Default Retirement Age- Latest developments

31st July 2010 The Government has announced the details of how it proposes to phase out the
current default retirement age of 65 years.

The Government has published a consultation document on this matter.The consultation will run until the 21st October 2010. 

Under the current regulations a retirement dismissal is automatically fair so long as the employer follows the set procedure set out in the regulations. This involves a number of steps, including writing to the individual between 6 and 12 months in advance of the proposed retirement date, and informing them of the right to request to work beyond the expected retirement date. 

The main proposals under consultation include that:-

1. Retirements under the Regulations will end completely on the 1st October 2011 (and no new notices of intended retirement may be issued after the 6th April 2011).

2. Transitional arrangements will apply to retirements that have been notified before the 6th April 2011 to take effect before the 1st October 2011. nb retirements that are notified before the 6th April 2011 which are intended to take effect after the 1st October 2011, will not be valid UNLESS they are objectively justified.  

3. Retirement dismissal will still be permissible after the 1st October 2011, but only if they are objectively justified.  

4. The procedural requirements under the current retirement regulations (such as notifying the employee of the expected retirement between 6 and 12 months in advance of that date) will be repealed.

Clearly it makes sense to remove the default retirment age of 65 years in light of the fact that the age for entitlement to the State Pension will have to rise above the current age of 65. The Government is not currently proposing an alternative default retirement age. Retirement will presumably then be a matter of basic contract agreement  between the employer and employee. This development highlights the need to specify the expected retirement age in the contract of employment (something which from experience we know if often ommitted!). Only by specifying the expected retirement age in the written contract can the employer then avoid arguments on this subject. As the retirement age will have to be objectively justified, employers will have to give careful thought to the reasoning behind the preferred retirement age.

Somewhat ironically, in view of the timing of the Government's consultation, the Court of Appeal has, in the case of Seldon v Clarkson, Wright and Jakes, just given a ruling on the subject of the default retirement age where it applies to partners in a business. This case concerned the retirement of a partner in a firm of solicitors.The firm's partnership deed referred to compulsory retirement at 65 years. When Mr Seldon was required to retire at age 65 he brought a claim that the retirement was in breach of the retirement regulations- which prohibited discrimination in business partnerships on the grounds of age. The Tribunal agreed that the partnership had established a number of objective reasons for the retirement at 65 years, and ruled that it was proportionate. The partnership argued that it was necessary to allow career progression to junior staff into the partnership, and assisted and enabled staff planning. On appeal Mr Seldon argued that the legitimate aims to justify the retirement could not be the employer's individual objectives,  but must be of a "social policy or public interest" nature. This was rejected by the Court of Appeal. This measn that an employer can rely on it's own (but legitimate and objective) criteria and reasons for the setting of the retirement age. This is good for employers as it allows them to consider their specific business requirements and needs in justifying the normal (default) retirement age they operate. The Court of Appeal ruled that the fact the current default retirment age is 65 years supported the objective and legitimate decision of this business to use the age of 65 years as the normal retirment age. Clearly this latter point will not survive much longer. Employers must remeber to use the current process to avoid the risk of claims in the Tribunal on this issue.

Please contact us if you need further help or advice on this subject.