Employment Law News Analysis

ECJ Gives Guidance on Justifying Compulsory Retirement - Expert Comments

David Reid
29th Jul 2011

Regular readers of our updates will know that (subject to transitional arrangements where the process started prior to 6 April this year) it is no longer possible for UK employers to compulsorily retire employees at a particular age unless they are able to establish an ‘employer-justified’ retirement age.

This means that employers who choose to retain a compulsory retirement age will have to demonstrate that this is a ‘proportionate means of achieving a legitimate aim’.

 

A new decision of the European Court of Justice (ECJ) has given some useful guidance on what might amount to ‘justification’ under the EU Framework Directive on Equal Treatment. UK law must be interpreted in accordance with this directive.

 

The court has decided that a provision of German law stipulating a retirement age of 65 for permanent civil servant prosecutors did not breach the Directive. It found that the aims of establishing a balanced age structure, encouraging the recruitment and promotion of young people and avoiding performance disputes with older workers, were legitimate social policy aims being pursued by appropriate means.

 

In addition, the Court stated that Member States are entitled to take cost considerations into account, when assessing social policy objectives but a desire to achieve cost savings cannot, of itself, constitute a legitimate aim.

 

Some commentators have already noted that they consider this to be a very ‘pro-employer’ decision but it must be emphasised that the case may be one restricted to its own facts. The ECJ found it relevant that the number of prosecutor posts was limited, that the Claimant’s could retire on 72% of their salary and could continue to work in another role (eg, legal advisor) without a compulsory retirement age. Had the employee not been entitled to generous pension benefits and the possibility of alternative employment then a different outcome may have been reached. It may also be the case that the particular aim of avoiding performance disputes with older workers would not be considered ‘legitimate’, if this was the only objective being pursued.

 

It is notable that the ECJ suggested that a desire to achieve cost savings cannot, of itself, justify discrimination. There has been much judicial debate about this point in UK law in recent months and some further clarity would be helpful.

 

While any decision in this developing area is welcome the sorts of aims being pursued by the German state have all previously been held to be potentially justifiable. The position in the UK is, of course, very different as our state is no longer attempting to justify a national compulsory retirement age for public servants.

 

This case may nonetheless help UK employers to establish a justification for “employer justified” retirement ages on grounds such as establishing a balanced age structure and encouraging the recruitment and promotion of younger people. However, in our opinion it remains far too early to draw too many conclusions about the impact of this decision on UK law.

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