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Default retirement age is lawful, rules High Court

The UK's default retirement age of 65 does not breach European law, the High Court ruled on Friday. The ruling means that employers can continue to require employees to retire at 65, though a Government review taking place next year could change that.29 Sep 2009

Background

In December 2006, the National Council on Ageing, part of Age Concern and also known as Heyday, began a High Court challenge, arguing that the Employment Equality (Age) Regulations 2006, which came into force on 1st October 2006, were unlawful and incompatible with the European Equal Treatment Framework Directive.

Heyday's main challenge was that by including provisions in the Regulations allowing for compulsory retirement of employees at 65, the Government had failed adequately to implement the Directive. Many employers use retirement for workforce planning and so rely on the provisions, contained in Regulation 30. In July 2007, the High Court referred various questions to the European Court of Justice (ECJ).

In its decision in March this year, the ECJ was not asked and so did not decide whether the provisions in Regulation 30 were compatible with the Directive.

Instead, the ECJ confirmed that the compulsory retirement provisions of the Regulations are, in principle, acceptable under the Directive provided they can be justified and are "a proportionate means of achieving a legitimate aim."

The ECJ then left the High Court to decide whether the default retirement age can be justified by reference to legitimate national social policy aims, such as those related to employment policy, the labour market or vocational training. 

The High Court proceedings

The High Court heard the case in July this year and it had to decide whether the UK's default retirement age of 65 could be justified by the Government and was appropriate and necessary.

The Government relied on the following social policy aims as justifying its decision to adopt a default retirement age:

  • Maintaining employer confidence in the labour market;
  • Workforce planning. A retirement age provides a target age against which employers and employees can plan work and retirement.  It also prevents job blocking and encourages employees to plan for retirement. Benefits the Government identified as flowing from the default retirement age included 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; and
  • Avoiding an adverse impact on the provision of occupational pensions and other work-related benefits.

The High Court's ruling

The High Court found that the UK's default retirement age is lawful. It was justified by the social policy aims relied on by the Government and that these aims were a labour market objective within the meaning of the Directive.

On the question of whether the use of a default retirement age of 65 was a proportionate means of achieving its social policy aims, the Court was strongly influenced by the fact that the Government has brought forward its review of the default retirement age from 2011 to next year. 

The Court said that had that default retirement age been adopted for the first time in 2009, or had there been no indication of an imminent review, it would have decided that a default retirement age of 65 would not have been proportionate as it creates a greater discriminatory effect than is necessary on a class of people who are both able to and want to continue in their employment.

Age Concern called the ruling "a blow for huge numbers of older people".

The charity said it is challenging MPs to now demonstrate their support for older workers by acting urgently to overturn the legislation. "The Charity is calling on parliamentarians to use the passage of the Equality Bill to abolish the default retirement age," it said in a statement. 

Andrew Harrop, Head of Public Policy at Age Concern, said: “In his ruling the judge makes it clear that the only reason he has allowed the law to stand is because ministers have already caved in to our pressure for a review of the law."

"He makes it clear that forced retirement at 65 is unsustainable," said Harrop. "This judgment makes it crystal clear that this unfair legislation is past its sell by date.

Implications for employers

The decision is good news for employers, according to Louise Donaldson, an employment law specialist at Pinsent Masons.

"The default retirement age will remain and so employers can continue to require employees to retire at 65, with no risk of claims for unfair dismissal or age discrimination, provided that they consider any application made by the employee to work beyond 65 and follow the statutory retirement procedure."

There are currently about 250 employment tribunal claims relating to compulsory retirement that have been stayed pending the ECJ’s judgment, according to Donaldson. These claims will now be dismissed.

"It is worth remembering that the Government has said it will review the retirement age next year so the outcome of the High Court case is unlikely to be the last word we hear on this issue," she said. "The Government may well decide to abolish the default retirement age and if that happens, employers will at that point need to be able to justify any retirement dismissals in order for them not to be found to be discriminatory."

The future

It is understood that the National Council on Ageing will not be appealing the judgment as it expects it to be abolished once the Government completes its review.

"Even if there were a change of Government, it seems likely that the default retirement age is destined to be scrapped as the Conservatives have been backing the Age Concern challenge," said Donaldson. "There is, however, a strong business lobby in favour of keeping some default retirement age and there may yet be the opportunity for further consultation and compromise."

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