The Supreme Court, the highest court in the UK, has recently heard two cases which consider age discrimination.
The first case examines direct discrimination and the issue of compulsory retirement. It reinforces our view that, following the abolition of the Default Retirement Age (DRA) last year, it will not be possible for most employers to justify a compulsory retirement age.
The second case provides more analysis on how employers can objectively justify indirect age discrimination.
We summarise the two judgments and then give practical advice on how to approach justification, and a reminder of some of the management issues you may be facing now that there is no longer a compulsory retirement age to fall back on.
Seldon v Clarkson Wright & Jakes – direct discrimination
This case involved a partner in a law firm who was required to retire at 65.
The Supreme Court ruled that the compulsory retirement age was direct age discrimination, but it was capable of justification as it was focused on legitimate social policy aims – summed up as ‘inter-generational fairness’ and preserving the dignity of older workers.
The case was sent back to employment tribunal to decide whether the selection of the specific age of 65 was a proportionate means of achieving those aims in that particular business.
Whilst the Supreme Court upheld the idea that compulsory retirement can be justified, in reality it went on to set the bar of justification very high.
The Court said that the test for justifying direct discrimination is narrower than the general test for justifying indirect discrimination.
To justify direct age discrimination, the Court said, employers must show:
- they have an aim
- that aim is capable of being in the ‘public interest’
- the aim is also legitimate in the context of the individual business
- the means chosen to achieve the aim are both appropriate and necessary.
Homer v Chief Constable of West Yorkshire Police – indirect discrimination
In this second case, the Supreme Court looked at indirect age discrimination.
Mr Homer worked for the Police National Legal Database (PNLD). When he was appointed, a law degree was not a requirement of the job. However a new grading structure was subsequently introduced with three promotion thresholds, the third of which required a law degree.
As such, Mr Homer could not reach that third level of promotion unless he embarked on a part-time law degree alongside his job, which would have taken him four years. Mr Homer was 62 at the time that this new requirement came in. Because Mr Homer was required to retire at 65 (this was in the days before the abolition of the default retirement age), even if he undertook the degree, he would still not have been able to reach the third level of promotion before leaving the PNLD.
He claimed indirect age discrimination, stating that there was a ‘provision, criterion or practice’ (PCP) which put persons of his age group, including himself, at a particular disadvantage when compared with others.
The lower courts concluded that it was Mr Homer’s impending retirement, rather than his age, which put him at disadvantage. In their view, his position was comparable to other employees nearing the end of their employment. So there was no indirect discrimination on grounds of age.
The Supreme Court upheld Mr Homer’s appeal and ruled that Mr Homer was disadvantaged because of a reason that related to age, i.e. impending retirement. It was not correct to equate leaving due to retirement with leaving for other reasons.
The Supreme Court sent the case back to the employment tribunal to decide if the requirement to have a law degree could be justified.
The justification test is easier in indirect discrimination cases where a real business need on the part of the employer can be enough (contrast this to the ‘public interest’ element stipulated as necessary to justify direct discrimination in the Seldon case above). Nonetheless, the Supreme Court emphasised that justification involves considering whether there are other less discriminatory measures which would achieve the same legitimate aims.
Direct discrimination is hard to justify
What do these cases mean in practice? First, it is more difficult to justify direct rather than indirect discrimination, as there is the additional hurdle of ensuring that the aim is capable of being in the ‘public interest’.
Examples of ‘public interest’ aims might include measures designed to ensure a balance between the generations at the workplace or measures designed to encourage youth employment.
It remains to be seen how readily the courts will accept that an employer’s aims are capable of being in the public interest. One hot topic for dispute is likely to be the withdrawal of certain benefits (e.g. medical benefits) from workers who reach a particular age. If the benefit is backed by an insurance scheme, this practice might be covered by an exemption to age discrimination law (the so-called “insured benefits exemption”) introduced last year. In cases where the exemption does not apply, however, the practice amounts to direct discrimination and it is hard to see a ‘public interest’ angle to any justification for it.
You must be armed with evidence to justify indirect discrimination
Even the more common scenario of indirect discrimination, justification is not easy. Employers will need to be able to come up with robust evidence if they wish to be able to justify an otherwise discriminatory provision, criterion or practice. Vague aims and anecdotal evidence will not suffice.
We recommend that employers take a step by step approach to justification and note each step of this process down:
1) First off, identify the aim of, or reason for the practice. In other words, ask ‘Why do we want to do this, what is our aim?’
2) Then consider whether that aim relates to a reasonable need of the business. Ask, does the business reasonably need to achieve that objective and, if so, why?
3) Next, whatever aim is identified, ask whether the practice does actually achieve, or go towards achieving, that aim (ie is it appropriate?). Do you have evidence to back this up?
4) Then consider if it is reasonably necessary – is there a less, or non-discriminatory, way of achieving the same result?
5) If there isn’t a less or non-discriminatory way of achieving the same result, weigh up, as objectively as possible, the discriminatory effect of the practice against the importance to the business of achieving of its aim. The greater the discriminatory effect of the practice, the more compelling must be its benefits.
Requiring an employee to retire at a particular age, in a world where the default retirement age has been abolished, constitutes unlawful direct age discrimination except in very limited circumstances. The Seldon case gives us some guidance as to the situations when a compulsory retirement age might be justifiable, but confirms that the bar for justification is set very high.
Most of our members abolished compulsory retirement schemes last year. Those that did not do so will want to review whether their compulsory retirement age can continue to be justified in the light of the decision in Seldon.
Facing the challenges of managing your workforce without a compulsory retirement age
More than one year has passed since the Government scrapped the default retirement age. How are employers managing without it? It may be that the true effects of the abolition of the DRA are not known for some time.
In the meantime, here is a reminder of some of the issues which EEF raised at the time, and which are still posing a challenge for employers:
Many employees will continue to retire voluntarily and you will want to encourage your employees to communicate with you about their retirement plans. As always, open and frank employer/employee dialogue is vital. Otherwise, you will have little information on which to base your manpower and succession planning decisions. Discussions about an employee’s retirement plans, however, need to be handled carefully and consistently.
How and when are your managers broaching this subject? ACAS guidance highlights the dangers of asking questions which could be seen as discriminatory and comments that any direct questions such as ‘are you planning to retire in the near future?’ are ‘best avoided’.
In practice, employers need to be asking their whole workforce about their future plans, rather than singling out older workers.
Evidence shows that whether and when employees want to retire is usually driven by financial considerations. To assess the probability of your employees retiring voluntarily, it would help to consider their potential financial situation.
Where applicable, you are likely to have already closed your defined benefit scheme and, if not, to at least be thinking about it. Are some or all parts of your workforce under-saving for retirement? Should you be more pro-active in encouraging your workforce to put enough money aside? This is something you will have to consider alongside your obligations under NEST (National Employment Savings Trust) and automatic pension enrolment.
Exiting an employee whose capability is declining with age is unpalatable, but, in the absence of a compulsory retirement age, you need to feel confident that, as a back stop, you are able to exit underperforming older workers safely. This means looking critically at the way in which your business handles performance issues. Are you setting clearer objectives and targets and addressing issues of underperformance sooner than you might previously have done?
It is worth investing in training your managers on effectively managing difficult conversations with employees about performance.
You should also review your occupational health (OH) support – it may be vital in helping you understand older workers competencies and, in some instances, successfully defending a dismissal based on lack of capability.
Remember also that an older worker could also be disabled for the purposes of the Equality Act 2010 and that you may be obliged to make reasonable adjustments to allow them to continue working. You may find that your reliance on OH support increases in order to meet your obligations in this respect.
Using flexible working as a precursor to retirement
Flexible working, including options such as part-time working, downshifting or consultancy can be a potential precursor to retirement. Are you are geared up to cope with such requests? Our flexible working toolkit will help you with this.
Links to judgments
Read the Seldon judgment
Read the Homer judgment