HMO Quarterly Employment Bulletin – March 2011

In our quarterly bulletins we usually cover a range of employment items but this quarter the abolition of the Default Retirement Age has been the talking point for employers and lawyers alike and exceptionally we are therefore devoting the whole of this bulletin to this issue.

This bulletin will concentrate on the law with effect from the 1 October 2011 when the Default Retirement Age will be abolished.  Why then the fuss when we are over 6 months from that date?  Well, there are transitional arrangements which mean that between now and then there are certain key dates to bear in mind if you are looking at retiring an employee before the 1 October 2011.  See our separate fact sheet by clicking here.

Go to this factsheet if you wish to see how the transitional provisions affect the following circumstances:-

• If you wish to retire an employee who is already 65 or will be 65 by the 30 September 2011 you must give him or her notice before 5 April 2011
• If you wish to secure a lawful retirement now of an employee who fits the above criteria but wish such retirement to take effect on the 4 October 2012
• You wish to ascertain the last day upon which an employee can ask to work beyond the dates set by the employer for his or her retirement.

OUT WITH THE OLD IN WITH THE NEW

The age legislation added to the potentially fair reasons for dismissal an additional category: retirement.  With the new legislation that goes.  There is now no default retirement age.  Every dismissal for retirement will have to stand the test of scrutiny under the unfair dismissal and discrimination laws.  Whatever the age, at forced retirement, of an employee an employer will- if challenged- have to establish a fair reason and an objective justification for the dismissal.  

FIXED RETIREMENT AGE OR NOT?

Whether in your business you choose to have a fixed retirement age or to look at each case on an individual basis it will still be necessary to justify your decision.

CONSULTATION

If you had to retire employees recently you should have adopted the process set out in the Age Regulations which creates a procedure and gives the employee an opportunity to request to work beyond the proposed retirement age.  Because the concept of retirement as a fair reason is going, so are the Regulations which require formal consultation.  Because you will now need to find a fair reason for dismissal the process to be adopted will be more akin to the process you will adopt in non retirement cases.  The potentially fair reason for dismissal is likely to be either the capability (or reduced capability) of your employee or some reason under the catch all category Some Other Substantial Reason.  

WHAT DOES AND DOES NOT CHANGE

At present your business will either have a fixed date of retirement (this may be particularly so if an employee has to be physically fit for the task) or it will have no retirement age (perhaps having relied upon the DRA or the custom within your industry, perhaps the state pension age).  If you do nothing then the contractual position between you and your employee will remain the same.  You will have a fixed retirement age in your contracts of employment or you will have none.  

But if you retain the fixed retirement age you will need to be able to “objectively justify it”.  

And if you have no fixed retirement age when it comes to you terminating that employee’s employment you will need to be able to show that your claim can be objectively justified.

Also, at present, if you conduct appraisals then you will need to be careful to ensure that these are not more rigorous for older workers than younger employees.  

WHAT DOES OBJECTIVE JUSTIFICATION MEAN?

The components are as follows:-

•    Legitimate business aim- a genuine need of the business
•    That the retirement age adopted achieves that
•    That it is a proportionate method of achieving that aim (in other words that it cannot be achieved by some different means)

There is no one size fits all here.  But often the considerations will be around planning a balanced workforce to deliver the end product or service that is required.  You will need to have evidence of this planning, usually in the form of a formal policy.

DO WE HAVE TO DO ANYTHING ELSE TO AVOID A DISMISSAL BEING REGARDED AS UNFAIR BY AN EMPLOYMENT TRIBUNAL?

If you have a fixed retirement age built into the contract of employment then you may assume (we suggest logically) that no consultation is required.  The ACAS guidance (Working without a Default Retirement Age) indicates to the contrary, however, in that it suggests best practice is to give “adequate notice” and consult.  Apart from it being common courtesy to your employee if it is in the ACAS guidance then your best policy is to comply.      

If the reason for retirement is to be capability then you will need to approach the dismissal as you would with any other.  You will need to adopt the three stage process in the ACAS code of:

•    Investigation, written notification of complaints and of meeting
•    Meeting and decision
•    Appeal- if requested

For advice and assistance in respect of employment matters contact Nigel Pepper, Consultant or Patrick Nelson, Associate on 01785 211411.

If you would like to read other articles, fact sheets and bulletins on Employment Law go to http://www.hmo.co.uk/content/view/87/93/.  

22 March 2011

Disclaimer
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.