Fixed Retirement Age
Compulsory retirement ages in contracts of employment used to be the norm. Now however, inserting such a clause would need careful consideration. Indeed, unless it can be shown that a fixed retirement age can be objectively justified (which can be extremely difficult to do), an employer risks falling foul of the Equality Act.
Since the abolition of the default retirement age (DRA) on 6 April 2011, employers must now make a conscious decision as to whether or not to have a fixed retirement age. The answer seems to have been that some employers may decide to have a fixed retirement age for only some (more specialist) roles within their organisation. But all will need to consider carefully the requirements before enforcing any such policies.
When can an employer justify having a fixed retirement age?
Compulsory retirement is prima facie direct age discrimination. However, unlike other forms of direct discrimination under the Equality Act 2010 (EqA 2010), direct age discrimination can be objectively justified if it is “a proportionate means of achieving a legitimate aim”.
If an employer wishes to have a fixed retirement age, it must be able to show that:
- It is intended to meet a legitimate aim;
- Having the particular retirement age meets that aim; and
- It is proportionate to use that retirement age as a means of meeting that aim.
If an employer cannot meet the above criteria, the only other way to defend an age discrimination claim based on compulsory retirement would be to show that the age limit on the job in question falls within the “occupational requirement” (OR) defence (i.e. police, firemen, pilot etc).
A legitimate aim must correspond to a “real business need”. While in indirect discrimination cases, there is no requirement for the employer to show that the legitimate aim has any wider public interest or social policy aims, it appears that when attempting to justify direct age discrimination, the employer needs to be able to show that its legitimate aim has some social policy or public interest benefit.
This can be seen in the case of Seldon v Clarkson Wright & Jakes & Anor in which a law firm argued that retiring partners at a certain age was objectively justified on the grounds that the business needs to be able to recruit and retain “new blood” coming through. The Supreme Court found that where such default retirement age policy is introduced and where it is “founded on legitimate social policy aims”, imposing a certain retirement age could be lawful.
It is clear that however that a blanket compulsory retirement age is highly unlikely to work in most business. If the decision to enforce a compulsory retirement age is made, there should be clear and detailed thinking to see if it would stand up to the requirements for it to be a proportionate means of achieving a legitimate aim.