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In this landmark ruling, the Supreme Court confirmed that it is
possible for an employer to justify its own rules where those rules
result in direct age discrimination. This includes the imposition
of a compulsory retirement age set by the employer. However, the
decision leaves partly unanswered the question of when a particular
retirement age will be justifiable.
Key principles
The Supreme Court held that, in order to justify direct age
discrimination (including that arising from a compulsory retirement
age), the employer must show that it had a legitimate objective
that relates to a wider social policy aim.
The court identified objectives with a social policy element
falling within two broad categories: inter-generational fairness
(including staff retention and workforce planning); and ensuring
dignity for older workers in relation to the termination of their
employment.
The objective with a social policy element must be the real
objective of the employer. For example, if the real objective of
retiring employees at a particular age was simply to cut costs, it
will not be possible to justify the discriminatory effect of the
rule even if it has the incidental effect of promoting
inter-generational fairness.
Even if there is an objective with a social policy element, the
steps taken in pursuit of that objective must be proportionate to
achieve the objective. In the context of compulsory retirement,
this means that the age chosen must be no lower than what is
proportionate to achieve the stated objective.
Proportionality
The Supreme Court confirmed that it will be for the Employment
Tribunals to assess on a case by case basis whether the
employer's discrimination (including compulsory retirement at a
set age) can be justified as proportionate.
It is precisely this proportionality test that will be most
difficult and unpredictable element for tribunals to determine. It
will entail a difficult balancing act between the true benefit of a
discriminatory rule (e.g. the degree of intergenerational fairness
it provides) and the rule's detrimental impact on persons of a
particular age group (e.g. the true impact of the forced retirement
on those whom it affects).
The Supreme Court did provide some suggestions on how the
tribunals might address the issue. It sanctioned the notion of
tribunals unpicking the issue of the age chosen and examining it by
reference to each of the stated objectives of the employer. This
suggests an expectation that tribunals will take a rigorous
approach to weed out cases where the employer is seeking to justify
a retirement age by reference to spurious objectives.
At the same time, there was also a suggestion from the Supreme
Court that tribunals will not need to be unduly exact when
considering whether the particular retirement age chosen was
proportionate. The Court noted that in this case the Employment
Tribunal might well decide that a compulsory retirement age of 65
was justifiable by reference to only two of the three objectives
relied upon by the employer (namely workforce planning and staff
retention).
It also gave a warning to employers that "all businesses
will now have to give careful consideration to what, if any,
mandatory retirement rules can be justified".
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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