Age discrimination: Can we set a mandatory retirement age for our staff?

Since 1 October 2012, as a result of the repeal of the retirement age provisions in the Equality Act 2010, there is no ‘default’ retirement age, and ‘retirement’ is no longer a potentially fair reason for dismissal.

Generally, employees are now able to retire when they are ready, rather than being retired ‘automatically’ when they reach a predetermined age set by their employer.

Importantly though, employers do still have discretion to operate a compulsory retirement age if they wish, as long as this policy decision can be objectively justified. The employer must be able to show that setting a retirement age for staff is a ‘proportionate means of achieving a legitimate aim’. Any dismissal based on an employee reaching an employer-set retirement age will usually be for ‘some other substantial reason’, one of the potentially fair reasons for dismissal available to an employer under current legislation.

So far so good. However, crucially, if an employment tribunal later decides that the retirement age was not objectively justified, the employer will be guilty of direct age discrimination and the potential unfair dismissal of retirees. As a mandatory retirement age generally applies across the workforce, or substantial parts of it, any adverse finding could potentially open the door to high volumes of expensive claims, from employees recently retired, or facing retirement, who claim that they were prepared to continue working and capable of doing so for many months or years more.

For this reason, understandably, many employers have been hesitant to introduce a default retirement age, for fear of falling foul of discrimination rules. The concept of ‘objective justification’ can feel nebulous, and it can be difficult to predict with certainty what an employment tribunal will make of an employer’s business case. Though it is relatively straightforward to outline a legitimate aim, it not always so easy to demonstrate that applying a compulsory retirement age is a proportionate way of achieving that aim.

However, a recent Employment Appeal Tribunal (EAT) decision, concerning the University of Oxford’s mandatory retirement age, has provided some useful insight into the factors an employment tribunal will consider, which may help employers with this difficult balancing act. 

What happened?

The University of Oxford operated a policy of requiring academic staff to retire at age 67, with an option to request an extension for specific reasons (for example, to complete a particular project).

Professor Pitcher, who taught English Literature, was refused an extension, and was compulsorily retired from his employment at that age. Professor Ewart, who taught Physics, obtained an extension beyond 67, vacating his substantive post and taking up a fixed-term position. However, when this came to an end, he was refused a further extension and also faced compulsory retirement.

The employment tribunal that first heard Professor Pitcher’s case, held that the University’s retirement age was objectively justified, and that his dismissal was fair. Confusingly, a different tribunal reached a very different decision in respect of Professor Ewart, holding that he had been discriminated against and unfairly dismissed. The EAT was tasked with considering both cases together and attempting to reconcile them.

The EAT decision

The University argued that its compulsory retirement age supported three key aims; intergenerational fairness; succession planning; and equality and diversity. Its rationale was that retiring staff promptly ensured that vacancies would open-up more regularly, and these senior positions could be filled by a younger, more diverse cohort of staff. The EAT held that these were all ‘legitimate aims’. It then went on to consider whether these aims had actually been achieved in each case, and whether the compulsory retirement age was a ‘proportionate means’ of achieving them.

In Professor Pitcher’s case, there was little data to show whether the compulsory retirement age had actually created vacancies, as the scheme was quite new. However, a survey of recent retirees showed that around 25% would have continued to work for longer in the absence of a compulsory retirement age, suggesting that the measure was indeed having some impact. The employment tribunal had been entitled to find that University’s compulsory retirement age was ‘proportionate’ (considering the possibility of an extension, and other post-retirement opportunities available).

By contrast, by the time Professor Ewart’s case was heard, there were some statistics available to show that the rate of vacancies created by the compulsory retirement age was ‘trivial’ (between 2-4%). The employment tribunal that first heard the case had decided that the University’s stated aims had not been achieved and, in any event, the compulsory retirement age was not ‘proportionate’; It was a very discriminatory measure that was not sufficiently mitigated by the possibility of extension (which was subject to several caveats and conditions).

The EAT held, in short, that the finding that Professor Pitcher had been treated fairly was acceptable; but the decision that Professor Ewart has been unfairly dismissed and discriminated against was acceptable too.

What does this mean for me?

You may feel that this decision hinders more than it helps. How can the same compulsory retirement policy be discriminatory in respect of one employee, but not in respect of another?

Legally, this inconsistency boils down to the fact that it was not the EAT’s role to reach a ‘final answer’ but rather to consider whether the original employment tribunals had made any errors. Although they reached different decisions, the original employment tribunals had been faced with slightly different facts, circumstances, and evidence. Both had made reasonable decisions and neither had made any mistakes.

So, while this decision presents few certainties to hold on to, it does usefully highlight the most important features of a ‘justification’ defence. An employment tribunal will always consider the actual proven effectiveness of an organisation’s compulsory retirement age towards achieving its stated aims; whether any alternative measures might have achieved these results; and the extent of any detrimental impact on the individual employee.

Implementing compulsory retirement: Key considerations

If your organisation is considering implementing a compulsory retirement age for your staff, the following tips may help you:

• Front-load your thinking: It is important to start thinking about how you will ‘objectively justify’ a compulsory retirement rule before you implement it. Make sure your key stakeholders can articulate the rationale behind the policy, and record key conversations in writing. You can always ‘build as you go’, but make sure your basic case is clear from the start.
• Don’t worry too much about evidence (at least initially); It is difficult to know, when you first introduce a new policy, whether the end will justify the means. The EAT in this case, acknowledged that it can be challenging to demonstrate the effectiveness of a compulsory retirement age before it is fully embedded. However, it is crucial to consider from the start how you will monitor and continually evaluate the ‘real-life’ impact the policy is having, and to build up as full a ‘data picture’ as you can as soon as possible.
• Consider alternatives in detail: This is key to any successful ‘proportionality’ argument. You must be able to show that you have considered other, less discriminatory alternatives to a compulsory retirement age, but decided that they were insufficient or unsuitable. You will need to show that you have thought about the detrimental impact on retirees, and whether alternatives, for example structured conversations with employees approaching retirement, would have the desired effect. Again, record any key conversations in writing.
• Can you ‘soften the edges’ of your compulsory retirement policy?: A very ‘black and white’ requirement that employees must retire at a given age is arguably less likely to be proportionate than a policy that is a little more nuanced and evidences more thought. Will you allow extensions for specific purposes? Might you consider a ‘phase down’ of duties or working time? Do you have any structured opportunities in place for employees who are willing to step back from their current roles, but still wish to contribute to your organisation? Remember that, as well as softening the detrimental impact on the employee, the benefits of a little flexibility may be mutual.
• Seek early legal advice: Always a good idea, but more important than ever in this context. We can work with you from the outset to help shape and stress-test your business case for compulsory retirement, and to ensure that any policy is robust and fit for purpose.

Read the full decision in Pitcher v University of Oxford/University of Oxford v Ewart online.