Advocate John Aycock reviews progress since compulsory retirement ages were abolished in the Isle of Man and explains how some retirements become negotiated as part of settlement agreements

MORE than half a decade ago, the Isle of Man abolished the compulsory retirement age with the advent of age discrimination protection in 2020.

Contracts of employment had habitually stipulated a compulsory retirement age, often 65, which before the change was enforceable by the employer as the statutory right not to be unfairly dismissed lapsed when an employee reached 65. The Equality Act 2017 of Tynwald changed things so that compulsory retirement amounted to unlawful age discrimination unless the employer showed it to be objectively justified as a proportionate means of achieving a legitimate aim.

We still see older contracts of employment which include a retirement clause quite often identifying 65 as the normal or compulsory retirement age. In some cases, this will simply be because employers have not updated their contracts since the 2020 law change but it may yet be that employers are seeking to rely on the exception to the discrimination principle by objectively justifying the retirement age. If they do that then the legitimate aim the employer identifies must be of a public interest/social policy nature and relevant to that employer’s circumstances. If the employer’s justification is based solely on costs that is unlikely to be sufficient to justify forced retirement.

The genre of legitimate aims that caselaw tends to show might pass the proportionality test normally involve factors such as workforce planning, managing employee succession, the health and safety of individuals involved and their capability particularly where the work might involve significant physicality. Tribunals will interpret the law bearing in mind ‘intergenerational fairness’ that is making sure younger workers have the same chance to progress as the older workers did in their younger years thanks to compulsory retirement of their elders.

For some, simply reaching the seminal age of 65 can still represent a mental (and physical) threshold whether or not their contract might include that type of clause. Employees currently attaining 65 are the “Baby Boomer” generation working most of their career under a contract stipulating a compulsory retirement, probably at 60 or 65 (matching the then state pension ages). It may be that subliminally this is why some who are approaching their mid-sixties and still working might approach their 65th birthday with some trepidation. On the other hand, many of this generation will have taken advantage of society’s more relaxed approach to early retirement/winding down which, with careful pension planning, can be managed from any age but certainly mid-fifties onwards; recent personal pension freedoms also help facilitate this.

Five years on from the change in Manx law, our Tribunal has not been inundated with age discrimination claims. Manx employers have embraced the new flexibility. In some cases, negotiated retirements have taken place via an employment settlement agreement whereby extra funds are paid on termination to compensate for possible claims. We have advised on retirement settlement agreements for employers and employees, the essence of which is to ensure there is good pension planning, general fairness and clarity of each party’s obligations under the MIRS conciliated termination agreement. If it is not a clean break situation then any ongoing instalment payments might need proper security. This type of deal might arise where there is some doubt about whether an employer could lawfully enforce a compulsory retirement but feels the need to deal with, for example, succession - so to avoid messy litigation, they buy out such possible claims. If the terms are satisfactory, this might also suit the 60-something employee; they should seek legal advice on any such proposals.

It may be because our neighbouring jurisdiction introduced age equality much earlier than the Isle of Man that our community has embraced these ideals without apparent upheaval: it was not a new concept to many larger Manx employers with UK offices. As far back as 2006, Age Equality Regulations were introduced in the UK and compulsory retirement as a fair reason for dismissal was outlawed in England in 2011.

The silver sector can therefore work as long as they wish, within reason; this not only can benefit them physically, mentally and financially but also the Manx economy through payment of taxes and perhaps even deferral of state pension drawdown. The Island has an active independent financial advice sector to help plan retirement finances, this market being markedly different to UK which involves major ‘foreign’ elements such as inheritance tax (soon to include unused pension pots) and pension lifetime allowances.

The choice to wind down, retire or continue working remains a very personal one and dependent on so many factors. The Manx legal framework is now very well established to ensure that workers have the freedom to make that choice, within the bounds of employment statutory protection.

Advocate John Aycock (not yet retired) is head of the employment team at M&P Legal and has 35 years’ experience of employment law in three jurisdictions. This article is not legal advice, you should take advice on the specific facts of each case.

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