In the recent case of Compass Group plc v Ayodele, the UK Employment Appeal Tribunal (“EAT”) has ruled that an employer must give genuine consideration, in good faith, to an employee’s request to work beyond retirement under the Employment Equality (Age) Regulations 2006 (the “Age Regulations”). A blanket refusal to grant any such request without giving any consideration to the employee’s representations in circumstances where the decision is pre-determined (e.g. by a company policy), will result in the dismissal for retirement being unfair.

This case will be of interest to those employers who have already served notice of retirement on employees on or before 5 April 2011 which, because of the forthcoming abolition of the default retirement age of 65 on 1 October 2011, is the last date on which employers could serve valid retirement notices under the Age Regulations.

What happened in this case?

Mr Ayodele was employed by Compass as a kitchen porter. Compass gave him written notice to retire on his 65^th birthday, the normal retirement date for Compass employees. He was also notified of his entitlement to request an extension to continue working beyond 65 in accordance with the statutory retirement procedure set out in the Age Regulations.

Mr Ayodele duly made the request and had two meetings with his manager, following which he was sent a letter refusing his request but giving no reasons. His appeal was then dismissed without reasons and his employment was terminated on his 65^th birthday. He brought claims in the Employment Tribunal for unfair dismissal and age discrimination, complaining that his employer had failed to follow the statutory retirement procedure as it had not given genuine consideration, in good faith, to his request for an extension. He was awarded £15,981, which included a compensatory award for loss of earnings.

Before the Employment Tribunal, the managers involved in the meetings and appeal process to consider the request gave evidence that they had decided before the meetings that Mr Ayodele’s request would be refused since the Compass retirement policy not to grant requests in any circumstances had to be applied rigidly with no exceptions. Crucially, they admitted that the meetings were a formality and there was nothing that Mr Ayodele could do to change the outcome, which was predetermined by the policy.

The Tribunal found that, although Mr Ayodele had been dismissed by reason of retirement, the dismissal was unfair since the meetings held with Mr Ayodele were meaningless formalities “which did not in any real sense involve the employer giving consideration to the Claimant’s request”. The Tribunal said that the Regulations confer a discretion on the employer to decide the request but, before doing so, it must meet the employee with an open mind so that the substance of the employee’s representations can be considered in a genuine sense. That did not happen in this case.

The Employment Appeal Tribunal (“EAT”) agreed with the Employment Tribunal, holding that a duty on the employer to “consider” a request by an employee to work beyond retirement requires the employer to consider it in “good faith”, in the sense that it genuinely considers it; it would be contrary to the spirit of the legislation to sit through a meeting with a closed mind because the outcome has been pre-determined. Although the wording of the statutory duty to consider a request does not explicitly state that the duty is to consider in “good faith”, this does not mean that it can’t be read into the words. However, the EAT confirmed that no reasons need be given for refusing a request and the statutory provision does not allow the employee to challenge the employer’s decision on its merits. The EAT said its decision does not therefore open the door to challenges to the merit of employers’ decisions, so an employee will not be able to argue the decision was made in bad faith if the decision is refused, provided it is given genuine consideration. Similarly, a policy not to grant a request save in exceptional circumstances cannot be used by the employee to argue bad faith provided it is a policy rather than an inflexible rule.

Compass also appealed the level of compensation awarded, arguing that the Tribunal should have reduced the compensation to take account of the chance that, if it had given proper consideration to Mr Ayodele’s request, it would not have been granted. In other words, Compass argued for a so-called “Polkey” reduction, based on the case of Polkey v A E Dayton Services Limited. The EAT disagreed, however, since Compass had failed to adduce any evidence to suggest that, had it given the request due consideration, it would have dismissed him anyway.

What does this decision mean for employers?

Since the default retirement age of 65 is being abolished from 1 October 2011, along with the statutory retirement procedures, this case will only be of interest to employers who have already served notice of retirement on employees. It is important to note that this decision does not place a burden on employers to give reasons for refusing any request. However, it does make clear that employers need to give requests genuine consideration e.g. by meeting the employee and listening to the employee’s reasons for making the request, thereby demonstrating that the employer’s decision has not been pre-determined. Even if the employer has a policy that requests will be refused, that policy can still be taken into account but employers should show that they are open to making exceptions.

As regards the EAT’s decision on compensation, it is possible that the manager who represented Compass in the Tribunal failed to adduce evidence on quantum because he had misunderstood that quantum would be dealt with at the same time as liability. Other employers need not make this mistake. If any employer is, in future, faced with a similar claim, they should, of course, produce evidence that the request would have been denied even if genuinely considered. It will then be open to the Tribunal to reduce the compensation awarded to reflect the chances of that happening.