the Regulations. Now that the complications caused by the transitional provisions have ended, we thought this would be an opportune time to set out a brief reminder of the main requirements.
Prior to the Age Regulations, it had always been lawful in the UK for employers to require employees to retire at an age determined by the employer and set out in the contract of employment. Where the contract did not set out any retirement age the default age was 65 – thus, for example, employees over that age were not able to claim certain employment rights such as the right not to be unfairly dismissed or to a redundancy payment.
On the face of it, to require an employee to retire when they reach a certain age, whether they wish to or not, seems clearly to amount to age discrimination and should therefore be unlawful. However, subject to review by 2011, the UK government decided on public policy grounds to retain a 'default' retirement age of 65 such that it will not be unlawful to require an employee to retire at or after that age – provided specific procedures are followed. Failure on the part of the employer to comply with these procedures will normally render a retirement an automatically unfair dismissal, for which employees of any age can now claim compensation. Depending on the extent of the failure, the dismissal may also amount to age discrimination. This article summarises the basic steps an employer must take to avoid costly claims.
The Regulations provide that it will not be unlawful to dismiss an employee where that employee is at or over age 65 at the date of termination of employment and that dismissal is by reason of retirement. However, to avoid potential claims, the employer must initiate the new statutory procedure. This requires that the employer must, not more than 12 months and not less than 6 months before the intended date of retirement, notify the employee in writing of the date he or she is to be retired and of his or her right to request to continue working beyond that date. This is known as the primary duty to notify. The employee's contract must then be terminated on that stated date (unless of course an employee's request to continue working is agreed by the employer). As long as these requirements are met the employee cannot bring a claim of age discrimination in respect of the retirement.
It is important to note that all is not lost if an employer misses the 6 month deadline. The Regulations provide employers with a second chance to 'get back on track' in the form of the continuing duty to notify. This permits employers to notify the employee of the intended retirement date and of the right to make a request right up to the 14th day before the intended retirement date. In this situation, a tribunal may require the employer to pay compensation to the employee for the late notification of up to 8 weeks pay, but the retirement will still be a fair dismissal in respect of which the employee cannot bring an age discrimination claim provided the employer complies with the remainder of the statutory retirement procedure.
However, if an employer does not give proper notification at all (or if it is given within 14 days of the intended retirement date), then it is unlikely that a tribunal will accept that retirement was the reason for the dismissal and protection against an age discrimination claim will be lost. The dismissal is also likely to be deemed automatically unfair.
Whilst compliance with the duty to give proper notification should ensure that the employee cannot successfully claim age discrimination in respect of the retirement, there are further steps which may have to be taken in order to ensure that the dismissal is fair. In particular, the employer must consider any request by the employee to continue working beyond the notified retirement date and, if that request is not agreed in full, consider any appeal against that decision. If these obligations are not complied with, the retirement dismissal will be automatically unfair.
If the employee wants to carry on working he or she must make a request in writing between 3 and 6 months before the intended retirement date (or, if the employer has failed to give notification of retirement by 6 months before the retirement date, at any time before that date). That request must propose that employment should continue indefinitely, or for a stated period, or until a stated date. The employer must then hold a meeting with the employee to discuss the request and give the employee written notification of the decision. This must also set out the employee's right of appeal if the request has not been granted in full. If the employee's request is refused the employer simply has to confirm that he wishes to retire the employee and the date that will take effect, and to inform the employee of his or her right to appeal – there is no requirement in the Regulations to give reasons for the decision to refuse the request. If the employee appeals against the decision, there must be another meeting to discuss the appeal and a written decision on the appeal must then be given. There are no set time limits for this procedure – each step should be carried out 'as soon as reasonably practicable'. The employee has the right to be accompanied by a fellow employee/worker at the meetings to discuss a request or an appeal.
Employers are more likely to be caught out by not properly following the required procedure than by any refusal to agree to requests to continue working.
One important further point is that if the employee is actually dismissed before the notified date, the dismissal will be open to claims of age discrimination and/or unfairness.
Where an employer operates a normal retirement age below 65, the Regulations provide that such retirements will be unfair and discriminatory unless the employer can objectively justify that retirement age. It is difficult to envisage cases in which there will be such a justification, and the safest course will normally be to change the retirement age to 65 or over. In this respect, the wording of the Regulations means that employers whose contracts still provide for a retirement age below 65 may face additional difficulties at tribunal even if they have recently ceased to enforce the contractual retirement age and allow employees to continue working until they are at least 65. Any client whose contractual documentation contains a compulsory retirement age of less than 65 should contact our 24 Hour Advice Service immediately in this regard (if they have not already done so).
It is also important to note that the protection against age discrimination claims provided by the Regulations in respect of retirements only applies to 'employees'. It does not apply to the wider category of individuals known as 'workers'. The termination of a worker's contract for services on the grounds that the individual has reached a particular age will be discriminatory unless objectively justified.
Key Point
The above is only a summary of the new statutory retirement provisions, the detail of which is particularly complex. It is vital that you contact Lindsays 24 Hour Advice Service at least 28 weeks prior to retiring any employee.