Nick Sheppard explains where the law currently stands on the default retirement age, what Heyday will mean for employers, and how a decision expected in 2009 will impact organisations.

The Employment Equality (Age) Regulations 2006 (the regulations) came into force on 1 October 2006. The regulations implement parts of the Equal Treatment Framework Directive 2000/78/EC (the directive) that established a framework for equal treatment in employment and occupation.

The directive makes it unlawful for employers to discriminate on the grounds of age at any stage in the employment process. Prior to the regulations, there were no legislative provisions in the UK to protect against discrimination on the grounds of age.

The regulations prohibit direct and indirect discrimination on the grounds of age. It is discriminatory to treat a person less favourably or to put them at a disadvantage by a provision, criteria or practice (PCP) and where that treatment or PCP cannot be shown to be a proportionate means of achieving a legitimate aim.

Retirement

The regulations have also introduced a default retirement age of 65. Under regulation 30(7) an employer can claim retirement is a fair reason for dismissal if an employee has reached the normal retirement age for their job or the default retirement age of 65. If the normal retirement age is below 65 the decision to dismiss must be objectively justified. To rely on regulation 30(7) the employer must give the employee between six months and a year’s notice of the intended date of the retirement and the employee’s right to request to continue working in accordance with Schedule 6 of the regulations.

Regulation 7(4) permits employers to discriminate against candidates during the recruitment process on the grounds of age if the candidate is older than either the normal retirement age (defined by the regulations as aged 65 or over) or 65.

Heyday

In The Incorporated Trustees of the National Council on Ageing (Age Concern England) v Secretary of State for Business, Enterprise and Regulatory Reform C-388/07, the National Council on Ageing, operating as the Heyday group, has challenged the compulsory retirement provisions in the regulations, on the grounds that the default retirement age of 65 is discriminatory and unlawful, contrary to the directive.

On 3 July 2006, Heyday filed an application to seek a judicial review of the regulations and to obtain a declaration that regulations 3, 30 and 7 are ultra vires. Heyday has submitted that the regulations are incompatible with article 3 of the directive, which requires member states to protect individuals against discrimination on the grounds of age when an employee is dismissed.

Heyday claims that the defence of justification to a claim of direct discrimination goes beyond that which is permitted by the directive and that it is not proportionate for regulation 30 to apply to all dismissals. The defendant has argued that the regulations are a proportionate means of meeting a legitimate aim through workforce planning and avoiding the adverse impact on the provision of occupational pensions and other work related benefits.

On 24 July 2007, the High Court referred Heyday’s application to the European Court of Justice for a preliminary ruling on the interpretation of the directive.

On 23 September 2008, the Advocate General handed down his opinion. His view is not binding but guides the ECJ decision and in 80% of cases, the ECJ follows the Advocate General’s opinion, which stated that national rules on retirement are subject to age discrimination law.

A national rule which permits employers to dismiss employees aged 65 or over for retirement can, in principle, be justified. It is for the national courts to determine if the compulsory retirement provisions are objectively justified.

The ECJ decision is expected in 2009. If the decision follows the Advocate General’s opinion, the High Court will assess the legality of the compulsory retirement provisions and decide if regulation 30 can be objectively justified. All compulsory retirement claims have been stayed pending the ECJ decision.

There is uncertainty over what Heyday will mean for employers. Employers working in the public sector will not be able to rely on regulation 30(7) if the regulations are found to be incompatible with the directive because of the principle of direct effect. Direct effect does not apply to the private sector and employers working in this sector can continue to rely on the regulations until they are amended or repealed.

In any event, the government has committed to reviewing the mandatory retirement age in 2011.

Redundancy

Following the implementation of the regulations, younger workers are also bringing claims in relation to contractual redundancy schemes to seek the same level of payment as older colleagues who are entitled to larger payments because of their age. Discriminatory schemes must be objectively justified. The statutory redundancy scheme is exempt from the regulations and any contractual schemes which use the same age bands and multipliers as the statutory scheme will also be exempt.

Nick Sheppard is an employment partner at Langleys.