Statutory Retirement Procedures to be Scrapped

Background

The Government has announced plans to scrap the statutory retirement procedures from April 2011. These procedures were introduced by the Employment Equality (Age) Regulations 2006 (the “Regulations”) and allow “fair” dismissal without an age discrimination challenge at 65 or older (or indeed younger if objectively justifiable), subject to following a set process, including a “duty to consider” requests to continue working.

Key Proposals

The key points to note are as follows:

• The statutory retirement procedures will be phased out from 6 April 2011.
• Following 6 April 2011, employers will not be able to issue any more notifications for compulsory retirement using the procedures. Between 6 April and 1 October 2011, only those employees notified before 6 April 2011 and those whose retirement date is before 6 October 2011, will be able to be compulsorily retired in accordance with the procedures.
• These changes will only apply to those who fall within the statutory definition of employee. A number of groups will therefore be unaffected, such as office holders, partnerships and professions where a statutory age limit is applied (commercial pilots, for example).
• Employees who wish to retire can still do so at any age. The withdrawal of the statutory retirement procedures also does not affect, and should not be confused with, the age at which employees may draw their state pension (due to rise to age 67 by 2036 and to age 68 by 2046).
• Employers will be able to have a compulsory retirement age but only if that particular age can be objectively justified as a proportionate means of achieving a legitimate aim. This is very difficult to prove in most occupations for a given age.
• The Government has suggested that some professions, such as Air Traffic Controllers and the Police, will be subject to compulsory retirement at a specific age.

What Action Should An Employer Take?

Whilst these changes are currently only proposals, a prudent employer should take action now, as the current timetable leaves little time for preparation. Our key recommendations for action points are as follows:

• Consider whether a compulsory retirement age is required by your organisation. If so, it will need to be objectively justified and credible evidence will need to be amassed.
• Review performance and capability management procedures. Whilst this is something employers should do periodically in any event, following the changes, employers will have no choice but to exit older employees whose performance or capability has diminished by using a disciplinary route. The option of carrying out a more “dignified” but still involuntary retirement process will only be available if there is an objectively justified retirement age.
• Carry out due diligence into up-coming retirement dates. Employees whose 65th birthdays fall before 6 October 2011 should be notified of their retirement prior to 6 April 2011 in order to meet the cut-off date.
• Consider whether the business requires guidance on how to approach retirement discussions in the light of these changes. During the transition process, managers may innocently make age-related comments which could lead to claims.

We are happy to assist with any of the recommendations set out above.

What next?

The Government has suggested that employers stand to save £45 million in the first year and that there will be between 200 and 400 fewer Tribunal cases as a result of these changes. Employers could be forgiven for treating these statements with some scepticism.

Some employers may be relieved that the complicated statutory retirement procedures are set to be removed. However, with the Government declaring its intention to extend the right to request flexible working in this year’s Queen’s Speech, an employer’s procedural workload seems unlikely to decrease in the near future if older workers seek to work longer but more flexibly.

As a result of the proposed changes, we anticipate age discrimination claims in relation to entire professions or organisations if businesses continue to set, and seek to justify, their own compulsory retirement ages. Therefore, whilst the substance of age discrimination claims may alter, the volume of claims seems unlikely to drop in the near future.

As part of consultation, the Government is asking whether specific guidance on handling retirement dismissals is required. If the response is positive, employers should expect the introduction of an ACAS code or similar dealing with this issue.

The proposal is subject to consultation which is scheduled to run until 21 October 2011. We will provide further updates on this topic when more information becomes available.