Clock Ticking on Retirement Age

Posted on October 18, 2019

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In the first of two articles on significant changes coming into place next year under the Equality Act 2017, Manx Advocate John Aycock and English Barrister Nicholas Siddall QC review the new law abolishing compulsory retirement ages and how a similar change was handled in England.

Time is rapidly running out for another type of exit but this one does not include the ‘B’ word. At the start of 2020 compulsory retirement ages will no longer be automatic in the Isle of Man because of the introduction of age discrimination into Manx equality law. With the Isle of Man reported to have the fourth oldest population in the world, this change is expected to have quite an impact.

The present position in the Isle of Man is that a normal retirement age can be enforced by the employer and in any event the statutory right not to be unfairly dismissed lapses when an employee reaches 65. The Equality Act 2017 makes age discrimination unlawful as of 1 January 2020 such that compulsory retirement ages can no longer be automatic. Fixing a compulsory retirement age will amount to unlawful age discrimination unless an employer can show retirement to be objectively justified as a proportionate means of achieving a legitimate aim. That aim must be both of a public interest/social policy nature and be relevant to the employer’s circumstances. An aim relevant only to the employer and/or based solely on costs is unlikely to be sufficient to justify an enforced retirement age.

Staff will have a right to continue to work where a fixed retirement age cannot be justified. Such staff can work until they decide to retire voluntarily or perhaps they become no longer capable of carrying out their employment to an appropriate standard whereupon an employer can manage this through its capability/performance procedures.

One of the most difficult areas for employers remains justification of a fixed retirement age because satisfying the proportionality requirement in the “legitimate aim” test can be tricky. In England ACAS guidance has cited that factors relevant to the legitimate aim argument might include workforce planning (namely the need to recruit and provide promotion opportunities to manage succession); health and safety of individual employees and the capability issue when employment might involve significant physicality. Another concept on which reliance can be placed is that of “inter-generational fairness”: older workers gained the chance to progress in their youth and middle years by the retirement of others and it would now be inequitable that the same requirement ought not to be applied to them.

Most current Manx contracts of employment include a normal retirement age. “Silver sector” staff will need their contracts adjusting. Manx employers will need to consider whether, for instance, 65 should be retained as a reasonable retirement age (that is justified according to the new law), whether to adopt a fixed retirement age set at a different age or whether to discard fixed retirement ages altogether.

The Island has a useful comparator by looking across the Irish Sea to study what happened when age equality regulations were first introduced into the UK in 2006. In 2011 the compulsory retirement age as a potentially fair reason for dismissal in England was removed. The general feeling in England appears to be that when compulsory retirement ages were abolished businesses had sufficiently prepared and there was not a rapid rise in Tribunal cases from older workers being managed out of their jobs.

Leading counsel Nicholas Siddall QC specialises in employment law and has significant experience of such law in the Isle of Man and England. He explains the English experience on abolishing compulsory retirement ages as follows.

The onset of age discrimination was heralded for some time on the other Island and thus businesses had time to adjust their practices and prepare as is the case on the Island. The experience of such claims has tended to demonstrate that an employer addressing their mind to the issue of retirement in advance of the coming into force of the legislation stands them in good stead when it comes to defending claims brought on that basis. Employers whom have successfully defended such claims have often been seen to have carried out the following steps:

Reviewing their contractual documentation and policies to determine whether they seek to have a fixed retirement age or not;

  1. If a retirement age is going to be abolished, to determine if they will allow workers to work as long as they wish or if some other process will be adopted and, if so, what;
  2. If a retirement age is going to be applied, to determine what it is and the reasons for setting it at any particular level;
  3. Particular attention shall need to be given to a retirement age which is lower than the state retirement age and its justification;
  4. The aims of the business and society generally which are perceived to be served by the setting of any particular age ought to be considered and potentially documented;
  5. The employer ought to consider whether a blanket policy will be adopted or if a discretion to continue to engage older workers should be allowed;
  6. If such a discretion is to be retained, the employer should consider the relevant factors in its exercise and further determine whether it wishes to record the same in a written policy document;
  7. If a discretion to extend is conferred, a record of the fact of its exercise, the duration and the reasons therefor in any particular case should be maintained.

Isle of Man employers should therefore be considering these issues ahead of this important pending law change.

Advocate John T Aycock is head of the Employment Unit at M&P Legal, Douglas. Nicholas Siddall QC practises at Littleton Chambers, London

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