Background
Palacios de la Villa was a case brought by a Spanish employee who was forced to retire against his wishes at age 65, in line with the compulsory retirement provisions in the relevant Spanish collective agreement. He argued that this was unlawful age discrimination.
The case was referred to the European Court of Justice (ECJ) for a ruling on whether the Spanish collective agreement infringed the so-called Framework Directive which covers, amongst other matters, age discrimination in employment.
Decision
The ECJ ruled that:
- compulsory retirement was less favourable treatment on grounds of age; but
- the Spanish compulsory retirement provisions had legitimate aims and met the legal test of 'justification'; and
- they did not, therefore, infringe the Framework Directive. They were lawful and could be relied on by Spanish employers.
Implications
When the UK government introduced regulations outlawing age discrimination in 2006, it introduced a procedure for requiring employees to retire at age 65, or a higher normal retirement age.
These retirement provisions are being challenged by an organisation called Heyday, which argues that they infringe the Framework Directive . A ruling from the ECJ in the Heyday case might not be received until 2009.
The UK retirement provisions were introduced with different aims from those of the Spanish ones (the Spanish provisions were designed to reduce unemployment whereas the UK retirement provisions were designed mainly to assist workforce planning and avoid adverse impact on pensions).
The UK government will therefore have to persuade the ECJ that these aims are equally legitimate and that the UK retirement provisions are equally justified.
However, in the light of the ECJ ruling in Palacios , the Heyday challenge looks less likely to succeed. This would be good news for member companies who wish to continue to rely on the option of compulsory retirement.