Richard Grogan on employment law: Dealing with an ageing workforce
It was previously that an individual got to 65 and retired. Currently the State Pension becomes payable at 66. This will rise to 67 in 2021 and 68 in 2028. There have been calls to increase the retirement age for the State pension to 70.
Most private occupational pension schemes pay out at 65. They usually have a provision in relation to a number of years where there are defined benefit schemes being a maximum of 40 over 60 but then usually reduce the payment by one and a half times the State Pension. This can leave a person retiring at 65 in quite an invidious position.
We also have the problem that people are living longer. When I first qualified the average life expectancy in Ireland was around 72 years of age. A person therefore got approximately 7 years retirement. Now life expectancy is 82 years. This means a pension has to be funded for a considerable length of time up from 7 years now to 17 years.
The solution for employees:
The reality of it is, is that most employees now believe that they need to work beyond 66. This is typically so that they will have a standard of living. Many employees are concerned with mandatory retirement ages.
The approach of employers:
While many employers themselves may wish to work after 65 or 66 many believe that retirement will be imposed upon their staff at 65 on the basis that this is the retirement age set in the company.
There is some talk that the Government will change the law to cease mandatory retirement.
There is a considerable amount of EU law. The most important is the Council Directive 2007/78/EEC which established the general framework for equal treatment in employment and this resulted in the Employment Equality Acts 1998 – 2015. Article 1 of that Directive includes as a ground of discrimination the issue of age. There are two other pieces of EU law which are particularly relevant. The first would be the Lisbon Treaty of 2009 where Article 9 of the Treaty requires States to take appropriate action to combat discrimination on the grounds of age. Another provision which was rarely quoted but is becoming an issue which is quoted more regularly now in cases is the Charter of Fundamental Rights which is binding on the EU Member States since 2009 and specifically provides that the discrimination on the grounds of age is prohibited.
In deciding whether age discrimination has occurred it is necessary first to show whether it is justifiable. This means whether it is objective and reasonably justified by legitimate aim and secondly the means of achieving the aim is appropriate and necessary.
This does place a significant burden on employers. It means that simply setting a retirement age effectively is probably no longer acceptable. It needs to be able to be justified on objective grounds.
The Law as it Applies
The Equality (Miscellaneous) Provision Act 2015 which amended Section 34 of the Employment Equality Acts is now necessary in specifying where discrimination occurs on the age ground that it can be justified if it is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.
The effect of this is that in our view having a compulsory retirement age on its face is no longer allowed in Ireland. Where an employer wants to have a mandatory retirement age it will need to show that it can be objectively justified.
The first issue that must be dealt with is the issue of a legitimate aim. Now this must be a specific aim. Cases C-250/09 and C-260/09 being decisions of the EU clearly show that it cannot be some vague item thought of by the employer.
Various grounds have been accepted in the past by the European Court of Justice these would include to enable a balance to diverse age structure, to create opportunities in the labour market, to promote intergenerational fairness, to ensure the health and safety of employees and of the public, to preserve the dignity of aging employees, national social and employment policies. If an employer is going to say there is a legitimate aim they need to be able to come to show what that legitimate aim is.
It is also necessary then for the employer to show that the matter is appropriate and necessary. This would include such issues as the ability of the employee to obtain a pension on retirement. The interaction of the State Pension and retirement age chosen. It would include agreements by the parties or with unions. The agreement with parties we would have a view that if they simply put in a contract would not be sufficient unless the employee had been advised to get independent advice. The issue of flexibility is going to be there also and whether the employer is willing to consider whether retirement could be deferred in some cases.
In dealing with the issue of whether it is appropriate and necessary case C-190/16 which is one which the employer won has however specifically confirmed that a mandatory retirement age is prima facia discriminatory. Now that means that in an equality claim once the employee shows it was a mandatory retirement age that is prima facia evidence of discrimination. The employee therefore has passed the test of showing a prima facia case and then it is up to the employer to justify. The effect of that case is that effectively it has moved the test similar to that which would apply in the case of a dismissal of say a pregnant employee. Once an employee in those circumstance shows they notified the employer they were pregnant and they were then dismissed everything then passes over to the employer to justify. In the case of a mandatory retirement age the employee will need only say there was a mandatory retirement age this is the documentation showing it and saying, “I was forced to retire”. Then the ball is in the employers’ court to prove that discrimination did not take place.
There will be some jobs where mandatory retirement ages are easier to justify. This will include such matters as members of An Garda Siochana, members of the Defence Forces, individuals undertaking very strenuous manual type jobs or where particular levels of physical fitness would be relevant such as in the case of Fireperson or as in DEC-E2011-142 a retirement age of 55 for a helicopter winchperson.
What should employers do?
It is important for employers who have a mandatory retirement age to now look at their retirement age. They need to look at how this is a legitimate age and how it is appropriate. Employers would need to show that the actions they are taking are appropriate and necessary.
It is vitally important for employers at this stage to consider reviewing their policies and practices. It is likely in our view that there will be a considerable about of litigation on this issue in the coming years.
The issue of compulsory retirement ages is becoming a significant issue for anybody who is involved in employment law. It is also relevant for those involved in pension law. Of course it has huge implications for employers and employees. In particular for employers the days of having a straight mandatory retirement age placed in a contract at the time that somebody joins the organisation with the same retirement age for those involved in physical activities in the employment and for those who may be in a more sedentary job is going to be difficult to justify going forward.
The litigation is there and is just waiting to be started. Prevention is always better than the cure and it is always a lot cheaper than finding yourself on the wrong side of decision which could impact not only in respect of that particular employee but could impact on your entire workforce.