Compulsory Retirement at 65

October 2006 saw the introduction of Age Discrimination making it unlawful to discriminate against people in the workplace on the grounds of their age.

A recent decision, the European Court of Justice (ECJ) has considered whether the United Kingdom’s Employment Equality (Age) Regulations are compatible with the Framework for Equal Treatment in Employment and Occupation (the Equal Treatment Directive), from which they are derived.

Generally, EU Directives do not have direct force on Member States, but rather create binding outcomes that Member States must achieve within a specifi c time period. It is the responsibility of each Member State to interpret Directives with domestic legislation. The important point is that whatever the shape of the domestic legislation, the outcomes stated in the Directive must be achieved.   

The British Government used the Employment Equality (Age) Regulations to implement the Equal Treatment Directive.

Article 6 (1) of the Equal Treatment Directive states:

“…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 justifi ed 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 allows for legislation that would otherwise be discriminatory but for the fact that it is attempting to achieve a legitimate aim. The question, as always, is what exactly constitutes a legitimate aim?

The British Government relied upon this Article to devise the default retirement age of 65 and subsequent lawful compulsory retirement. There were two reasons behind this decision; the danger that retaining younger staff would be difficult if older staff were to indefinitely delay retirement and the fear that benefits that would become more expensive for older staff, would be removed from all staff by employers.

The Regulations provide that, if the correct procedure is followed, it will not be unlawful to enforce retirement at 65. Dismissal by reason of retirement is currently one of the potentially fair reasons for dismissal contained in the Employment Rights Act 1996.

This procedure detailed in the Employment Equality (Age) Regulations is as follows:

• Between 12 and 6 months from the employee’s default retirement age, the employer should write to them informing them of their retirement date and of their right to request to work beyond that date.
• Between 6 and 3 months of their default retirement age the employee, if they wish to, should inform the employer of their desire to work beyond 65.
• The employer should hold a meeting to discuss the request and inform the employee of their decision within a reasonably practicable time, in writing; if that decision is negative the employee has the right of appeal.
• If the employer rejects the appeal, they should inform the employee in writing and confirm that the employee will be dismissed by reason of retirement on the day they reach 65.

It is clear that on a reasonable interpretation, compulsory retirement of staff at 65 could be seen to be age discrimination; the sole reason for the dismissal is because of the age they have reached. However, the British Government, in enacting the Employment Equality (Age) Regulations relied upon Article 6 of the Equal Treatment Directive in saying it would not constitute unlawful age discrimination and believed they were enforcing a legitimate employment policy.

For us, as employers and advisers, it is quite simple; it is not unlawful age discrimination because the Regulations say it is not unlawful age discrimination as long as the proscribed procedure is followed.   

Heyday, an offshoot of Age Concern, immediately challenged this. Their argument is that a default retirement age of 65 is not permitted by the legislation and is an inherent case of age discrimination. In 2006, they instigated a process of judicial review in the High Court.   

Judicial review is a particular type of court proceeding where a judge reviews the lawfulness of a decision or action made by a public body. It can be requested by anybody who is affected by the decision in question; in this case, Heyday. The High Court referred the decision to the ECJ in December 2006.   

The ECJ has also recently considered the Spanish provisions for a default retirement age and whether they were compatible with the Equal Treatment Directive.   

The case in question Palacios de la Villa v Cortefi el Servicios SA[2007] was referred to the ECJ by the Spanish judiciary.   

Spanish law states that agreements to compulsory retirement are lawful as long as the employees in question have completed the minimum period of contributions and fulfi lled any other requirements for entitlement to a pension.   

The ECJ found that this was compatible with Article 6 of the Equal Treatment Directive as it was an attempt to regulate the national labour market and control unemployment, thus making it a legitimate aim.   

Furthermore, the ECJ decided that the Equal Treatment Directive allowed for considerable fl exibility in the domestic legislation that may implement it.

An Advocate General has recently given an opinion on the Heyday case. While the opinions of an Advocate General are not binding on the ECJ, it does tend to follow them.   

The Advocate General in Heyday believes that a default retirement age can be compatible with the Equal Treatment Directive, it is a question of whether it is lawful in the circumstances; is it a proportionate means of achieving a legitimate aim? The Attorney General believes this is something that should be considered by the UK domestic courts.