1. What changes to the law are happening as a result of the removal of the default retirement age?
The changes to the law are contained in the draft Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011, which were laid before Parliament on 1 March 2011. The Regulations were approved by Parliament on 5 April 2011 and came into force on 6 April 2011 in England, Scotland and Wales.
Regulations to repeal the default retirement age provisions (PDF, 5 pages, 28KB)
The main changes with effect from 6 April 2011 are as follows:
- Paragraph 8 of Schedule 9 of the Equality Act 2010 is removed. This means that it is discrimination for an employer to compulsorily retire an employee who is aged 65 or above, subject to the transition arrangements.
- Paragraph 9 of Schedule 9 of the Equality Act 2010 is removed. This makes it unlawful not to recruit someone because they are age 65 (or over) or are within 6 months of reaching that age.
- Various sections of the Employment Rights Act 1996 are amended to mean that retirement is no longer a fair reason for dismissal and therefore section 98ZA-98ZH for judging the fairness of retirement dismissals no longer applies.
- Schedule 6 of the Employment Equality (Age) Regulations 2006 has been repealed to remove the duty for employers to consider requests from employees to work beyond retirement.
- Regulations 5-8 of the 2011 Regulations introduce transitional provisions from 6 April – 1 October 2011 for employers to manage the removal of the default retirement age.
These changes mean that unless the transitional provisions apply, any dismissal that takes effect from 6 April 2011 that is because the employee has reached age 65 or above is age discrimination unless the employer can objectively justify the decision as a proportionate means of achieving a legitimate aim.
2. What do employers have to do to manage the transition period for removing the default retirement age?
The transitional arrangements for employers to manage the removal of the default retirement age are set out in the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 (regulations 5-8). Parliament approved the Regulations on 5 April 2011 and the transition arrangements mean that compulsory retirements notified before 6 April 2011 are lawful providing that the following conditions are met:
- the statutory retirement procedures (as set out in the previous Employment Equality (Age) Regulations 2006) are followed correctly, i.e. employers have provided between 6-12 months' notice of the intended date of retirement, and any request made by the employee to work beyond retirement age has been seriously considered; and:
- the employee reaches age 65 (or the employer's normal retirement age if this is higher) before 1 October 2011.
This means that the employee must be age 65 by 30 September 2011 if they are to be lawfully retired using the transitional default retirement age arrangements, and includes employees whose birthday falls between 6 April and 1 October 2011. But an employee who reaches age 65 (or the employer's normal retirement age if this is higher) on or after 1 October 2011 can't be lawfully retired using the default retirement age transitional provisions.
3. Under the transition arrangements for removing the default retirement age, what is the last date that an employer can compulsorily retire an employee?
An employee's actual retirement date does not need to take effect within the dates of the transition arrangements (6 April – 1 October 2011). The Department for Business Innovation and Skills (BIS) have confirmed that, using these procedures, the last date for a compulsory retirement to take effect would be 5 October 2012.
The transition arrangements require the employer to use the statutory retirement procedures. This means that employees have the right to request to continue working after the date that the employer has identified as the retirement date. Therefore, if an employer gives the maximum allowed notice period of 12 months on the last date possible of the transition arrangements of 5 April 2011 to take effect on 6 April 2012, the employee could request to work beyond this date. If the employer agrees to extend the retirement date by six months or less, the compulsory retirement taking effect on 5 October 2012 would still be lawful under the transition arrangements at the end of the extended period.
Employers should note that the maximum extension to the retirement date possible under the transition arrangements is six months. This is because, under the statutory retirement procedures, if an employer agrees to extend the retirement date for more than 6 months or indefinitely then the employer has to repeat the statutory processes at the point when the employee is due to retire. However, as it will not be possible to use the statutory processes to give any new notifications of retirement after 5 April 2011, the employer won't be able to rely on the transitional arrangements if a longer extension is agreed. Any retirement outside of these arrangements would have to be objectively justified as a proportionate means of achieving a legitimate aim
4. What happens where employees have previously been allowed to work beyond the normal retirement age but the extension is due to come to an end after the transition period?
An employee who is working beyond their employer's normal retirement age can be compulsorily retired using the transition arrangements. An employee's actual retirement date does not need to take effect within the dates of the transition arrangements (6 April – 1 October 2011). Provided that the employer has told the employee prior to 6 April 2011 that they will be retired and given an opportunity to request to continue working, then the compulsory retirement will be lawful.
5. How can employers manage retirement after the transition period for removing the default retirement age has finished in October 2011?
From 1 October 2011, employees will have more choice about when they want to retire (and pension schemes can continue to have a pensionable age to release benefits). But a compulsory retirement by an employer will be an unfair dismissal and age discrimination under the Equality Act 2010 unless it can be objectively justified. This means that a compulsory retirement will have to be a proportionate means of achieving a legitimate aim. The case of Seldon v Clarkson, Wright & Jakes (see Advisory Bulletin 568) contains some helpful guidance on what the courts would consider as justifiable for a compulsory retirement.
In practice justifying a compulsory retirement is likely to be difficult unless the employer can provide evidence that there is a decline in performance (either mental or physical) that is linked to an increase in age. LGA Workforce Team would advise local authorities to look at issues such as succession planning to justify a compulsory retirement rather than develop processes that rely on an assumption that performance will decline after a certain age. However, as a word of caution, employers will have to justify each and every compulsory retirement – circumstances in some departments may support succession planning leading to compulsory retirement and others may not. And although trying to save money by compulsorily retiring more expensive older workers could appear to be a legitimate aim, this is unlikely to be an acceptable objective justification on its own.
In addition, an organisation-wide retirement age for such diverse organisations as local authorities is unlikely to be justifiable. However it will still be possible to retain schemes to allow employees to make requests for voluntary early retirement. And it may be possible to objectively justify a collectively agreed retirement date for some jobs or professions at a local or national level where there is evidence of a decline in performance (mental or physical) linked to a particular age, for example with fire fighters.
However, employers should also note that, even where the retirement can be justified, they will have to operate a fair process of dismissal under the usual unfair dismissal rules. A fair process is likely to include providing reasonable notice of the dismissal and considering any representations from individual employees to continue working beyond the intended retirement dismissal date.
The Government has worked with Acas to produce a guide to managing without the default retirement age to help employers to discuss employees' retirement plans going forward.
6. Will an employer still be able to rely on contracts of employment that have a compulsory retirement age in the future?
No. The employer can only act on a contract that has a compulsory retirement age if that corresponds with the transitional arrangements for the removal of the default retirement age. Outside of the transitional arrangements, any contractual clauses relating to compulsory retirement will be invalid and can not be relied on by employers. Local authorities should note that this includes any nationally agreed terms and conditions relating to compulsory retirement that have been incorporated into individuals' contracts of employment.
Local authorities are recommended to notify their employees about any changes to their contract arising from this change to the law, but there is no need to issue new contracts of employment to each employee affected by this change.
7. If an employer can justify a compulsory retirement in the future, what will be the reason for dismissal?
The Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 remove retirement from the list of potentially fair reason for dismissal contained in the Employment Rights Act 1996. This means that any compulsory retirement after 6 April 2011 (except those using the transitional arrangements for removing the default retirement age) will be deemed to be a dismissal for "some other substantial reason" (SOSR) under s.98 of the Employment Rights Act