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Compulsory Retirement Guidance

01/09/2011

European Court of Justice Provides Guidance on Justifying a Compulsory Retirement Age

As reported in our July 2010 bulletin, it is no longer possible for employers in the UK to compulsorily retire employees at 65 (or any other particular age), unless the employer is able to justify that particular retirement age based on the specific facts.

The European Court of Justice (ECJ) has recently provided guidance on the justification of compulsory retirement ages and identified what may amount to a justification under the EU Framework Directive on Equal Treatment.

The ECJ decided that a provision contained within German law, specifying a retirement age of 65 for permanent civil servant prosecutors, was capable of justification.

The ECJ recognised that the legitimate aims of establishing a balanced age structure within the workforce, encouraging the recruitment and promotion of younger people and avoiding performance disputes with older workers, were legitimate social policy aims that were being pursued by the employer by appropriate means.

Additionally the ECJ stated that courts were entitled to take cost considerations into account when assessing justification, however, the desire to achieve a cost saving cannot on its own constitute a legitimate aim capable of justifying a specific retirement age.

Clearly this decision is very "pro-employer", however, is it likely that this case in particular may be one which is restricted to its own facts. In this case a number of facts were unique to the particular business, for example, the number of prosecutor posts was very limited and the employees were entitled to fairly unique and generous pension benefit whereby the employees could retire on a percentage of their salary and continue to work in another role without a compulsory retirement age.

Had this not been the case, the outcome may have been different.

Clearly, this is an area of law which is currently in a state of flux and therefore poses a high risk for employers who are contemplating retiring employees. KBL are able to provide advice and assistance in respect of the new retirement regime in a bid to reduce any potential risk of claims against the business following the retirement.