Default Retirement Age to be phased out from April 2011

The Government has recently published a consultation document explaining how it proposes to phase out the Default Retirement Age (DRA).

The DRA will be phased out from 6th April 2011. In removing the DRA the Government intends also to remove all associated statutory retirement procedures, including the duty on employers to give a minimum of six months notice of retirement to employees and the right for employees to request to work beyond their retirement age. Therefore if an employer wishes to dismiss (or retire) an older worker this would entail following a fair procedure and relying on one of the established reasons for a potentially fair dismissal set out in section 98 Employment Rights Act 1996 (i.e. conduct, capability, illegality, redundancy or some other substantial reason).

There will be transitional arrangements for retirements that have been notified prior to April 2011 and where the date of retirement falls before 1 October 2011.

The current legal framework allows employers to objectively justify a compulsory retirement age that is below the current DRA of 65. Removing the DRA will not change this position and “Employer Justified Retirement Ages” (EJRAs) will need to be objectively justified as a proportionate means of achieving a legitimate aim. However, the current statutory retirement procedures will not apply in these situations either.

Responses to the consultation are required by 21st October. If the changes go ahead as outlined employers will no longer be able to use the DRA to maintain a compulsory retirement policy for their workforce at age 65 or above after April 2011 (subject to the transitional period until 1 October 2011 where retirements have already been initiated). Therefore employers wishing to have a compulsory retirement age for their workforce will only be able to do so if they can objectively justify it. The consultation paper states that age discrimination can be justified if it is a proportionate means of achieving a legitimate aim. However it specifically adds that “ it is not easy to demonstrate that a retirement age is objectively justified, so the employer should be confident that it can be objectively justified before deciding to use a retirement age” The consultation also states that an employee would still be able to request to stay on after the objectively justified retirement age and an employer in following a fair procedure would need to properly consider such a request. It seems therefore that the Government is encouraging employers to stop using retirement ages altogether; indeed it promises guidance on managing without retirement ages.

The DRA only applies to employees and so a number of other workers (including office holders and partnerships) are theoretically unaffected. However in the light of the removal of the DRA for employees we consider that the ability of a partnership to justify a mandatory retirement age of 65 (as was upheld by the Court of Appeal in the case of Seldon v Clarkson Wright & Jakes on 28th July) will be more difficult in future.

Employers with a mandatory retirement age must now review whether there are legitimate business needs for its retention. Robust tests will be required to ensure that any remaining mandatory retirement ages after 6th April 2011 can be objectively justified. Failure to objectively justify a retirement age may result in claims for unfair dismissal and/or age discrimination for which employers will no longer have the defence that they followed the statutory retirement procedure.

This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, please go to www.law-now.com