Retirement rules

5 March 2009

The European Court of Justice decides that retirement rules are subject to age discrimination law.

Summary
The European Court of Justice (“ECJ”) has today (5th March 2009) released its judgment in The Incorporated Trustees of the National Council for Ageing (Age Concern England) v Secretary of State for Business, Enterprise and Regulatory Reform, Case C-388/07 (“Heyday case”). In the judgment, the ECJ decided that national rules on retirement within the Employment Equality (Age) Regulations 2006 (“the 2006 Regulations”) are subject to age discrimination law. However, a UK rule which permits employers to dismiss employees aged 65 (or over) for retirement may be justified in principle. The High Court has now to rule on whether the relevant parts of the 2006 Regulations, properly implement European Union (“EU”) law. It has also to decide whether the rule allowing dismissal at 65 can be objectively and reasonably justified.

Background to the case
Age Concern England (operating under its pressure group title of “Heyday“) challenged the 2006 Regulations. These rules allow employers to use mandatory retirement ages to dismiss employees and to reject job applicants because they are over 65. The challenge was based on Heyday’s belief that the effect of the EC Equal Treatment Framework Directive 2000/78 (“the Directive”) does not allow an employer to dismiss on grounds of age even when a maximum age for retirement has been reached.

The 2006 Regulations implement the Directive into UK law and make it unlawful for an employer to discriminate on grounds of a person’s age. However, para. 30(2) of the 2006 Regulations provides for a significant exception to this rule which allows employers to dismiss an employee at or over the age of 65 where the reason for dismissal is retirement. (This is so long as the employer used the right procedures to dismiss the employee.) Heyday asserted that the Directive had not been properly implemented in English law and that it was unlawful under EU law to dismiss an employee purely on the grounds he had reached the age of 65.

The challenge was referred by the High Court to the ECJ. Pending the outcome of this case, a practice direction was issued staying all current and future tribunal claims which concern the UK's mandatory retirement age.

Judgment
The ECJ decided:

• The 2006 Regulations are subject to EU anti-discrimination law.
• There is no EU requirement for a precise list of the aims justifying derogation from the principle of non-discrimination to be compiled by the Government.
• EU Member States must justify any rule providing for a compulsory retirement age by showing the legitimate social policy objectives, such as those related to employment policy, the labour market or vocational training, that would justify such a rule.
• The rules on national retirement ages can be justified so long as the justification given by the Government concerned is proportionate, objective and reasonably justified within the context of the relevant national law of the EU member State concerned.

Practical effect of judgment
The High Court has still to decide whether the rule allowing dismissal at 65 can be objectively and reasonably justified. This may take some time. As a consequence, the practice direction staying age discrimination claims is likely to be extended until the High Court has made a decision.

The full transcript of the case is available by clicking here.