The new age discrimination regulations released on 9 March 2006, once approved by Parliament, will come into force on 1 October 2006. The regulations prohibit age discrimination and will affect many areas of the employment relationship including recruitment, promotion, benefits, pensions and retirement.
Unlike the United States, where the federal age discrimination law protects only employees aged 40 and over, all age groups will be protected by the legislation in the UK—both young and old.
The regulations will be wide ranging and have the following consequences:
- Employers can still have (and enforce) a retirement age for their employees, but this cannot be below 65 unless a lower age is justified, which will be very rare.
- Employers who want any employee to retire at or after 65 will be required to notify employees in writing and at least six months in advance of their intended retirement date (even if a set retirement date is specified in the contract).
- Employers will be required to consider an employee’s request to continue working beyond retirement based on a meeting or written representations and subject to a specified procedure (including an appeal).
- Currently, employees above the normal retirement age cannot claim unfair dismissal and are not entitled to a redundancy payment. However, this upper age limit will be removed. Dismissed workers over 65 will have the right to claim unfair dismissal and to receive a redundancy payment where redundancy is the reason for dismissal. "Retirement" dismissals will be automatically unfair unless the notification and request procedure outlined above are followed. As the regulations are complex, we expect plenty of litigation in which employees argue that some procedural problem means the dismissal was unfair. Maximum compensation for unfair dismissal is currently £58,400, but such claims are likely to be brought in tandem with other age discrimination claims (such as harassment) for which compensation is uncapped.
- The regulations include provisions affecting service-related benefits and occupational pensions, as described below.
The regulations outline two forms of discrimination: direct and indirect.
Direct discrimination occurs when a person’s actual or perceived age is used as a reason for different treatment in a comparable situation and there is no objective justification for doing so. The fact that direct age discrimination can be justified differentiates it from other forms of discrimination, such as sex and race, which can never be justified. For example, advertising for a "young and dynamic professional" will be unlawful unless it is objectively justifiable.
Indirect age discrimination occurs when an apparently neutral practice disadvantages persons of the same age group, even if this effect is inadvertent. For example, advertising for "recent graduates" may indirectly discriminate against an older age group. Again, this will be unlawful unless it can be objectively justified. "Age group" is not defined by the regulations but will include a group with a range of ages.
The objective test of justification is the same for both direct and indirect discrimination. The treatment must be a proportionate means of achieving a legitimate aim.
To be legitimate, the aim must correspond with a real need of the employer. A probable example of a legitimate aim would be employees’ and clients’ health, safety and welfare, or the need to encourage and reward loyalty amongst staff.
When considering whether the means of pursuing the legitimate aim are proportionate, the employer must be able to show that the practice contributes to the pursuit of the legitimate aim (ie, the use of an age-related practice to encourage loyalty must actually do so). The importance of the aim being pursued should be weighed against its discriminatory effects.
The regulations will prohibit harassment on the grounds of age. An individual subjects another to such harassment where, on grounds of age, an employee engages in unwanted conduct which:
- Violates another employee’s dignity or
- Creates an intimidating, hostile, degrading or offensive environment.
The conduct can be unintentional, but it can never be justified. The test of whether harassment has taken place is both objective and subjective. It is a test of what is reasonable taking into account the complainant’s subjective perception.
An employer can be held liable for an employee’s actions unless it can show that it took such steps as were reasonably practicable to prevent the employee’s behaviour. However, case law dealing with other forms of discrimination, such as age and sex, which also have this type of "defence" for an employer, has shown that it is very hard for employers to meet the standard required to rely on this defence.
Victimisation on grounds of age will amount to discrimination if the employee has made or intends to make an allegation or complaint with regards to age discrimination, in good faith, and is treated less favourably as a result. If the employee makes allegations they know to be false, the employee will not be protected.
The regulations regarding retirement are complex and likely to result in much litigation. There are also "transitional provisions" which must be used for terminations before 1 April 2007. These are set out in more detail below.
Retirement under the regulations depends on what age (if any) the employer normally retires its employees and when the notice to terminate and the termination itself takes place.
Normal Retirement Age—65 or above
If the employee has a normal retirement age (either in the employment contract or by custom and practice) of 65 or above, the employee will be dismissed fairly provided the correct procedure has been followed (set out below) and the dismissal takes place on the intended retirement date (as set by the employer or as modified by the parties during the procedure).
Normal Retirement Age—below 65
Where the employee has a normal retirement age of below 65, any employee who does not want to retire at this age is likely to challenge the employer on the grounds that the retirement age is discriminatory. To defend such a challenge, the employer will have to objectively justify the lower retirement age. What amounts to objective justification of a sub-65 retirement age is unclear but is likely to be proved in only exceptional circumstances, such as for high risk jobs (eg, pilots, firefighters) where health and safety is of paramount importance.
Even if the lower retirement age is objectively justified, the correct procedure must be followed in order for the dismissal to be fair, and the dismissal must take place on the intended retirement date (as set by the employer or as modified by the parties during the procedure). Sub-65 normal retirement ages which are not objectively justified will, if challenged, be discriminatory, and a retirement at this age will be an unfair dismissal.
No Normal Retirement Age
Where the employee has no normal retirement age, the "retirement" dismissal will be fair provided the correct procedure is followed and the dismissal takes effect on or after the employee’s 65th birthday and on the intended retirement date (as set by the employer or as modified by the parties during the procedure).
The regulations introduce a "duty to consider procedure" which must be followed on retirement. First, the employer must, six to 12 months before retirement, inform the employee of the date of intended retirement and the employee’s right to request to work after the retirement age.
It is then for the employee to request to continue working. If the employer has given six months notice of retirement, the employee has three months in which to make such a request, ie, the employee has to make the request three months before the employee would otherwise retire. If the employee misses this deadline, the employer has no obligation to consider his request, and the retirement can go ahead as planned by the employer. The employee’s request must propose that his employment continues indefinitely, for a stated period or until a stated date.
The employee may make this request even if the employer has failed to notify the employee of his impending retirement. In this case, the employee must identify in his request the date on which it is believed the employer was intending retirement.
The employer must then either agree to the request or meet with the employee to discuss it unless a meeting cannot be held within a reasonable period of time. In such cases, the employer must consider any written representations from the employee. Following consideration, the employer must, as soon as is reasonably practicable, notify the employee of its decision and the right to appeal. The employer does not need to give a reason for its decision.
If the employee chooses to appeal, the employee must do so as soon as reasonably practicable after receiving the decision.
The regulations set out the provisions which apply in the following circumstances between now and 1 April 2007.
Notice of Retirement Given before 1 October 2006; Retirement to Occur between 1 October 2006 and 1 April 2007
In circumstances where:
- Before 1 October 2006, an employer has given notice of dismissal to an employee
- The notice given by the employer is at least that required by the contract or, where the contract requires more than four weeks, at least four weeks, and
- Before 1 October 2006, the employer has made the employee aware that it will consider the employee to be retired at the end of the notice period the employee will be treated as having complied with his notification obligations provided, on or as soon as possible after 1 October 2006, the employer writes to the employee notifying him of his right to make a request to continue working.
A request to continue working will be treated as complying with the provisions of the regulations where the request is made following the employer’s notification; proposes that employment continues indefinitely, for a stated period or until a stated date; or is made at least four weeks before the expiry of the employer’s notice, or if this is not practicable, as soon as possible but no more than four weeks after the termination of employment. Note that this may mean having to consider taking an employee back after retirement.
Notice of Retirement Due on or after 1 October 2006; Retirement to Occur before 1 April 2007
In circumstances where:
- On or after 1 October 2006, an employer has given notice of dismissal to an employee
- The notice given by the employer is that required by the contract or statute, whichever is longer, and
- Dismissal is due to take place before 1 April 2007, the employee will be treated as having complied with his notification obligations provided, before or on the same day as notice has been given, the employer writes to the employee notifying him of his right to make a request to continue working.
A request to continue working will be treated as complying with the provisions of the regulations where the request is made following the employer’s notification; proposes that employment continues indefinitely, for a stated period or until a stated date; or is made at least four weeks before the expiry of the employer’s notice, or if this is not practicable, as soon as possible but no more than four weeks after the termination of employment.
Employees due to retire after 1 April 2007 will be subject to the full procedure as set out above.
What does this mean in practice?
In practical terms, early retirement without freely given consent before the age of 65 will no longer be possible. Contractual terms giving an age for retirement before 65 can not be relied on without justification.
If the employer has a compulsory retirement age of less than 65, they should consider agreeing to a later retirement date with their work force or simply not retire employees until they are 65 (unless there is an objective justification). Employees are, of course, able to request early retirement.
If the employer has a normal retirement age of 65 or above (or no normal retirement age but wants to "retire" an employee of 65 or over) and follows the procedure without delays, retirements will be relatively straight forward and classified as fair. However, if the correct procedure is not followed, it will be up to the Employment Tribunal to decide whether the reason for dismissal was actually retirement. If they decide that the dismissal was really for some other reason, eg, incapacity, the dismissal is likely to be unfair because the employer has not followed the correct procedures required to dismiss for incapacity. In addition to any claim for discrimination and/or unfair dismissal, the Tribunal will award compensation of up to eight weeks’ pay where an employer has failed to comply with its notification obligations.
There is plenty of scope for the employee to complicate and delay the process, for example, by serving a request to continue working but then taking stress-related sickness. In this situation, the employer must consider any representations of the employee. If the employee is too ill to make such representations (under the regulations as they currently stand) the employer’s ability to go ahead with the planned date and to dismiss fairly may be jeopardised. If the termination still occurs without consideration of representations, it will be unfair.
The regulations also do not provide for circumstances where an employer commences the procedure, but, before its conclusion, the employee resigns and claims constructive dismissal. This means that the employment will terminate prior to the intended retirement date, and the dismissal may be found to be automatically unfair. This lack of clarity will inevitably lead to litigation.
Many employers provide benefits which are related to the employee’s length of service. Requiring a certain length of service before the employer gives or increases a benefit is potentially indirectly discriminatory on grounds of age, as (generally) older workers are likely to have longer service than younger workers. Under the regulations, service-related benefits are lawful where the disparity in the benefit is connected to service of up to five years. Benefits for service exceeding five years are also lawful provided it reasonably appears to the employer that the disparity fulfils a business need, eg, loyalty, motivation or rewarding experience. Enhanced redundancy payments are also lawful provided they are calculated in the same way as statutory redundancy payments, albeit on an enhanced basis.
The scope of the regulations means that all employers will be affected by them to some degree. Every employer needs common sense advice about the effect of the new rules on their business. Employers must act now and assess how the law will impact their policies, practices, procedures, and terms and conditions. Retirement procedures should be first in line for review given that the transitional provisions have a direct impact on any notice given now which expires after 1 October 2006.
Employers should also be encouraged to start management training before the regulations come into force to avoid claims which could arise from a lack of understanding. Given employers’ experience in the United States and the amount of claims arising out of age discrimination legislation, employers will need to be properly prepared.