Case of the week: compulsory retirement risk for private and public sector: Johns v Solent SD Limited

Johns v Solent SD Limited, Employment Appeal Tribunal

Background The default retirement age exemption in the Employment Equality (Age) Regulations 2006 allows employers to retire employees at 65, as long as a retirement process is followed.

This exemption is the subject of a challenge by the National Council on Ageing, operating as the Heyday group.

Heyday claims that the exemption is inconsistent with the European Directive on age discrimination.

Heyday’s case has been referred to the European Court of Justice (ECJ), but a decision is not expected until early 2009. However, early indications are that the default retirement age may be here to stay.

In Palacios de la Villa v Cortfiel Servicios, the ECJ recently decided that Spanish compulsory retirement provisions were lawful. There are, however, differences between the Palacios and Heyday cases, and the outcome of Heyday will depend on its facts and whether the ECJ believes that the UK government can justify the default retirement age.

In the meantime, tribunals have had to decide whether to freeze age discrimination cases based on the issues in Heyday, pending the outcome of that case.

Facts Solent retired Mrs Johns in 2006 by following the retirement process in the age regulations. Johns was over 65 at the time of her retirement and, therefore, the default retirement age exemption in the UK age regulations applied.

Johns brought a claim against Solent for unlawful age discrimination and unfair dismissal. She accepted that Solent had followed the proper retirement process, but argued that her claim should be put on hold pending the ECJ’s decision in Heyday.

The tribunal rejected this argument and struck out her claim on the basis that it had no reasonable prospect of success.

Johns appealed to the Employment Appeal Tribunal (EAT).

Decision The EAT overturned the tribunal’s decision and froze Johns’ claim pending the decision in Heyday.

The EAT’s decision is not available in full, but it appears it found that the outcome of Heyday is uncertain, and if the Heyday challenge does succeed, Johns would have a reasonable prospect of winning her claim.

Since this decision, the president of the employment tribunals has directed that all claims of age discrimination relating to the default retirement age should be put on hold pending the outcome of the Heyday case.

Key implications This decision potentially exposes all employers to risk if they compulsorily retire employees. Any age discrimination claim relating to the default retirement age will be put on hold for the time being.

This is the case even where the employer has followed the retirement process set out in the regulations, and relied on the default retirement exemption.

As public sector employees have direct rights under the European directive, if the ECJ agrees with Heyday, claims brought now (within the relevant time limits) by public sector employees will be able to proceed.

As private sector employees do not have direct rights under the directive, it had been thought that the private sector was unaffected by the Heyday challenge. However, this decision suggests that private employers may also be at risk. Solent is a private employer and the EAT said that Johns’ claim had a reasonable prospect of success if the Heyday challenge succeeds. The basis for this decision is as yet unclear.

Solent has been given permission to appeal to the Court of Appeal, and we await clarification of this decision, in particular the impact on the private sector. The tribunal’s direction to put claims on hold will also be revisited in light of the Court of Appeal decision.

In the meantime, employers relying on compulsory retirement should tread carefully. At the very least, employers should follow the retirement process to the letter, but even those that do so are potentially at risk.

Judith Harris, professional support lawyer, Addleshaw Goddard

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