Introduction
Employers at present can normally require employees to retire at
65 and there is very little, if anything, that employees can do to
prevent that. Sixty five has become known as the default retirement
age ("DRA"), although some retire earlier or later by mutual
agreement.
Following an accident, or in claims for unfair dismissal and
discrimination the calculation for future loss of earnings and
pension rights generally proceeded on the assumption that there
would have been retirement at the DRA.
The government announced on 29 July 2010 that the DRA is to be
phased out. The present provisions will remain effective until 6
April 2011, so that any notice of termination given before that day
of six months duration will still be effective in law, but after
that and in full effect by October 2011 there will be a need to
justify, objectively and as "a proportionate means of achieving a
legitimate aim", any retirement that is against the employee's
wishes.
Employees will therefore be able to claim that they would have
worked well beyond the DRA, and that any attempt to have enforced
retirement earlier than they had wished was unlawful. Therefore,
the removal of the DRA will create substantial uncertainty in the
issue of when a claimant would have retired.
Effect on quantifications
It seems inevitable that for those claims where the employee
alleges that loss continues for the remainder of the working life,
the quantification will increase as the working life is, at least
potentially, extended. The difficulty for insurers and defenders
will be establishing when the end of the working life would have
been, as that will vary from employer to employer, and person to
person.
The Ogden tables already provide some detail for retirement ages
other than 65, and have tables for 70 and 75 suggesting that
evidence of some employees working well beyond the DRA already
exists. We are likely to see an increase in this evidence and no
doubt an amendment to the tables will require consideration.
The provisions relating to pensions, and other benefits such as
long term disability payments, are liable to be reconsidered by
employers in light of this change. Pensions may become deferred,
and the calculation of pension losses is likely to be made more
difficult and uncertain and will inevitably lead to higher sums
being sought.
General effect
The older one is, the harder it can sometimes be to keep up to
date with developments. Old habits may die hard, and eyesight,
hearing and physical strength can, and usually do, deteriorate. The
risk of an accident occurring to, or being caused by, a person past
the DRA may be higher. That will require employers to make
appropriate changes to the working environment.
Justification
Precisely what the phrase "proportionate means of achieving a
legitimate aim" means depends on the circumstances. It has been
considered in a number of cases, both in the UK courts and at the
Court of Justice of the European Community.
The most recent decision was last week from the Court of Appeal,
in the case of a partner in a law firm being compulsorily retired
at the DRA. His claim was supported by the Equality and Human
Rights Commission. The Court of Appeal held that the firm's policy
was objectively justified as it allowed opportunities within the
partnership to non-partners and aided in succession planning for
the assumption of new partners to occupy retiring partners' places
(called somewhat insensitively "dead man's shoes"). It also avoided
the need to expel partners for poor performance, and encouraged
collegiality.
This does give some ground for optimism that the new provisions
will not simply lead to employees being able to decide for
themselves when they retire. Insurers, defenders and employers will
be able to argue that the claimant would lawfully have been retired
by the employer at the DRA, broadly maintaining the current
quantification. To make that argument may require both substantial
investigation and evidence on when the employee would have retired
having regard to the employer's policy, practice and other
circumstances.
Employers should be encouraged to introduce a policy on
retirement, or amend an existing policy. What the policy will
contain depends on a number of factors, including the type of
operation, the size of workforce, and the aims and objectives of
the organisation. Neither UK nor European law gives much practical
guidance on what issues are likely to be most effective in meeting
the justification test, and the more work that is done at this
stage the stronger the defence is likely to be.
Conclusion
The removal of the DRA is likely to have many and significant
effects for employers and their insurers. It is likely to increase
the risk of claims, and the value of claims, both as insured claims
for personal injury and claims before the Employment Tribunal for
unfair dismissal and discrimination.
Sandy Kemp, Partner and Solicitor Advocate
Simpson and Marwick, August 2010
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Employment Law Roadshow
2 September 2010
We are delighted to announce the first in our Employment Law
Roadshows which takes place on 2 September 2010 at the Apex Hotel,
1 West Victoria Dock Road,Dundee, Scotland DD1 3JP. Our exciting
programme is Chaired by Ian Truscott QC., and is packed with
topical employment issues, including Recruitment, Interviews,
Promotion & Appraisals, Discipline & Grievances,
Questioning Techniques and The Contract of Employment.
The event commences at 09.30 and concludes with lunch at 13.00.
There is no charge for attendance and lunch will be provided for
delegates.
If you would like to attend please email Celia Lauder at events@simpmar.com