Regulations prohibiting discrimination against employees on grounds of age have been in force since October 2006. However, the Age Regulations contain a controversial exception: employers are permitted to dismiss employees at age 65 by reason of retirement.
In 2006, campaigning group Heyday brought a judicial review against the UK government claiming that the Age Regulations breach European law by allowing compulsory retirement at 65. The High Court referred the case to the European Court of Justice (ECJ). On 5 March the ECJ said that a rule such as the UK's default retirement age can, in principle, be objectively justified but it is for the UK High Court to determine whether it is in fact lawful. The ECJ indicated that the Government will have to establish, to a high standard of proof, the legitimacy of the aim relied on as justification for retiring workers at 65.
The ECJ's findings do not mean that the default retirement age has been upheld. The government will now be forced to defend the retirement provisions of the Age Regulations in the High Court showing that they are objectively justified, i.e. a proportionate means of achieving a legitimate social policy aim.
When the default retirement age was introduced, the arguments put forward in support were that significant numbers of employers use a set retirement age as a necessary part of their workforce planning; and that if all employers only had the option of individually justified retirement ages this could risk adverse consequences for occupational pension schemes and other work-related benefits.
Research carried out by the government in 2006 suggested that only 37% of employers operated a set retirement age. However, even assuming that the government can establish that these were legitimate social aims, it will also have to show that they could not have been achieved in a less discriminatory manner.
So, what should employers do? For now, the default retirement age remains. There is a risk, however, that if Heyday's challenge to the Age Regulations is successful, dismissals carried out under the current law could subsequently be held to be age discrimination.
In the current economic climate the number of employees wishing to work past 65 is likely to increase and employees are more likely to challenge retirement dismissals. The number of age discrimination claims submitted to the employment tribunals rose by over 200% between 2007 and 2008. There is also evidence that employees aged 50 or over are losing their jobs in the recession faster than any other age group.
The best practice approach is to implement proper performance management for older and younger workers. This would enable employers to address performance problems with older workers and, if necessary, dismiss for that reason rather than purely on the grounds of age. This is something which employers may have to get to grips with eventually as the government has committed to reviewing the default retirement age in 2011 with a view to abolishing it.