Should we include a retirement age in our contracts of employment? – Part 2

In part 1 of this 2 part series, we looked at the issue of including a retirement age in our contracts of employment.

In this part 2, we look at:-

1. how an employer defends a claim for age discrimination and
2. the potential exposure

How does an employer defend a claim for age discrimination?

If an employer has established that a normal contractual retirement age exists, it will avoid a successful claim for unfair dismissal.

However, to successfully defend a claim for age discrimination, the employer will also have to comply with the provisions of the Equality (Miscellaneous Provisions) Act 2015 which provides that:-

“[…] it shall not constitute discrimination on the age ground to fix different ages for the retirement (whether voluntarily or compulsorily) of employees of any class of employees if –

(a) it is objectively and reasonably justified by a legitimate aim, and

(b) the means of achieving that aim are appropriate and necessary”

What amounts to objective justification varies from case to case and depends on the particular circumstances. Some examples of objective justifications that have been upheld are outlined in the grid below:-

Potential Exposure

If an employee successfully claims for unfair dismissal as a result of being compulsorily retired, the following remedies are available under the unfair dismissals legislation:- reinstatement (with back pay), re-engagement or compensation of up to two year’s remuneration based on the employee’s loss.

If an employee successfully claims for age discrimination as a result of being compulsorily retired, the employee under section 82 of the Employment Equality Act could be awarded up to two years remuneration or €40,000, whichever is the greater, which is not limited to the employee’s loss.

Code of Practice on Longer Working

The Workplace Relation Commission has published a code of practice setting out the principles and practices to follow during the engagement between employers and employees in the run up to retirement. The Code sets out best practice in relation to the following areas:

• Utilising skills and experience of older workers;
• Objective justification of retirement;
• Standard retirement arrangements; and
• Requests to work longer.

The full Code of Practice can be found by clicking on the following link:

http://www.irishstatutebook.ie/eli/2017/si/600/made/en/pdf

Practical Steps

1. Include a retirement clause in your contract of employment, such as:-
   “Your role has a fixed retirement age of [insert age] (“the Retirement Age”). The Company reserves the right to vary the Retirement Age from time to time at its discretion.”
2. Consider putting in place a Retirement Policy which sets out the fixed retirement age and the objective justification relied upon by the employer (including why the aims cannot be met by any other means); what employees can expect when approaching retirement; how requests to work beyond retirement are considered and termination of employment on retirement. Measures which would support the pathway to retirement might also be considered to form part of the Retirement Policy. These measures, which would be subject to agreement, might include; the transitional arrangements with regard to the post in questions, flexible working, and/or looking at alternative roles up to the date of retirement.
3. Review all contracts of employment and diary any upcoming retirement dates and assess whether there is an objective justification for enforcing those retirement ages or if the aim could be achieved by any other means.
4. Consult the Code of Conduct prior to compulsorily retiring an employee.

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