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Compulsory Retirement Age in the Workplace

PRACTICE AREA GROUP: Employment, Pensions and Benefits
DATE: 31.03.2016

On 1 January 2016 the Equality (Miscellaneous Provisions) Act 2015 (2015 Act) was enacted. This Act has helped bring a degree of clarity to the use of compulsory retirement ages in the workplace.

Prior to the enactment of the 2015 Act the Employment Equality Acts were at odds with a growing line of case law on the legality of compulsory retirement ages. On its face it appeared that:

  • it was not discriminatory under statute on the grounds of age to fix different retirement ages; and
  • employers had an absolute right to set retirement ages without the risk of a claim for age discrimination.

However, the Irish legislation differed to Article 6 of the European Council Directive 2000/78 EC, which required the use of a retirement age in the workplace to be “objectively justified by a legitimate aim”. Despite the fact that the Irish legislation did not refer to this requirement, we have seen the Irish courts in recent years follow the approach taken by the Courts of Justice of the European Union (CJEU), which obviously relied on Article 6.

The enactment of the 2015 Act is therefore much anticipated, bringing the Irish position firmly in line with the CJEU.

What are these changes?

The changes brought in by the 2015 Act are twofold:

1. It will still not constitute discrimination on the age ground to fix a retirement age (whether voluntarily or compulsory). However, this is now on condition that the reason for doing so:

  • is objectively and reasonably justified by a legitimate aim; and
  • the means of achieving that aim are appropriate and necessary.

2. Similarly, if an employer decides to keep an employee on after reaching the compulsory retirement age, by way of a fixed term contract, it will only be considered not to constitute discrimination if it can be shown that the decision to offer a fixed term contract:

  • was objectively and reasonably justified by a legitimate aim; and
  • the means of achieving that aim are appropriate and necessary.

So what does this mean for Employers?

  • As before, employers should ensure that all employees are made aware of the retirement age in the workplace (if there is one) and make sure it is well communicated to all members of staff.
  • It is good practice to implement a policy, possibly as part of the employee handbook, or as a supplemental policy, on the objective and reasonable justification for the retirement age. Recent case law, for example, has accepted succession planning and health reasons where the role is physically demanding, as suitable reasons. In our experience, more employers are relying on succession planning.
  • Objective justification must be in support of a legitimate aim, and the means of achieving that aim must be appropriate and necessary. Therefore it is important to consider the company’s overall business needs and determine the reasons in accordance with that.
  • The policy should reserve the right to vary the retirement age, and indeed the objective justification, supporting the retirement age. It is good practice to revisit this policy at least once a year to make sure it remains consistent with current business needs.
  • Special consideration should be given as to whether a fixed term contract is really necessary for an employee who has passed the retirement age. Before making the proposal, the employer must consider whether the need for the fixed term contract is an appropriate and necessary means of achieving a legitimate aim of the business. The narrative or logic for this should be documented, as this can prove useful evidence in the event of a challenge.
  • Finally, employers should always be mindful of allowing employees to work past a set compulsory retirement age. Such actions could create a precedent, effectively nullifying the original compulsory retirement age. Where it is agreed, it should be presented as an exception and for a very specific or unique reason.

This article was written by Bláthnaid Evans, Associate in the Employment, Pensions and Benefits Group.


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