Abolishing the Default Retirement Age: What does it mean for you?
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 here. The consultation is open until 21 October 2010.