What employers need to know about compulsory retirement
Enforced retirement from employment is increasingly being litigated between employees and employers. There is no statutory compulsory retirement age in the private sector in Ireland. The Equality (Miscellaneous Provisions) Act 2015 provides that employers must objectively justify a compulsory retirement age.
The Act, which came into force on 1 January 2016, is relevant to public sector and private employers, including those who don’t have an express contractual retirement age in place. Employers should take steps to ensure they do not have any potential areas of exposure, and here we outline our top tips to help employers to protect themselves.
Have a clear policy in place
Employers should be consistent in outlining the applicable retirement age for all employees in employment contracts, handbooks and retirement policies. Employers should ensure that they reserve the right to vary and review the retirement age in the context of the operational requirements and business needs of the employer.
Understand objective justification
Where an employer specifies a retirement age in respect of any particular class of employee, an employer must be able to objectively justify that retirement age. If not, the employer may be deemed to be discriminating on grounds of age. The employer’s reason for setting a retirement age must be rational and legitimate and the measures used in pursuit of that aim (i.ee the manner in which the retirement age is applied) must be proportionate.
‘Legitimate aim’ and ‘proportionate means’
Examples of what constitutes a legitimate aim and proportionate means of pursuing that aim include health and safety concerns, preserving the dignity of ageing employees, promotion of workforce planning and access to employment for a new generation of workers.
Employers should not rely on general justifications, and budgetary concerns alone are not a legitimate aim. Employers must show specific proof of the legitimate aim being an actual policy of the employer and not just a convenient pleading.
Working beyond retirement age
In certain cases, an employee may request to work beyond the compulsory retirement age. Employers should give careful consideration to any such request, taking into account the implications to pension scheme rules and the feasibility of extending insurance-related benefits to employees older than the compulsory retirement age.
If the employer has a retirement policy in place, this should specify the circumstances in which working beyond the compulsory retirement age will be considered. A request by an employee to work beyond the compulsory retirement age should only be granted in exceptional circumstances.
If all such requests were granted, this would undermine the objective justification for the compulsory retirement age. Employers must ensure that the criteria used to decide whether or not to grant a request to work beyond compulsory retirement age are objective and applied consistently to all requests.
Contracts beyond retirement
If an employer agrees to allow an employee to continue working beyond the compulsory retirement age, it is common practice for the retirement to be implemented at the compulsory retirement age and for the retired employee to be then offered a fixed-term contract. It is important that the fixed-term contract is not deemed to be an extension of the original employment.