Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

The ACAS Guidance explains that retirements notified on or before 5 April 2011 will continue to completion as long as:

• the DRA procedure, as outlined in the current 2006 Regulations, is followed (ie employers must give the correct notice and must continue to give serious consideration to any request by the employee to continue working past retirement age); and
• the retiring employee reaches 65 or the normal retirement age (if higher than 65) by the 30 September 2011.

To be clear, this means that those employers giving the maximum twelve months’ notice from 5 April 2011 will be able to compulsorily retire their employee on or before 5 April 2012* (ie more than half a year after the 30 September 2011 deadline). This is provided the relevant employee reaches age 65 before 1 October 2011. An employer serving the minimum 6 months’ notice on 5 April 2011 should ensure that the notice expires on 5 October 2011* to avoid a penalty for giving short notice.

Additional extension to retirement date under revised draft Regulations

The revised draft Regulations introduce new provisions to clarify the right to request working beyond retirement which is permitted under the current rules. The revised draft Regulations provide that no further requests can be made on or after 5 January 2012. Since any request to work beyond retirement must be made at least 3 months and no more than 6 months before the notice expires, an employee served with 12 months’ notice on 5 April 2011 (the last date notice can be served) must make his request to work beyond retirement by 4 January 2012.  

 5 October 2012 – the last possible date of retirement under the current rules

Under the current rules, an employer can agree to a 6 month extension of the retirement date without having to issue a fresh notice of retirement. As no notices of retirement can be made after 5 April 2011, in practice, an employer will, after that date, only be able to grant a 6 month extension. A 6 month extension to an intended retirement date of 5 April 2012 would take the retirement date to 5 October 2012*. 

What this means in practice

The practical consequences of the phase out stage under the revised draft Regulations may best be highlighted using examples.

Scenario A: Employee turns 65 at any time before 30 September 2011. Notice of at least six months has been given to him no later than 5 April 2011. He can be compulsorily retired even if the notice expires after 30 September 2011.

Scenario B: Employee turns 65 after the transitional period has ended, e.g. 1 October 2011. He cannot be compulsorily retired under the DRA procedure, regardless of whether notice was given on or before 5 April 2011, as he did not reach retirement age by 30 September 2011.

Scenario C: Employee turns 65 by 30 September 2011. Notice is not given until 6 April 2011 or later. The employee cannot be compulsorily retired under the DRA procedure as the notice was not issued in time. The late notice will not be deemed to be short notice, as this will be abolished as of 6 April 2011, so the employer is not at risk of a compensation payment.

Scenario D: Employee turns 65 by 30 September 2011. 12 months notice served on him on 1 April 2011. Retirement date is therefore 1 April 2012*. He can request to work beyond retirement at any time between 1 October 2011 and 31 December 2011 (being more than 3 months and no more than 6 months before the intended date of retirement). If the employer agrees to a 6 month extension of the retirement date, the new retirement date will be on 1 October 2012*.

If an employer seeks to retire an employee who only reaches retirement age after 30 September 2011, he risks a claim of age discrimination unless he can provide objective justification for retirement at that age. An employer would have to rely on the grounds of capability or conduct or “some other substantial reason” to dismiss an employee fairly if he felt that the employee’s age rendered him unfit to continue his job. The chances of employers facing age discrimination claims in the future will no doubt increase once the revised draft Regulations have come into force. 

Good news for employers on insurance benefits

As we mentioned in our previous alert, the Government has taken into consideration employer concerns regarding group risk insured benefits. Regulation 2 of the revised draft Regulations specifies that it is not unlawful for an employer to bring to an end employer-provided insurance (class or otherwise) or related financial service when the employee reaches the age of 65 or the State Pension Age (whichever is greatest). This exemption will therefore cover employer provided group risk insured benefits such as income protection, life assurance, private medical cover and sickness insurance. It appears that it does not cover self insured arrangements. Without this provision, employers would be obliged to continue expensive insurance schemes or face a claim of age discrimination. Note that there is no comparable exemption which applies to other employee benefits such as employee share schemes or those which accrue with age such as enhanced redundancy schemes. These must be offered to all employees regardless of age.

Summary of key dates

5 April 2011 – the last date on which retirement notices can be served.

30 September 2011 – only employees who are 65 by this date can be retired under the current rules.

4 January 2012 – the last date on which an employee can make a request to work beyond retirement.

5 April 2012 – the last date on which notices of retirement can expire.

5 October 2012 – the last possible date of retirement under the current rules (given a 6 month agreed extension of 5 April 2012 retirement date).

What should employers do now?

• Read the new ACAS Guidance and the revised draft Regulations.
• Consider whether to issue any retirement notices by (and including) 5 April 2011. Remember that the employee must have reached the age of at least 65 by 30 September 2011.
• Review any retirement notices already sent out to check the proposed retirement date does not fall after 5 April 2012.
• Consider whether employment contracts need to be amended.
• Consider the effect on your business of having an older workforce – will you need to put any measures in place to accommodate this? (See our previous alert for more on this).
• If you wish to retire an employee by using an objectively justifiable ground, this will need to be considered carefully. (See our previous alert).

* NOTE – there is some uncertainty as to how to calculate the date of retirement upon expiry of the notice of retirement. The dates given in this alert assume that the day on which notice is served does not count. These dates are in line with BIS guidance.

The Government’s main conclusions

Reed Smith submitted a response to the Government’s consultation and, as a result, has been named as one of the respondents listed in Annex A to the Government’s Response. In our response, we raised several concerns, some of which the Government has addressed. These are considered below against the Government’s main conclusions:

1.      All administrative procedures associated with the DRA will be removed. This means that even if employers wish to retire employees using an employer objectively justified retirement age, they will not be required to follow the current statutory procedure set out in Schedule 6 of the previous Employment Equality (Age) Regulations 2006 (requiring notification of retirement and the “right to request” working past the retirement age). However, they will still need to ensure that a fair procedure is followed in order to safeguard against any unfair dismissal claims. According to the new ACAS guidance, this will involve considering any request by an employee to stay beyond the compulsory retirement age.

2.      “Retirement” will no longer be a fair reason for dismissal. We raised this as a particular concern in our response and the Government has addressed this by stating that they will make it clear through guidance that retiring an individual, when a retirement age is objectively justified, amounts to “some other substantial reason” and is therefore a potentially fair reason for dismissal. Although the new ACAS guidance considers how employers need to follow a fair procedure, it does not currently specifically deal with this point. Having spoken to the Government’s senior policy adviser, we understand this is an oversight and ACAS will be issuing revised guidance to deal with this point.

3.      Guidance, rather than a more prescriptive Code of Practice, is considered by the Government to be preferable in supporting employers to manage older workers. We agree that formal guidance is preferable to a statutory Code since it gives employers more flexibility to interpret the legal framework to fit with business needs. The Government rejected a Code of Practice because it would not necessarily provide the legal certainty which some respondents thought it would give, and any penalty for failure to follow the Code (such as an uplift in compensation in line with the current ACAS Code for disciplinary dismissals) would be a “heavy handed” way of implementing a policy aimed at facilitating open discussions about future plans between employers and employees.

4.      The Government has played down employer concerns that dismissals using capability and performance procedures are likely to increase, which in turn will lead to an increase in age discrimination claims. The Government believes that the guidance issued by ACAS should mitigate the risk of an increase in age discrimination claims by use of effective performance management methods. The Government agrees with the views of many respondents that the DRA should not be used in place of effective performance management.

5.      The Government confirmed the original timing of the abolition of the DRA and the six months’ transitional period starting on 6 April 2011. Although we agree with the six month transitional period, we are concerned that the current timetable gives employers very little time to prepare. The Government says that the costs of the transition will soon be off-set by the benefits to be derived from removal of the DRA and associated procedures. Such benefits are stated as being “to the economy, individuals and business from increased economic activity, increased labour supply and the removal of the administrative costs of the DRA procedures”. However, the Government has missed the point as cost is not the only issue. Employers have not, until now (mid-January 2011), had any certainty about the proposed timetable or, more importantly, the nature of the change. Even now, the draft Regulations have not yet been published. Employers will have to make rapid decisions as to whether to have an Employer Justified Retirement Age. This will involve gathering substantial evidence and taking legal advice. A knee jerk reaction to this will be for employers to protect their position by issuing retirement notices to all employees who are either approaching or have now reached 65, perhaps in circumstances where they would not otherwise have done so. This is a significant disadvantage with the timetable which the Government has failed to address in their Response.

6.      There will be a specific exemption for group risk insured benefits (income protection, life assurance and sickness and accident insurance, including private medical cover). This is to be welcomed since the increased cost of providing these benefits to over 65s could lead to employers scrapping these benefits altogether for all workers. This exemption will mean that employers can lawfully discriminate (depending on the nature of the benefit offered) against employees aged over 65 by not providing them with benefits which are available to the rest of the workforce. Before employers can sit back and relax, it is important to look carefully at the wording of the proposed exemption set out in the Regulations which are yet to be issued. It is of note that the Government refers to “group risk” insurance benefits, so the provision of benefits outside this definition will not presumably fall within the exemption.

7.      There will be no exemption as regards employee share schemes which contain “good” and “bad” leaver clauses. The concern is that it will be difficult to distinguish between employees who are retiring and those who are voluntary leavers; a retiree is normally a good leaver so will be treated more beneficially under the scheme than a person who voluntarily resigns, so will be a bad leaver. Although it is a shame that the Government has not addressed the employer concerns here, we consider that the problem can be overcome by addressing the drafting of the relevant scheme.

What should employers do now?

• Read the new ACAS guidance and the Age Positive publications.
• Consider whether to issue any retirement notices by 30 March 2011.
• Review any retirement notices already sent out to check the proposed retirement date does not fall on or after 1October 2011.
• Consider the position of employees aged over 65 who have already been granted the right to continue working beyond age 65.
• Consider how the proposed changes will impact on your organisation: how will you deal with older workers in the future?
• If compulsory retirement is preferred, take advice on whether this is a real possibility for your organisation and whether you could objectively justify a retirement age.
• If no compulsory retirement age is to be used:
  • introduce informal workplace discussions where the issue of retirement can be raised with older workers;
  • consider whether performance management, recruitment procedures and flexible working procedures need to be amended; and
  • consider offering retraining or flexible working to older employees.
• Once the draft Regulations are published, take advice on the precise wording of the exemption on group risk insured benefits for the over 65s to assess whether it will apply to your particular arrangements. 
• Review the terms of any employee share schemes so that future retirees are protected.
• Review the draft Regulations, once published.
• Consider training on the new law and new procedures for your managers and staff.

We can provide the detailed advice which your organisation may require having considered the full impact of the Government’s response to the consultation. We will also be providing training. Please contact Graham Green for more information or your usual contact in the Reed Smith Employment Group.

What happened in this case?

The appellant, Mr Woodcock, was employed as CEO of Cumbria Primary Care Trust (“PCT”). In 2005, Mr Woodcock’s employers sought to start the redundancy process. However, they failed to find a date on which they could meet Mr Woodcock until less than 12 months before Mr Woodcock turned 50. Realising that this would mean employment would not end until after Mr Woodcock turned 50, his employers wrote to him giving him notice that his employment would terminate on a date prior to his 50^th birthday, despite having not yet consulted with him.

The primary (although not the sole) aim of the PCT in doing so was to avoid the significant cost liability to them and the public purse of the enhanced pension Mr Woodcock would receive if his employment ended after he turned 50 (the monetary difference being approximately £500,000).

The EAT agreed with the Tribunal’s findings that giving Mr Woodcock notice prior to the planned consultation meeting did discriminate against him on the grounds of his age. Direct age discrimination can be justified if the employer can show that its action, although of a discriminatory nature, is a proportionate way of achieving a legitimate aim. The EAT held that the PCT had in fact identified more than simply cost as their legitimate aim. Mr Woodcock was clearly redundant and no alternative job had been found for him: it was this need to dismiss a redundant employee that made the employer’s aim legitimate rather than cost alone. The EAT reasoned that in these circumstances the chance of taking early retirement in the final weeks of his notice period would be a “windfall” for Mr Woodcock.

The EAT therefore held that the Tribunal had correctly applied the “cost plus” approach to justification, as seen in Cross -v- British Airways, (another EAT decision), i.e. that cost alone cannot justify a measure or state of affairs with discriminatory impact but that “costs plus some other factor” may do so. 

The EAT emphasised that it was not departing from such an approach, and so in that respect the law has not changed. However, the EAT was not complimentary towards this “costs plus” approach, noting that it “tends to involve parties and Tribunals in artificial game playing”. The EAT recognised the arbitrary and artificial nature of having to “find” other factors apart from cost, and the difficulty in having to establish where “cost” ends and “other factors” begin. The EAT therefore suggested (albeit on an obiter, i.e. non-binding basis) that an employer should be entitled to justify potential discrimination on the grounds that avoiding or rectifying such discrimination would be disproportionately high. In other words, the EAT was not convinced that Cross establishes that cost alone will never be sufficient to justify discrimination.

What does this case mean for employers?

This case confirms to employers that cost can be a key part of a defence of justification for age discrimination, but it must be remembered that the EAT was careful not to depart from the established “cost plus” approach. 

This decision may therefore be of some comfort to employers seeking to objectively justify age discrimination where cost is a key issue, i.e. where the cost of avoiding or rectifying the discriminatory impact would be disproportionately high. In such situations, employers may have more scope to argue the proportionality of measures in the normal way, even where cost is the main or even sole issue. In light of the EAT’s comments in this case, courts and Tribunals may be more open to such arguments. However, as the law stands, it remains the case that employers must seek to rely on costs plus other factors when seeking to objectively justify age discrimination. It is predicted and hoped that this judgment will lead to further discussion and guidance on this issue.

The issue is likely to become even more relevant once the proposals for abolishing the default retirement age come into force in October 2011, as expected. Following this change, employers may be more likely to have employees in their workforce who are over 65. This will have a serious impact on the provision of benefits such as group medical insurance, critical life cover or income protection schemes. The cost of such schemes in respect of employees over 65 will no doubt be higher than for younger employees, and so employers will have to think carefully as to whether they pay the increased premiums or instead limit the provision of such benefits to those under 65. If they choose the latter, it is likely that the only justification for such a prima facie discriminatory practice will be cost, and so employers will wait and see just how the case law develops in this area, in light of the EAT’s views in Woodcock. 

What happened in these cases?

In Wolf, Mr Wolf applied for a post in the Frankfurt Fire Service. However, he was told that his application would not be considered as the maximum recruitment age for such posts (which involved physically demanding tasks such as fighting fires and rescuing people) was 30. Mr Wolf brought proceedings in the German Courts on the basis that the maximum recruitment age was age discriminatory. The Court referred the case to the ECJ.

In Petersen, Ms Petersen, who practiced as a panel dentist for the German national health service, was informed that her authorisation to provide panel care would expire once she reached 68. German law provided that admission to practise as a panel dentist expires at the age of 68. However, outside this panel system, dentists can practice privately without any age restriction. Ms Petersen brought a claim in the German Courts for age discrimination. Consequently, the German Courts sought guidance from the ECJ on whether the Directive permitted a national law which sets a maximum age for practising as a panel dentist in order to protect patients health under a statutory health insurance scheme (on the assumption based on “general experience” that after this age there would be a decline in performance). 

The ECJ Decision

The ECJ in Wolf held that the maximum recruitment age for 30 was not contrary to the Directive as it was a genuine occupational requirement within Article 4(1) of the Directive. Article 4(1) of the Directive provides that no discrimination will occur where there is a difference of treatment based on a characteristic related to age and that characteristic constitutes a genuine occupational requirement, provided that the objective is legitimate and the requirement is proportionate.

The German Government said that the aim of the maximum recruitment age was to ensure “the operational capacity and proper functioning of the professional fire service”. The ECJ held that this constituted a legitimate objective within the meaning of Article 4(1). The ECJ’s reasoning was supported by Recital 18 of the preamble to the Directive which provides that the Directive does not require emergency services to recruit or retain persons who cannot carry out the range of functions that they may be called upon to perform in their job.

The German Government also provided evidence that only younger officials could cope with the exceptionally high physical demands of the fire service. Therefore the maximum recruitment age was needed to maximise the period in a career in which an official is able to perform those tasks. Having high physical capabilities was held to be a genuine and determining occupational requirement and this is related to age. The ECJ went on to hold that this was appropriate and proportionate to the objective, as recruitment at an older age would mean that the fire-service might be short of officials who could carry out the most physically demanding duties.

In Petersen, the German Government sought to rely on the exemption set out in Article 2(5) of the Directive which provides that the principle of equal treatment does not apply to national law that is necessary for the protection of health. It was argued that this maximum age was to protect the health of patients, because it was assumed from “general experience” that the performance of dentists would deteriorate from the age of 68 onwards. The ECJ held that the protection of patients from declining performance was a legitimate aim that might be considered necessary for the protection of health. However, the fact that panel dentists could practice privately outside the panel system after the age of 68, was inconsistent with that aim and undermined the prospect of it being consistently and systematically achieved. The ECJ then identified a further aim, that of ensuring the financial stability of the system, which could be considered necessary for the protection of heath. This aim could potentially be justified as it provided a means of limiting the pool of dentists employed within the national health system. The case will return to the national court in Germany to decide which of these aims might be achieved by the age limit.

The age limit could also be justified under the Directive, as an ‘appropriate and necessary’ means of giving younger people the opportunity of working as national health physicians. This would be a proportionate means of achieving a legitimate aim (as required by Article 6(1) of the Directive) if there were an excessive number of national health dentists, or a potential risk of such excess occurring. The national court in Germany will now have to decide whether any of these circumstances existed.

What these decisions mean for employers

In both cases the ECJ has accepted that age-related decline in performance is capable of justifying directly age discriminatory rules. Whilst in Wolf, (re the fire service) the German Government produced substantial evidence to prove this point, the same cannot be said in Petersen (re dentists) where the argument for age-related decline in performance was made on an assumption based on “general experience, Although the ECJ did not accept that the age limit could be justified (because it did not apply uniformly between the public and private sectors), it is significant that the ECJ considered age-related decline to be a valid assumption when considering whether a potentially discriminatory age cut off date is justified. This indicates that the ECJ is willing to accept a wide interpretation of the Directive in order to justify age-related discrimination. It would have been interesting, however, to see the ECJ’s conclusions should they have examined further the link between age and the decline in performance rather than just accepting this general assumption.  

This wide interpretation of the Directive was also illustrated in Wolf where the ECJ gave a very broad interpretation of the genuine occupational defence by finding that a maximum recruitment age, as well as physical fitness, was genuine occupational requirement related to age.

In UK law, except in relation to age, direct discrimination cannot be justified. Therefore, direct discrimination on other grounds (such as race, ethnic or national origins, religion or belief, sexual orientation) can only be defended by establishing a genuine occupational requirement. There is a possibility that employers who are seeking to defend claims under these strands might try to rely on the ECJ’s wide interpretation of the genuine occupational requirement to defend other strands of discrimination claims. However, in reality, it would be difficult for an employer to try and make this argument “through the back door”.

The case concerned a collective agreement which Rolls Royce had negotiated with the union Unite before the introduction of the Employment Equality (Age) Regulations 2006 (the “Age Regulations”). The collective agreement contained an agreed method of selection in any redundancy exercise, involving a point scoring system, where those employees awarded the least number of points were selected for redundancy. The selection matrix comprised a number of criteria including: Achievement of Objective; Self Motivation (drive); Expertise/Knowledge; Versatility/Application of Knowledge; Wider personal contributions to team. In addition, an employee would receive one point for each year of service, as part of the selection criteria. Rolls Royce was concerned that the use of length of service in this way could amount to unlawful age discrimination. In particular, Rolls Royce considered that the redundancy selection criteria agreed with Unite no longer fulfilled its business need, which was to retain those employees best able to adapt to the changed business environment. Rolls Royce applied to the High Court for a declaration as to the question of lawfulness. After hearing both sides’ arguments, the High Court declared the use of length of service as a criterion in this way to be lawful. Rolls Royce appealed to the Court of Appeal.

Whilst expressing some concerns about making a declaration on an issue which affected employees who had not been party to the proceedings, the Court of Appeal upheld the High Court’s decision finding that length of service criteria was lawful.

Indirect discrimination on the grounds of age may be justified if the employer can show that the application of the relevant “provision, criterion or practice” is “a proportionate means of achieving a legitimate aim” (Regulation 3(1) of the Age Regulations). The Court said that while length of service was indirectly discriminatory under Regulation 3, its use as a selection criterion could be justified because, viewed objectively, it pursued legitimate aims of rewarding loyalty and achieving a stable workforce in the context of a fair process of redundancy selection. The means of achieving these aims were proportionate because length of service was one of many criteria used and was by no means determinative; it was consistent with the overarching concept of fairness and also because the younger employees accepted it.

In addition, the Court considered the specific exception set out in Regulation 32 which provides that it is not unlawful for an employer to award a worker a “benefit” based on length of service where such service is 5 years or less, or, where it exceeds 5 years, it fulfils a business need. The Court said that length of service was clearly capable of constituting a “benefit” within the meaning of Regulation 32 and that viewed objectively, the length of service criterion reasonably fulfilled a business need (i.e. that of having a loyal and stable workforce). The fact that Rolls Royce doubted whether a business need was fulfilled in this way was, according to the Court, irrelevant.

What this decision means for employers

Although the Court of Appeal has confirmed that the use of length of service criteria in a redundancy selection matrix is not unlawful, it is important to note that the Court’s reasoning for this conclusion is particular to the circumstances of this case. The use of length of service as a criterion was not used as a “blunt tool” on its own to determine who was to be selected for redundancy. Instead, it was just one factor amongst many and, as the Court said, “was by no means determinative or definitive of selection”. It should also be noted that the use of length of service as a criterion for selection was negotiated in the context of a collective agreement with the union. Employers should still be very wary about using criteria such as “first-in, last-out”, or other criteria which make length of service determinative of the selection, as use of length of service in this way may not be a proportionate means of achieving a legitimate aim. The case is therefore not authority for a general proposition that length of service is invariably going to be a lawful criterion for redundancy selection, in the context of age discrimination.

What did the Advocate General say?

The aspect of the challenge which will be of most interest to employers concerns Regulation 30 of the Age Regulations. This Regulation permits employers to dismiss employees aged 65 and over by reason of retirement.    The AG said that Regulation 30 fell within the scope of Equal Treatment Directive 2000/78 (“the Directive”) and so was directly discriminatory on the grounds of age but might be capable of being objectively justifiable in accordance with the test laid down by the Directive; namely that it pursues a legitimate aim and the means of achieving that aim are appropriate and necessary.   The AG followed the reasoning adopted by the ECJ last year in Palacios v Cortefiel Servicios SA which concerned a similar challenge to Spanish mandatory retirement ages.

It is important to note that the High Court did not ask the ECJ to consider whether Regulation 30 was objectively justified as this is a matter for the High Court itself to decide. Nevertheless, the ECJ was asked to consider certain questions concerning the objective justification defence. 

First, as to whether the justification defence for direct age discrimination under UK law was less strict than that under the Directive, the AG said that it was sufficient for UK law to set out a general justification defence, and that a specific list illustrating the type of treatment which may be justified (as set out in the Directive) was not necessary. 

Second, as Regulation 30 is directly age discriminatory, the High Court had asked the ECJ to consider if the objective justification defence for direct age discrimination set out in the Directive should be stricter, in practice, than the objective justification defence for indirect discrimination. The AG said that possibilities under the Directive of justifying differences of treatment on age are more extensive that those based on other grounds. Age discrimination is unlike other forms of discrimination because it is not by its nature “a suspect ground”. Following the Spanish case of Palacios, the AG said that is appears that Member States are left with a relatively wide discretion in identifying the means to be used to achieve a legitimate aim relating to social and employment policies. 

The AG concluded that a rule providing for mandatory retirement ages (such as in Regulation 30) can, in principle, be lawful if that rule is objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market, and it is not apparent that the means put in place to achieve that aim of public interest are inappropriate and unnecessary for the purpose.

What does this decision mean for employers?

Employers still need to wait for the final decision of the ECJ (expected in the next 6 months) and then the High Court before they can be sure that the UK’s mandatory retirement age of 65 is lawful. The prospects of success for Heyday have seriously diminished following Palacios and this opinion of the AG.

Assuming that the ECJ follows the AG’s opinion, it will be for the High Court to determine whether Regulation 30 does indeed pursue a legitimate aim which is proportionate. The UK Government has argued that Regulation 30 is justified on the basis that it helps work force planning as it provides a target age for retirement; it also reduces the risk of blocking promotion for younger workers and encourages workers to plan for their retirement. Assuming that this aim is indeed legitimate (because it was accepted in the Palacios case), the Court will have to decide whether the means to achieve such an aim i.e. a blanket mandatory retirement age of 65, is proportionate in achieving that aim.

In Palacios, the ECJ decided that Spanish law on mandatory retirement ages was proportionate. However, UK law is not quite as flexible as the Spanish law, in that under Spanish law, the default retirement age is set by collective agreement, thus giving some flexibility in opting out of the retirement age in respect of certain jobs. The state pension for a retired person in Spain is also different from that provided in the UK. Given these distinctions, there may be scope for Heyday to argue before the High Court that the way in which the UK law approaches the default retirement age is not appropriate, or goes further than is proportionate and necessary to meet the UK Government’s aims. 

If Heyday succeeds (which seems unlikely), the Government would have to remove the default retirement age under the Age Regulations. Employers would still be permitted to set their own retirement ages but they would have to be prepared to justify them objectively in the case of each age. Many employees have already challenged their compulsory retirement at 65 by bringing claims in the Employment Tribunal directly against their employers relying directly on the Directive. The claims that have already been made have been stayed pending the outcome of the Heyday decision. If Heyday succeeds, claims against public sector employers will also succeed because public sector employees are able to enforce EU law directly against their employers. The position as regard private sector employer is not so clear (see our Human Capital alert November 2007 regarding the EAT case of Johns v Solent). If Heyday does succeed, it is likely that there will be a flood of discrimination claims brought by employees who are forced to retire at 65. Whatever the outcome of the Heyday decision, the Government is set to review the default retirement age in any event in 2011. It is possible that at that point, the default retirement age could be abolished altogether, though given the arguments for retention which it has advanced in the Heyday case, this seems less likely.

Click to view the Advocate General’s opinion.