But a recent decision made by the European Court of Justice provides interesting guidance on compulsory retirement ages and age discrimination issues.

 

Previously in Hungary, judges, prosecutors and notaries were required to retire from office at 70 years of age. However, as of 1 January 2012, Hungarian legislation was amended so that judges and prosecutors would be obliged to retire at 62 instead. 

 

The amended legislation provided for a very short transitional period during 2012 and the same situation will apply to notaries from 1 January 2014.

 

The rationale for the change was to standardise retirement age limits for public sector professions and to establish a more balanced age structure by making it easier for young lawyers to access the professions concerned. 

 

Traditionally, the ECJ has been quite relaxed about age discrimination against older workers in relation to the application of a compulsory retirement age. But the radical lowering of the retirement age from 70 to 62 for Hungarian judges was a step too far. 

 

Although the Court accepted that the aims were legitimate, it felt that the means taken to achieve them were not proportionate to the circumstances.

 

In terms of standardisation, the ECJ found that the amended legislation had abruptly and significantly lowered the age limit, without providing for transitional measures to protect the legitimate expectations of those persons. 

 

 

This situation was in contrast to the approach adopted by the Hungarian government in relation to a three year increase in the general pension scheme retirement age, which was staggered over an eight year period. 

 

The Court also found that the way in which the Hungarian government had lowered the retirement age would not achieve a truly balanced age structure into the medium- and long-term. Instead, while there would be a rush of vacancies created in the first year, after that, turnover was likely to return to previous levels. 

 

So what impact will this decision have on the UK’s stance on compulsory retirement ages? The country no longer has a default retirement age, but the issue is still very much a live one in the context of individual employers being able to justify the continued use of a compulsory retirement age.

 

The most significant English court case on this topic was Seldon v Clarkson-Wright and Jake, which was heard by the Supreme Court earlier this year. The Court accepted that the firm had a number of legitimate aims in having a compulsory retirement age of 65 for partners. 

 

It also recognised that there was a distinction between the approach adopted when justifying direct versus indirect age discrimination.

 

The Supreme Court looked at ECJ case law and upheld the principle that, in a direct age discrimination claim, the only legitimate aims on which an employer could rely were social policy objectives of a public interest nature, such as workforce planning or maintaining the dignity of older workers. 

 

Individual aims that related to the employer’s situation such as cost reduction or an improvement in competitiveness would generally not constitute legitimate aims in these circumstances.

 

However, identifying a legitimate aim may not be the greatest hurdle for employers looking to justify the use of a compulsory retirement age. As with the Hungarian case, proportionality is likely to be the main stumbling block. 

 

If the Hungarian government had introduced a longer transitional period to implement the changes, it is likely that the outcome would have been different. 

 

 

Similarly, although the UK courts have tended not to be so lenient in their approach to justification, there is still scope for employers to adopt a compulsory retirement age. 

 

In essence, the employer’s aim must correspond to a real business need, and the means that they adopt must actually meet that need and go no further than is reasonably necessary to do so. In many cases, employers will find this a difficult hurdle to overcome. however. 

 

Therefore, if they wish to continue applying a compulsory retirement age, the following steps should help to ensure that they are in the best possible position to justify it:

 

1. Ensure that you have an explanation, not only for why compulsory retirement is necessary, but also why a particular age has been chosen, along with evidence to support this stance. Consider why this retirement age is appropriate, for example, whether there is evidence to suggest that performance declines after a certain age, or that retiring people at a certain age will directly affect the promotion prospects of younger workers. 

 

2. Make certain that your rationale can be linked to one of the permitted legitimate social policy aims (that is, legitimate employment policy or labour market vocational training objectives). Aims that have been considered legitimate in the past comprise: promoting access to employment for a particular age group; official planning of the departure and recruitment of staff; ensuring a mix of generations so as to promote the exchange of experience and new ideas; avoiding disputes about an employee’s fitness for work over a certain age. 

 

3. Think about whether the aim of the chosen retirement age is legitimate in the particular circumstances of the case (in terms of the workforce as a whole rather than an individual employee). For example, avoiding the need for performance management among older workers might be a legitimate aim but, if you have sophisticated performance management measures in place, it may not be legitimate to avoid such activity for only one section of the workforce.

 

4. Evaluate whether there are any alternative, less discriminatory ways to achieve your aim, for example, using fitness or competency tests rather than age as criteria for retirement.

 

5. Establish whether the retirement age is applied consistently as any deviations are likely to undermine the assertion that the chosen cut-off point is necessary.