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Adam Crudge

Thomas Eggar

Solicitor

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Ask the Expert: How does the DRA’s removal hit employment contracts?

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The question 

I’m aware of the Default Retirement Age having been removed under the Employment Equality Regulations 2011, but I would like guidance on how this situation affects contracts of employment.
 
The wording of our contracts is currently as below and, while I suspect it will need to be removed, I’d like to find out what the legal situation is? Do I need to remove it and if so, what alternate text should I provide?
 
11. Retirement
 
“Your considered date of retirement is the end of the month in which you reach your 65th birthday. You have the right to seek to work beyond that date and the Society will inform you of your rights between 6 and 12 months in advance of the considered retirement date.”
 
 
The legal verdict
 
Adam Crudge, solicitor at Thomas Eggar
 
Before the Default Retirement Age was removed in 2011, employers could lawfully dismiss employees when they reached the age of 65, provided they followed the correct retirement procedure. 
 
Following a change in the law, it would now be unlawful age discrimination to dismiss an employee simply because they had hit 65 – or any other particular age (except in certain limited circumstances).
 
Therefore, as you suggest, it would be advisable for you to remove the wording in your contract, which specifies that retirement will take place following an employee’s 65th birthday. Simply having this wording in your contract is unlikely to amount to age discrimination, but as it should no longer be relied upon, it would be sensible to remove it. 
 
In order to do so, you should write to your employees informing them that the clause will be removed and asking them to sign and return a copy of the letter to confirm that they accept this change.
 
Given that most employers will no longer be relying on a retirement age, it is not necessary for you to include any alternate text, as the employee will have the right to stay employed until they choose to resign or retire (unless some other fair reason for dismissal arises). 
 
However, there is an alternative option for employers to keep a retirement age if they can show that it can be justified objectively. To do so, they need to show that a retirement age is a proportional means of achieving a legitimate aim.
 
Although recent case law has demonstrated that employers are able to rely on this scenario in certain circumstances, it may be difficult for many to show that dismissal at a particular age can be objectively justified.
 
Therefore, the lowest risk option for most is likely to be to remove the concept of compulsory retirement from contracts of employment altogether.
 

Adam Crudge is a solicitor in Thomas Eggar‘s business services team.

 
Rebecca Kershaw, solicitor at Barlow Robbins
 
You are right to say that, from 6 April 2011, employers were no longer able to compel employees to retire on reaching the Default Retirement Age.
 
But the abolition of the DRA has led to uncertainty as to how they may best address the issues that arise in circumstances where they would previously have relied upon the statutory retirement procedure.
 
The contractual provision referred to reflects the previous law and should be amended. The removal of the DRA has resulted in two options for employers – either not to specify a retirement age or to retain a fixed retirement age.
 
Therefore, the contractual provision should be amended to reflect whichever option the employer decides to take, that is, to either state that the company has no fixed retirement age, or to set it out.
 
If an employer does not wish to have a fixed retirement age, there is no need to have a clause relating to retirement within individuals’ contracts of employment and it may be removed.
 
If that is the case, the organisation should notify employees that the law has changed, which means that the current clause no longer applies. If it wishes to impose a fixed retirement age, a clause setting this out should be included.
 
To fix, or not to fix, that is the question.
 
Whereas previously, the use of the statutory retirement procedure, if employed properly, would not result in a successful claim of age discrimination, this protection no longer exists.
 
Inter-generational fairness and dignity
 
This means that using a fixed retirement age is not without its risks. As the legislative changes were imposed relatively recently, there is not yet much case law to provide guidance on when a fixed retirement age may be used “safely”.
 
It is clear that a compulsory retirement age would be discriminatory on the grounds of age. However, unlike other forms of direct discrimination, direct age discrimination may be justified if it is a “proportionate means of achieving a legitimate aim”.
 
The leading case in this area, Seldon v Clarkson Wright & Jakes [2012] UKSC 16, established that, in order to be justified, a fixed retirement age must be set in a way that was consistent with the country’s broader social policy aims. In this case, the social policy aims of “inter-generational fairness” and “dignity” were referred to.
 
The firm was successful in arguing that workforce planning and staff retention were linked to the broad social objectives of “inter-generational fairness”, and the maintenance of “dignity” in the workplace by avoiding the expulsion of aging partners through potentially embarrassing performance management procedures.
 
The case has been sent back to an employment tribunal to decide on whether a fixed retirement age of 65 was a proportionate means of achieving those aims. If (and only if) the full justification test is satisfied, the fixed retirement age of 65 would, in this instance, be lawful.
 
The Seldon case has made it clear that, if employers impose a fixed retirement age, they must first consider whether the aims that they are trying to achieve are consistent with social policy.
 
Once they have done so, they must then address whether the means of achieving those aims (ie the level of the fixed retirement age and the ways in which it is achieved) is proportionate.
 
If employers choose not to have a fixed retirement age, each employee, regardless of age, should be treated on a case-by-case basis. In practice, this may mean an increased use of performance management procedures.
 

Rebecca Kershaw is a solicitor at law firm, Barlow Robbins LLP.

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Adam Crudge

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