65 and Out? Employer’s Retirement Procedure

by Hazel Phillips

Introduction

This month the Government launched its long awaited consultation and review into the retirement age.  The review comes hot on the heels of the High Court’s decision in the long running and much publicised ‘Heyday’ Case which was the challenge, led by Age Concern, to the legality of having a set age at which an employer can force and employee to retire and the Government’s decision to set the retirement age at 65. 

All the media coverage around the Heyday decision and the consultation has kept retirement in the spotlight and has meant employees have become more aware of their legal rights but the coverage has also caused confusion over the rules.  As a result, we thought that we would use this month’s bulletin to remind employers of their obligations.

Current Position

The High Court’s decision in Heyday was that the Employment Equality (Age) Regulations 2006 (the “Regulations”) were compatible with the EU anti-age discrimination rules.  The result of this decision is that employers can still force their employees to retire at the age of 65 provided they follow the requisite procedure. 

Employers are also entitled to refuse to recruit anyone into their business who is over the age of 65 and it is even possible for businesses to have a “retirement age” that is below the age of 65, provided this lower age can be objectively justified.

However, there are increasing numbers of people who want to continue their employment beyond the age of 65 and employers are not required to retire employees when they reach the retirement age.  Indeed many businesses benefit from having older employees within the workplace.  Having said that, there is not an automatic right to stay on after 65: employees only have the right to request to continue working beyond the date which they have been notified by their employer as their intended retirement date. 

Employer’s Procedure for “Fair Retirement”

The key to avoiding unfair dismissal and age discrimination claims is to ensure that the statutory retirement procedure is followed in full so that employees can be fairly dismissed when they reach the default retirement age or the normal retirement age of the business.

The first step in this process is to give the employee in question written notice of the date of his or her intended retirement. The appropriate timing for giving the employee the retirement notice is at least six months, but no more than twelve months, before the intended retirement date. 

When employers are writing to an employee to give them the intended retirement date, the employer must also advise the employee of his or her right to request to continue working.  Although not strictly necessary, it is also advisable to inform the employee as to how the retirement process will be structured. 

Employee’s Request to Continue Working

Many employees will be happy to take retirement on the date specified in the notice.  However, there are those who will wish to continue working, and the employer needs to deal with any request to stay properly and promptly.

The employee who wants to continue working for the business needs to make a formal request to do so at least three months before the intended retirement date.  The employer then has to consider that request in good faith.  Failure to do this before the employee’s intended retirement date will make the dismissal automatically unfair. 

To demonstrate compliance with this aspect of the Regulations it is of paramount importance that the employer meets with the employee to discuss his or her request to continue working within a reasonable period of its receipt. 

Discussing the Request

The retirement meeting is essentially a dismissal meeting so the employee should be informed that he or she has a right to be accompanied to that meeting by a trade union representative or work colleague.

During the course of the meeting it can assist if the employer can highlight some reasons as to why there are reservations about the request.  Having said that, in order to demonstrate that genuine consideration has been given to the request, no decision should be made on the day.  It is better to take some time after the meeting to consider the options and then provide the employee with the decision in writing at a later date.  However, until the decision has been relayed to the employee, his or her employment will continue. Some employers, therefore, prefer to deliver the message face to face and to follow up with a letter, particularly if the meeting takes place close to the retirement date. Either approach is fine but if the decision is given verbally it must be confirmed in writing.

If the employer decides to reject the employee’s request and, therefore, to force the employee into retirement, there is still no legal requirement to give a reason for that decision.   Employers can have peace of mind that the reason for the employee’s dismissal will always be retirement, provided that the retirement procedure has been followed correctly.  However, it would be advisable to give reasons if possible, in order to demonstrate that the request has been properly considered, maintain goodwill and preserve working relations up to the date of retirement. 

The employee also has to be informed of the right to appeal.  As part of the appeal process, the employee is entitled to have another meeting with the employer, which should be held as soon as is reasonable. 

Failure to follow the retirement procedure correctly can make the dismissal automatically unfair but of greater concern should be the possible age discrimination claims that can easily accompany a claim based on a failure to follow the right procedure.  If the employee has been replaced with a younger member of staff (which will almost always be the case), and the employer cannot rely on any other fair reason for the dismissal, an Employment Tribunal may decide that age discrimination was a factor in the dismissal and claims for this carry unlimited compensatory awards.

Government’s review of the default retirement age

In response to an express statement within the Heyday judgment that there was a compelling case for the compulsory retirement age to rise, the Government announced last month that, as part of its strategy for tackling our ageing society, “Building a Society for All Ages”, it would bring forward a planned review of the default retirement age from 2011 to 2010.

The review will be conducted jointly by the Department for Business, Innovation and Skills (BIS) and the Department for Work and Pensions (DWP) and will look at many issues including the needs of business and individuals in the prevailing economic climate but its primary objective is to consider whether the default retirement age of 65 remains appropriate and necessary.

The Government has therefore commissioned a major research project to look specifically at this point.  It is hoped that the survey will provide an insight into employers’ age-based practices and, in particular, the use of the default retirement age. As part of the project the Government wants to take into account the broadest possible range of evidence and is looking for comments from all stakeholders and interested individuals.  The Government is canvassing opinions on, amongst other things:
- the operation of the default retirement age in practice;
- the reasons that businesses use mandatory retirement ages;
- the impacts (positive and negative) on businesses, individuals, and the economy, of raising or removing the default retirement age;
- the experience of businesses operating without a default retirement age;
- how could any costs of raising or removing the retirement age can  be mitigated and benefits realised?

Submissions are requested by 1 February 2010 and should be emailed to draevidence@bis.gsi.gov.uk and/or posted to DRA Evidence, Department for Business, Innovation and Skills, V497, 1 Victoria Street, London SW1H 0ET.  More information about the consultation can be found on the BIS website.

We would encourage you all to participate in this survey, whether you support the retirement age of 65 or not.  Without evidence from businesses of all shapes and sizes the Government risks imposing on employers yet another system put together by legislators with little or no experience of what will and won’t work in practice.

Conclusion

As is self evident, when a worker reaches the age of 65 (or the retirement age of the business) it is no longer as easy as handing over a carriage clock and bidding farewell to the departing employee. A stringent procedure must be adhered to so that the employer does not find itself unexpectedly adding to the ‘retirement pot’ of the outgoing worker. 

If a request should come in from an employee wanting to continue working, businesses that don’t feel able to retain that employee long term or full time should consider whether a short term contract or a variation to the employee’s hours or duties may be an option. 

If it is not possible to keep the employee, for whatever reason, handling that decision sensitively is likely to be the key to avoiding a claim.

Although the point of this bulletin is that nothing has changed yet, change is coming.  The retirement age is highly likely to rise (or even be removed altogether) and all employers need to keep an eye on this developing area of law to see what the next changes will be.

For further information on retirement procedure, contact Burnetts on 01228 552222.

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