Justification of compulsory retirement ages

Justification of compulsory retirement ages

Retirement age is a headline employment issue of which employers should be aware.

Prior to 2008, it was accepted that employers were free to set contractual retirement ages and to compel employees to retire upon reaching that age. Compulsory retirement in this way was not considered age discrimination as it was permitted by the Employment Equality Acts.

However, in 2008 it became apparent that the Employment Equality Acts do not comply with the European Directive which requires that differences in treatment on the grounds of age should be objectively justified so as not to constitute age discrimination.  Please refer to our earlier article on this topic – Compulsory Retirement — Is It Allowed?

While the Employment Equality Acts do not expressly state that retirement ages must be objectively justified, this practice has become accepted and applied in Irish employment tribunals and Courts.  This practice is soon to become an express provision of the Employment Equality Acts.

The Equality (Miscellaneous Provisions) Bill 2013 proposes to amend the Employment Equality Acts and expressly require employers to show that any contractual retirement age is:

  1. objectively justified by a legitimate aim, and
  2. that the means of achieving that aim are appropriate and necessary.

In light of the increase in the State Pension age to 66 and further increases on the horizon, employers are faced with increased reluctance by employees to retire.

Employers should exercise caution in enforcing any contractual retirement age and take specific advice on whether the retirement age may be considered objectively justifiable, appropriate and necessary in the particular circumstances.

In some circumstances, employers offer compulsorily retired employees a fixed term contract for a period after that employee’s retirement which is permissible under the Employment Equality Acts.

It is proposed in the Equality (Miscellaneous Provisions) Bill 2013 that offering such a fixed term contract to an employee over the compulsory retirement age will also need to be objectively justified by a legitimate aim and that the means of achieving that aim must be appropriate and necessary.

While employers are already required by the employment tribunals and courts to have an objective justification for compulsorily retiring employees, they are not generally required to have an objective justification for providing an employee with a first fixed term contract.  If the proposed amendments are enacted, there may be a two stage hurdle in enforcing a retirement age but allowing the employee to stay a further year or so.

The proposed amendments will mean that employers will need to be extremely careful if offering a fixed term contract to a compulsory retired employee as the two stage hurdle may trip them up as one objective justification could undermine the other.

For further information on this topic, please contact Laura Graham at lgraham@reddycharlton.ie

Laura Graham
Author: Laura Graham