As has been widely reported, the High Court in R (on the Application of Age UK) v Secretary of State for Business, Innovation and Skills [2009] has found that the default retirement age (DRA) of 65 is justified and can remain for the time being, although the judge gave a strong indication that it will have to be raised after next year’s government review.
Since the implementation of the Employment Equality (Age) Regulations 2006 (the Regulations), 65 has been set as a DRA, which means that from that age employers can retire employees without liability for age discrimination or unfair dismissal, provided detailed procedures are followed.
Summary of judgment
In Age UK, originally brought by Age Concern, Age UK (a new organisation that encompasses Age Concern, also referred to as Heyday and Help the Aged) challenged the legality of the Regulations that came into force on 1 October 2006. After Age UK was referred to the European Court of Justice, it returned to the High Court for it to decide whether the government could show sufficient evidence to support the argument that having a DRA of 65 is a proportionate means of achieving legitimate social and employment policy aims.
There were two strands to the challenge. Age UK claimed that the Regulations were inconsistent with the European Equal Treatment Directive (the Directive) in two respects:
- allowing employers to justify direct age discrimination; and
- allowing employers to fairly dismiss employees who have reached the age of 65 on grounds of retirement.
Age UK claimed first that there should be no DRA at all and, alternatively, that if a DRA was found to be legitimate, it should be older than 65.
The first argument, relating to the justification of direct age discrimination, is dealt with very briefly in the judgment. The High Court found that the Regulations merely replicate the language of the Directive. Unlike other forms of discrimination, there is nothing to suggest that the kinds of business reasons that can justify indirect discrimination should not also apply to direct discrimination. In this regard, the legislation recognises that age discrimination is unlike any other form of discrimination.
The judgment contains a detailed discussion of the social policy benefits and drawbacks of a DRA of 65, in an effort to assess whether the government is able to justify it. As the High Court points out, there is a real policy tension in this area. On the one hand, there is the government’s interest in promoting employment, continuity of employment, tax revenues from people who remain in employment after 65, reducing the burden on the state pension, and ensuring that as people live longer, they work longer and are able to lead both socially and economically productive lives. On the other hand, there is a need for clarity and flexibility, and a need to maintain competitiveness, address issues such as career planning and ensure availability of jobs to workers of different ages.
In its examination of the social policy objectives of the legislation, the High Court looked at the result of the extensive consultation exercise carried out between 2001 and 2006. It also considered various studies commissioned by the Department for Trade and Industry (DTI), as it then was, and focused in particular on one study by a social policy economist and another by a human resources specialist. The report of the human resources specialist, which was published in March 2006, was based on research carried out at 30 employers, at senior management level. The research found that there was an overwhelming desire for a national retirement age and the interviewees identified various reasons for imposing a DRA, including the view that:
‘There is generally deterioration in performance as people get older and retirement is a satisfactory way of ending the employment relationship with dignity. Performance management schemes are not seen as the right way of dealing with those at the end of a long and successful career.’
At the conclusion of this report, various recommendations were made that included:
- the introduction of a national retirement age of 65;
- if considered necessary, a right for employees to be considered for post-65 working to be mutually agreed;
- the announcement of a review of the impact of the legislation within five to ten years.
These recommendations clearly proved influential in the ultimate decisions taken by the government as all feature in the Regulations. Age UK claimed that the government was unduly influenced by this report, which it alleged contained stereotypical views that were inconsistent with the principles of the Directive. In particular, the available evidence shows that, except in a very limited range of jobs, work performance does not deteriorate with age at least up to the age of 70. Beyond that age, there is virtually no reliable evidence due to the small number of people employed.
The High Court accepted that the concept of a default retirement age was justified by reference to legitimate social policy aims (see box on p22). It held that the existence of a set retirement age is a means of providing certainty and facilitating planning for employers and employees. Whether or not that retirement age should have been set at 65 is another matter.
The High Court found that there were compelling arguments for adopting an age over 65 instead and seemed to favour the age of 68. However, the High Court reluctantly accepted that a retirement age of 65 was justified for the time being, but only on the basis that it is subject to an imminent government review (recently brought forward to 2010). In the rather surprising concluding paragraphs, the judge comments that if the Regulations had been adopted for the first time in 2009, or there had been no indication of an imminent review, he would have concluded that the age of 65 was unlawful.
Implications
We have known for some time that a national retirement age of 65 is not sustainable. The government has already committed to raising the state pension age to 68 by 2044, and logically the default retirement age should be raised to keep pace with this. The Pensions Commission has in fact suggested that the DRA should be set higher than the state pension age. It is now only a matter of time before the DRA is increased. Given the remit of the government’s 2010 review, it is not inconceivable that the DRA will be abolished altogether (although this would be extremely unpopular with employers).
If a DRA is retained it is not clear whether the existing ‘duty to consider’ procedure would also be retained. It has been criticised for being too focused on form rather than fairness. An employer could feasibly turn down all requests to continue working post retirement without giving any reason, and without liability, provided that the correct notification is given and the proper meetings are held. According to research carried out by the Confederation of British Industry (CBI), 81% of employers have in fact accepted the requests made by employees under the procedure. If this research is correct, then the procedures do seem to be working. However, the figures do not show the kind of extensions granted or the proportion of employees who have actually been notified of their right to request continued work.
For the moment, employers can continue to operate their retirement procedures and can continue to retire employees who reach 65 as a matter of course. However, it is clear following this decision that it will not be long before employers have to start preparing for a change. The consequences of a growing population, increased life expectancy, underfunded pension schemes and the lack of any private pension provision for many workers means that raising the retirement age is just one of many essential measures that we can expect in the years to come.
In justifying the concept of a default retirement age the government relied on the following aims:
- workforce planning;
- avoiding an adverse impact on the provision of occupational pensions and other work-related benefits;
- the protection of the dignity of workers at the end of their working lives;
- improving the participation of workers in the 50-64 age group; and
- encouraging culture change.
‘It creates greater discriminatory effect than is necessary on a class of people who both are able to and want to continue in their employment. A higher age would not have any detrimental labour market consequences or block access to high-level jobs by future generations. If the selection of age 65 is not necessary it cannot therefore be justified.’
Mr Justice Blake, commenting on the default retirement age of 65.