Aldridge and Brownlee Solicitiors

Second regulations published as new retirement age rules loom

* The Government has now published a second set of draft regulations abolishing the employee default retirement age, making complex and important changes to the transitional rules. Find out what the new rules are, and when employers need to take special care.

Under the old rules an employer could force an employee to retire at 65 (or any earlier age that it could ‘objectively justify’), provided it gave the employee between six and twelve months’ notice of the intended retirement date, following a binding legal procedure. Employees could submit requests to postpone their retirement provided they did so at least three months before the employer’s notice expired. An employer had to consider the request but was not obliged to grant it.

Under the new rules employers can no longer forcibly retire an employee when he reaches a default retirement age, unless the employer can ‘objectively justify’ it (ie show that it is a ‘proportionate means of achieving a legitimate aim’). Employers are unlikely to be able to objectively justify most jobs. This means most employees can stay in employment either until they decide to retire voluntarily, or until there is a fair reason to dismiss them, such as capability or conduct, or redundancy.

Transitional provisions in the regulations set out how long the old rules can be used for. The overall principle is that the old rules will only apply (where an employer’s default age is 65 or more), if the employee who is being retired reaches the default retirement age on or before 30 September 2011.

However, there was an error in the first draft of the regulations. If allowed to stand, the error would have meant an employer could not forcibly retire an employee under the old rules if the employee’s 65th birthday fell before 1 April 2011. If an employer had done so, it would have faced an age discrimination and unfair dismissal claim, even if the employee had already been given notice of retirement by the employer. This has now been corrected in the second draft. The transitional arrangements will therefore apply to all employees, whether or not their 65th birthday is before 1 April 2011 or not provided they are 65 by 30 September.

The second draft also makes other changes. The Department for Business, Innovation and Skills explains them as follows:

"…we have taken the opportunity to address some concerns about the extent to which the DRA [default retirement age] can continue to apply to individuals after 30 September 2011. The original draft Regulations are absolutely clear that no one who reaches retirement age after 30 September can be retired using the DRA. However, the transitional arrangements do provide flexibility so that a notification of retirement of between six and twelve months can be given before 6 April 2011, and an extension of up to six months agreed through the right to request procedure. The amending Regulations clarify that the latest possible retirement date that can be set using the DRA procedure in this way is 5 October 2012."

However, there appears to be doubt that 5 October is the latest possible retirement date under the old rules (as amended by the transitional provisions), because it appears under the second draft regulations that:

• Employers can forcibly retire an employee who will be 65 by 30 September 2011, by giving her/him notice by 5 April 2011 under the old rules.
• The latest date an employee can make a request to postpone their retirement is 5 January 2012. (Because the last day an employee who is given 12 months' notice on 5 April 2011 can make his request is three months before the employer's notice runs out – which is 5 January 2012).
• Under the old rules, an employee can agree with his employer that he will continue working for either a fixed or an indefinite period beyond his default retirement date. However, if the agreed extra period is longer than six months the employer has to issue a fresh notice. Yet the employer is not allowed to issue such a notice after 5 April 2011. So the longest period an employee can stay in employment is if:
  • S/he is given 12 months’ notice on 5 April 2011, so he must retire on 4 April 2012.
  • S/he then agrees an extension. This cannot exceed a maximum of six months, because that would trigger a need to issue a fresh notice after 5 April 2011, which is not allowed under the old rules. The maximum six months’ notice takes the employee to 3 October 2012.

It therefore appears that the latest date an employee can be forcibly retired under the old rules is 3 October 2012.

Recommendation
Given the complexity of the transitional provisions, and particularly the operation of the rules regarding agreed extensions to an employee’s employment, employers are strongly recommended to take advice on the practical application and implications of the new regulations.

* This is not legal advice; it is intended to provide information of general interest about current legal issues.