Compulsory retirement has had its day

Should employers be able to sack workers simply because they have reached a certain age? The current UK regulations on age discrimination say they can.

Employers can set a default retirement age of 65 for men and women, after which employees can be made to retire. Age Concern’s challenge to these regulations – the so-called Heyday case – brought under the EU’s equal treatment directive, has rumbled on since 2006.

In its judgment on the case earlier this month, the European Court of Justice (ECJ) failed to decide whether the default retirement age is lawful or not. The court ruled that the government can legislate to allow employers to set a retirement age.

However, the judgment underlined that the government needs to be able to justify such an exemption from age discrimination laws on social policy grounds, such as meeting employment policy, labour market or vocational training objectives.

This ruling has inevitably disappointed organisations, including the CIPD, that have consistently argued for the removal of the default retirement age. CIPD research, Future Demand for Working among Older Workers (2007), shows that many employees wish to work past retirement age. The survey found that 38% of individuals planned to carry on working beyond 65, and a further 31% would work past retirement if their employer allowed them to work flexibly.

The whole idea of retirement has a curiously dated feel today. Many people want to be able to combine work and retirement in a more flexible way than has been possible in the past, and a fixed retirement age doesn’t encourage this flexibility.

There are wider economic arguments for abandoning the concept of a default retirement age. Demographic projections suggest that people aged over 65 will constitute nearly half of the population by the year 2050. It is inconceivable that younger people will be able to bear the full burden of supporting them financially, particularly given the liabilities which the taxpayer has recently assumed in an attempt to stave off the worst consequences of recession.

So, far from driving older people into retirement, we will need all the help we can get to maintain output and employment in the years ahead.

Happily, it is also possible to adopt a ‘glass half full’ interpretation of the ECJ ruling.

The court found that it was ultimately for the High Court to determine whether, and to what extent, a provision that allows employers to dismiss workers who have reached retirement age is justified by ‘legitimate’ aims.

What are the chances that the British government will be able to justify retaining a default retirement age?

The ECJ has made clear that a high standard of proof is required in establishing the legitimacy of social aims that might justify retaining a default retirement age. Employer reluctance to talk to older workers about performance issues will not fall into this category. Equally, asserting that it is healthy, on social grounds, to move older employees on so that younger people can take their place will hardly wash when employment levels need to be increased, rather than reduced, and pension funds are coming under serious financial pressure.

The better question is not whether the government will be able to defend the default retirement when the issue returns to the High Court, but whether it will even wish to. The government is committed to review the issue in 2011 it is unclear whether the Heyday case will have been finally decided significantly earlier than that.

But in any case, it increasingly looks as if the days of the default retirement age are numbered, whether this comes about as a result of legal, economic or political pressures.

In the meantime, employers should plan actively to apply the normal performance management criteria when considering whether to terminate the employment of older people. The soft option of enforced retirement may not be open to them for much longer.

Mike Emmott, employee relations adviser, Chartered Institute of Personnel and Development

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