The Employment Equality (Age) regulations 2006 came into force on 1 October 2006 and for the first time in the UK, discrimination on the grounds of age is now unlawful.  The effect of this legislation is substantial.

The regulations prohibit the following types of discrimination on grounds of age:

• direct discrimination - less favourable treatment on the basis of actual or perceived age which cannot be justified;
• indirect discrimination - a provision, criterion or practice that applies to everyone but which causes a particular disadvantage to a certain age group and which cannot be justified;
• harassment on grounds of age;
• victimisation - dismissal or adverse treatment because a complaint of age discrimination has been made; and
• instructions to discriminate on grounds of age;

The regulations also introduce:

• A default retirement age of 65;
• A duty for employers to consider an employee’s request to continue working after they are due to retire;
• Removal of the upper age limit for unfair dismissal and redundancy rights;
• Limits on the use of “length of service” criteria for pay and benefits;
• A questionnaire procedure matching that in other discrimination legislation;

The aim of this article is to provide an introduction to one aspect of the regulations in particular, namely the new retirement provisions which will affect all employees as they approach retirement.

We hope that this guide will help you to navigate your way through these complicated provisions and provide you with all of the tools needed to comply with the new obligations whilst minimising the risk of unfair dismissal claims arising upon retirement.

Retirement

Before 1 October 2006, an employee who reached his employer’s normal retirement age, or the age of 65 where his employer did not have a normal retirement age, could be retired without any procedures being followed.

Although technically the existing statutory dismissal procedures applied to a compulsory retirement, employees who were over an employer’s normal retirement age could not usually bring a claim for unfair dismissal and so could not complain about a failure to follow these procedures.

In practice, most employees simply retired without question when they reached retirement age.  Even if an employer allowed an employee to work beyond the existing normal retirement age (or 65, if there is none), the employer could sack him or her with relative impunity at any time thereafter, again because the employee had no right to bring a claim for unfair dismissal if he was dismissed after his retirement age.

The new regulations have introduced an entirely new approach to retirement:

• Claims for Unfair Dismissal may be brought by employees who are over the normal retirement age;
• Retirement has become the 6th potentially fair reason for dismissal;
• A dismissal at a normal retirement age which is lower than the default retirement age of 65 will not be a retirement unless an employer can justify that lower retirement age.
• In practice, 65 will become the retirement age in the vast majority of cases;
• Use of the correct procedures is vital.  By complying with the correct procedural requirements, the law deems the dismissal both to be by reason of retirement and fair, no matter what the employee argues, and no matter what evidence might be available to suggest otherwise;
• Where retirement is not the real reason for dismissal, the dismissal is unfair and discriminatory;
• Allowing a worker to work beyond 65 does not prejudice an employer’s right to retire him later.  A retirement on or after the normal retirement age is lawful providing the correct procedures are followed – so the employer can grant a limited extension, but still retire an employee later.

Default Retirement Age

The regulations provide for a default normal retirement age of 65.  Effectively, setting a retirement age which is lower than 65 will amount to direct age discrimination unless an employer can show that having a lower retirement age can be justified – or in the words of the regulations, is “a proportionate means of achieving a legitimate aim”.

In practice, it is likely to be very difficult for employers to justify a lower retirement age than 65.  So the first issue for employers who have a lower retirement age is either to raise the normal retirement age to 65 or to very carefully evaluate the reasons why they believe they need to retain a lower retirement age.

Dismissal by reason of retirement

A dismissal which is claimed by an employer to be by reason of retirement may be discriminatory and/or unfair if in fact the dismissal is not genuinely a retirement or if it has been carried out without carrying out the retirement notification procedures.

However there are two circumstances where retirement is deemed to be the reason for dismissal without question.

The first is by far the most common:

• The employer complies with the full retirement notification procedure and the dismissal takes effect on or after the employee’s 65th birthday (unless the employer, unusually, has a normal retirement age of over 65) and on the notified date of retirement set out in the notification letter;
• The employer has a normal retirement age which is below 65, the employer is able to justify that retirement age, the employer complies with the retirement notification procedure, the dismissal takes effect on or after the employee reaches the normal retirement age and on the notified date of retirement;

In either of these two circumstances, an employee cannot argue that he was dismissed for a reason other than retirement.  For this reason, employers who follow the procedure carefully can, in effect, “retire” employees without liability, even where retirement is not the real reason for the dismissal.  Neither is there a need to go through performance or redundancy procedures.

Dismissal by reason of retirement

There are also circumstances where retirement cannot be the reason for dismissal, no matter what the employer argues:

• The employer has a normal retirement age (whether under or over 65) and the dismissal takes effect before the employee reaches the normal retirement age;
• The employer has no normal retirement age and the dismissal takes effect before the employee reaches the age of 65;
• The employer has a normal retirement age which is below 65 and the employer is unable to justify that retirement age;
• The employer complies with the retirement notification procedure but the dismissal takes effect before the notified date of retirement;
• The employer does not fully comply with the retirement notification procedure but does notify a retirement date and the dismissal takes effect before the notified date of retirement;

If a dismissal is not by reason of retirement then the statutory disciplinary and dismissals procedures and the normal principles of fairness apply to the dismissal.

Reason for dismissal decided by tribunal

There is a third category of cases where it will be up to a tribunal to decide whether retirement is the reason for dismissal:

• The employer has not complied fully with its obligations under the retirement notification procedure (usually because it has not given the minimum six months notice of the right to request working after retirement or has even given no such notice at all) but it has notified a retirement date and the dismissal takes effect on the notified date of retirement;
• The employer has complied with its obligations under the retirement notification procedure but the dismissal takes effect after the notified date of retirement;

In order to determine whether retirement is the reason for dismissal, the tribunal must take into account factors such as:

• Whether the employee has taken certain “remedial” steps;
• When those steps were taken;
• Whether the employer held a meeting to consider a request to work on beyond retirement as part of the retirement notification procedure;

Fairness

Once a tribunal has concluded that retirement is the reason for dismissal, it must go on to consider the fairness of the dismissal in accordance with a new procedural test prescribed solely for retirement dismissals.

In effect, whether a retirement dismissal is “fair” will depend entirely on compliance with the retirement notification procedure set out below – described in the regulations as the duty to consider working beyond retirement.  Tribunals will only have to consider this test and not the general fairness test which exists at section 98(4) of Employment Rights Act 1996 in relation to other types of dismissal.

In summary a retirement dismissal is a fair dismissal if:

• It takes place at or after a normal retirement age of 65 or a lower normal retirement age which has been set and can be objectively justified by the employer; and
• The new procedural requirements for compulsory retirement (the retirement notification procedures) set out in Schedule 6 of the Regulations have been followed.

This means that the employment must have given notification six months before the retirement date, or must have taken the remedial steps described below.  Any request to work beyond retirement age must then have been considered;

A retirement dismissal will be automatically unfair where:

• The employer has not informed the employee of the right to request to continue working and of the intended retirement date at least two weeks before the retirement date;
• The dismissal takes effect while a "duty to consider" procedure is still under way and the employer has not yet held the meeting with the employee or informed the employee of its decision; or
• The employer has failed to consider the employee's appeal against a decision to retire him.

Getting away with it - what happens when the employer gets it wrong?

An employer has a duty to inform an employee, between 6 and 12 months before his retirement will take effect, what his retirement date will be and that he has a right to request to work beyond that date.

• But if the employer fails to do so, all is not lost.  The situation can be remedied, providing that he takes three remedial steps:

  • notice is given before the intended retirement date of what that intended date is;
  • not less than two weeks before to intended retirement date, the employer advises the employee in writing of his “right to request”;
  • the employee’s request (providing it is made before the notified retirement date) is properly considered;

If these key remedial steps are taken, then there are two legal consequences:

1. The dismissal will not automatically be regarded as a retirement, and so a Tribunal will have to decide as a matter of fact whether the dismissal really is by reason of retirement. Take care if you are dealing with a difficult employee who has, for example, raised grievances in the past or who has been identified as a poor performer, then following the minimum remedial steps may still be dangerous; a Tribunal may still conclude that retirement was not your real motive.  In a case like that, consider putting off the retirement so that you can give the full six months notice.
2. But the dismissal will be automatically fair providing you can get over the hurdle of convincing a Tribunal that retirement was the real reason.

Note, then, that the real penalty for failing to give the full six months notice of the right to request is that you lose the right to have the dismissal automatically regarded as a retirement.  However, in some cases, that will be a very significant penalty. 

Note also that a Tribunal may award up to eight weeks pay, capped at £310 per week, in relation to a failure to give the full 6 months notice.

Retirement notification procedure - the duty to consider working beyond retirement

The Age Regulations contain a new procedure designed to encourage employers and employees "to enter into a dialogue on the issue of retirement." All employees regardless of length of service have the right to request "not to be retired".  But providing an employer can show that it has considered a request, its decision cannot be challenged.

The “standard” procedure, which will apply to all retirements which take effect after 1 April 2007, is as follows:

• The employer must inform the employee in writing of the intended retirement date and the right to request to work beyond retirement at least six months and not more than 12 months before the intended date of retirement;
• If the employer fails to notify the employee within this time frame, it will still be under a duty to provide the “right to request” information to the employee up until the retirement date. If the employer fails to do this at least two weeks before the intended retirement date, the dismissal will be automatically unfair;
• If the employee makes a request to work beyond retirement between six months and three months before the intended retirement date or, where the employer has failed to notify in accordance with the regulations, at any time up to the intended retirement date, then the employer has a duty to consider the request and must either agree to the request or meet with the employee within a reasonable period to discuss it;
• The employer must then inform the employee of its decision as soon as is reasonably practicable. It does not have to give the employee any reasons for rejecting the request;
• The employee can request and the employer can agree that the employee will work beyond retirement  either for a stated period or until a stated date or indefinitely;
• The employee can appeal the employer's decision by giving notice as soon as is reasonably practicable after receiving the employer's decision.  The appeal meeting should take place within a reasonable period;
• The employer must then inform the employee of its decision upon the appeal as soon as is reasonably practicable;
• If a request to continue working is granted, the employee will have the same employment rights as an employee has prior to the normal retirement age, including the right to make another request to continue working. Only one "formal" request can be made for each "retirement occasion". However, as with flexible working, there is nothing to prevent an employee making an "informal" request;
• Where the employer realises that it has not yet complied with the requirement to give at least six months' notice, it should consider sending the “remedial” letter, providing it is sent at least two weeks before the dismissal takes effect.  Providing the employee makes a request before employment ends, that request must be considered and an appeal granted if necessary.