MT Expert - Legal: Retirement age on borrowed time

The High Court says the UK's default retirement age is justified. But employers' relief may be short-lived...

Back in December 2006, the National Council on Ageing, part of Age Concern and also known as Heyday, commenced a High Court challenge: they argued that by including provisions in the Employment Equality (Age) Regulations 2006 allowing for compulsory retirement of employees at 65, the Government had failed to implement adequately the European Equal Treatment Framework Directive. In July 2007, the High Court referred various questions to the European Court of Justice, which ruled that the provisions were acceptable provided they could be justified and were ‘a proportionate means of achieving a legitimate aim’. The ECJ then left the High Court to decide whether the default retirement age can be justified by reference to legitimate national social policy aims.

At the time it was thought that identifying a legitimate aim should be reasonably easy for the Government – for example, workforce planning, encouraging employees to save for retirement and avoiding an adverse impact on pensions and other work related benefits. However, showing that a default retirement age of 65 was a proportionate means of achieving that aim was thought to be more of an uphill battle, given the pensions collapse, low saving rates, the economic downturn, and the Government's stated aim of encouraging employees to work for longer. Last October, the cabinet office also announced plans to remove the compulsory retirement age across the civil service by March 2010, leaving the Government liable to be accused of double standards.

Last Friday, the High Court ruled that the UK's default retirement age is lawful, and that it is justified by the Government’s social policy aims (and also that these aims were a labour market objective within the meaning of the Directive). This is good news for employers. There is a significant voice within UK businesses that is against the idea of removing the DRA, because it's viewed as an essential part of employment practice, enabling businesses to plan and develop their workforces - which can also be to the benefit of employees. Without a DRA, the lack of certainty around retirement may create further complications and could lead to an increase in employment disputes. As a result of this ruling, the default retirement age will remain and employers can continue to require employees to retire at 65, with no risk of claims for unfair dismissal or age discrimination (provided that they consider any application made by the employee to work beyond 65 and follow the statutory retirement procedure).

But this may only be a short window of opportunity. On the question of whether the use of a default retirement age of 65 was a proportionate means of achieving its social policy aims, the Court was strongly influenced by the fact that the Government has brought forward its review of the default retirement age from 2011 to next year. The smart money is on it extending the DRA or removing it completely as a vote-winning tactic ahead of the next election. Even if there were a change of Government, it seems likely that the default retirement age is destined to be scrapped as the Conservatives have been backing the Age Concern challenge. There is, however, a strong business lobby in favour of keeping some default retirement age, and there may yet be the opportunity for further consultation and compromise. So watch this space!

Tom Flanagan is an employment partner at Pinsent Masons LLP

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