Currently, employees can be dismissed with relative impunity at the employer’s normal retirement age. Employees generally have no legal recourse against compulsory retirement. Age discrimination is not unlawful and they are ordinarily barred from claiming unfair dismissal or redundancy rights after they reach the normal retirement age, or 65, the state pension age.
However, all this is set to change on 1 October 2006, when age discrimination will become unlawful in the UK. The final age equality regulations are due to be published soon. These will:
- apply to employees, contract workers and any officeholders
- prohibit direct and indirect age discrimination unless it can be objectively justified
- set a default retirement age of 65
- introduce a duty on employers to consider a request by an employee to work after 65
- remove the upper age limits for claiming unfair dismissal and redundancy rights
- allow limited use of length-of-service criteria in pay and non-monetary benefits.
Retirement
Employers will still be able to retire employees at a compulsory retirement age. However, if the employee does not retire voluntarily this will constitute a dismissal and could be subject to challenge for unfair dismissal. There will, however be a presumption that a dismissal is fair if it is due to a ‘planned’ retirement and the new “duty to consider” procedure is followed.
The regulations will distinguish between ‘planned’ retirement, retirement at 65 or a higher or objectively justified lower age and retirement ‘out of the blue’.
Under the duty to consider procedure the employee has the right to request to work beyond retirement. The employer must arrange a meeting to discuss this, give its decision and allow an appeal. The employee has no substantive rights. There is no penalty for the employer refusing a request. The only penalty is up to eight weeks’ capped pay for non-compliance with the actual procedure. If the procedure is not followed, then any dismissal is automatically unfair. Provided, therefore, that the retirement is planned and the procedure is followed, it will be a fair and non-discriminatory dismissal which will be difficult for the employee to challenge. Retirement decisions should be carefully planned and documented to support this.
Unfair dismissal
Employers will not be able to rely on the presumption that dismissal is due to genuine retirement where they dismiss employees after the planned retirement date. There may be a variety of reasons for dismissal and retirement might be the easier/cheaper option, but employers will have to prove retirement is the genuine reason. An employer faced with a poor performer at or above retirement age may want to retire them rather than performance-manage them out. If, however, circumstances suggest that this is not a genuine retirement, the employer could face claims for unfair dismissal (and automatic unfair dismissal if the statutory dismissal procedures are not followed) or age discrimination.
Redundancy
Employers undertaking a redundancy programme may want to retire employees at or above retirement age rather than make them redundant. However, if the reason for dismissal is redundancy they could be liable for unfair dismissal and/or age discrimination. Even if they decide to make the employee redundant, they could still be liable – for example, if the employee is selected on the basis of unjustifiably discriminatory selection criteria.
Employers should assess the age profile of employees at risk of redundancy and carefully analyse any apparently neutral criteria which could indirectly and adversely affect certain age groups, for example IT skills, ‘potential’, ‘dynamism’, geographical mobility and attendance. Even where the criteria are objective they should analyse the underlying reasons for poor scores that might be age-related.
In Roge v NYP Holdings, Inc, No.00-77773, Mitsubishi Motor Manufacturing of America faced claims from five former managers for age discrimination on the basis that their dismissals during a redundancy exercise were age-related, because those taking their jobs were younger and less skilled. Age discrimination has been outlawed in the US since 1967 under the Age Discrimination in Employment Act.
Constructive dismissal
Employers will have to be careful how their staff treat employees approaching retirement age and afterwards. Claims for constructive unfair dismissal or age discrimination could arise where employees have been passed over for promotion, harassed or bullied by colleagues or not awarded the same benefits as colleagues, for example, bonus or salary increases when they are close to retirement.
Employers should audit terms and conditions to make sure they are not unjustifiably discriminatory on the grounds of age. They should not impose unilateral changes to employees’ contracts but consult with the employees to secure their consent, even where the changes are to comply with the regulations (for example, changing contractual redundancy schemes). Promotion decisions should be transparent and fully documented. Stereotypes should be rooted out. Finally, employers should ensure staff receive full training on their equal opportunities policies and that these are enforced.
The extension of unfair dismissal rights will increase the number of claims brought, but employees will still have to acquire one year’s service to bring a claim and the damages available will still be capped (the compensatory award rose to £58,400 on 1 February). Employers may find that awards meet the cap, with tribunals often awarding loss of future earnings up to the employee’s intended retirement date with their former employer to reflect the fact that older employees find it more difficult to find new employment.
As age applies to all employees, the real risk for employers is that the claims brought will be for age discrimination rather than unfair dismissal or that, as in Ireland, multiple discrimination claims are brought (for example, disability and age). There is no service qualification for bringing an age discrimination claim, damages are uncapped and can include damages for injury to feelings.
It is foreseeable that, as in some whistleblowing cases, claims will be made by employees seeking to circumvent the service qualification, and by senior employees or directors whose potential damages would quickly exhaust the unfair dismissal cap. The added attraction is that employees could claim their full losses in the tribunal, rather than having to bring a separate claim for breach of contract in the High Court. As a result, senior exits could be more difficult to manage and negotiate.
It remains to be seen whether there will be a significant rise in the number of tribunal claims after October. One thing is certain, however: one of the first questions employers will be asked by their advisers when considering dismissing an employee is the employee’s age.
Paul Callegari is an employment partner and Jackie Cuneen an associate at Kirkpatrick & Lockhart Nicholson Graham
Some recent cases from Ireland
In Ireland, age discrimination has been outlawed since 1998 under the Equality Act (as amended by the Equality Act 2004).
- In Hughes v Aer Lingus, DEC-E2002-049, a woman of 53 applied to an airline for a cabin crew position. She had been a senior cabin crew member for another airline. She was asked how she would feel about taking orders from younger employees. She did not get the job and brought a claim for discrimination. The employer was able to rebut the presumption of discrimination as it was able to prove from interview notes that the reason for her rejection was her strong personality and not her age. The statistics also confirmed that there was no blanket policy of rejecting over-50s.
- In O’Mahony and Others v Revenue Commissioners, DEC-E-2005-018, the equality officer found that applicants for promotion over 50 had been treated less favourably than younger candidates based on statistical analysis and inconsistencies in grading. One candidate had even been asked why he was seeking promotion at this late stage of his career.
- In A Named Female v A Company, DEC-E2002-014, a young female manager who resigned in response to continuous undermining by older male colleagues and belittling comments such as “young foolish girl” brought a successful claim for age discrimination.
In the UK, as in Ireland, younger employees will be protected from age discrimination. By contrast, in the US, only workers aged 40 and above are protected.
In A Firm of Solicitors v A Worker, EED011, an experienced legal secretary was replaced by a younger secretary to do paralegal/secretarial work. She was not given an opportunity to apply for this role yet there was no suggestion that she could not do the work. The court held her dismissal was discriminatory on the grounds of age.
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