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Home > Feature Articles > Default Retirement Age to be gone next year

Default Retirement Age to be gone next year

Email Update 73

Yesterday, the Government began the consultation process on its plan to abolish the Default Retirement Age (DRA) of 65 on 6 April 2011. From that date, it is expected that employers will no longer have the automatic right to issue notices of retirement to employees who have reached or who are approaching the age of 65.

 

Under planned transitional arrangements, employers who have already issued notices of retirement to employees before 6 April 2011 will be able to continue to rely on the DRA to retire these employees, as long as the employment terminates before 1 October 2011.

 

This announcement is described as a “phasing out” of the DRA but perhaps in reality is an abolition of the DRA rather more quickly that businesses might have hoped for.

 

The measure is one of the steps that the Government is taking to enable and encourage people to work longer, alongside raising the State Pension Age to 66 faster than currently scheduled.

 

Presently, an employer has a right to dismiss an employee by reason of retirement provided that the employee is, or is approaching, the age of 65 and that the employer complies with the statutory retirement procedure. The current procedure gives the employee a statutory right to at least six months' notice of the retirement and a right to request to work longer, which the employer is under a duty to consider. Under the new proposals, the "right to request" procedure will be abolished and employers will no longer be able to automatically justify a dismissal by compulsory retirement when the employee reaches 65.

 

This does not, however, remove the right of the employer to set a compulsory retirement age, or dismiss an employee by reason of retirement. The key change is that employers will now need to satisfy the legal test that they have an objectively justifiable reason for having a set retirement age. It is likely that this will be easier to justify in some industries than others.

 

We would suggest that in industries where the work is neither physically demanding nor safety critical, it may be extremely difficult to justify maintaining a set retirement age under the proposed new laws.

 

Under the proposed new laws, an employee who is compulsorily retired at any age will be able to complain to an employment tribunal that the dismissal is unfair (subject to the normal service requirements) or discriminatory (ie not objectively justified). It will then be for the employment tribunal to decide whether the basis for retiring the employee was reasonable and whether the retirement age selected was objectively justified.

 

It is not entirely clear at this stage whether “retirement” will remain a separate, potentially fair reason for dismissing an employee in terms of unfair dismissal legislation. If not, it raises the rather unedifying prospect of employers being forced to dismiss older employees on “capability” grounds once they do reach the point when they are no longer able to fulfil their duties satisfactorily. Further clarity is required in this area.

 

The Government is aware that employers will need guidance and support to manage the transition as the DRA is phased out. To this end, the consultation paper calls for employers to respond to the proposals with suggestions on how they would be best supported throughout this transitional period and what help they will need to adapt to the changes.

 

A copy of the consultation document can be found at www.bis.gov.uk/retirement-age. The consultation is open until 21 October 2010.