Why scrapping of the default retirement age (DRA) has led to confusion

Laura Burke

Laura Burke

Lisa Jinks

Lisa Jinks

Employment law experts Laura Burke and Lisa Jinks explain the confusion around changes to the law affecting retirement age

PROBABLY the most significant employment law development in 2011 is the removal of the default retirement age (DRA) later this year. Up to now, employers have been allowed to retire employees at a DRA (normally 65) by following a statutory procedure, giving between six and 12 months’ notice of intended retirement. However, the proposed removal of the DRA has not been a straightforward process and there is still much confusion surrounding the issue, particularly as a result of the recently published transitional provisions.

Life after the DRA

In January 2011, the coalition government confirmed, following further consultation, that from October 1 2011 the DRA would be scrapped and that, after this time, no further valid retirement dismissals could be effected

The government stated that from October 1 2011 businesses will have two choices: either to have no normal retirement age or to have an employer justified retirement age (EJRA).

Under the first option, employers will have to consider each employee on a case by case basis and ensure that any dismissal is for a fair reason and follows a fair procedure (e.g. for ill health, performance or redundancy).

Clearly, employers will want to know what their employees’ future plans are in order to facilitate workforce planning, and new ACAS guidance has been issued to assist employers deal with this new regime. Employers may want to hold workplace discussions with employees to seek their views on, e.g., their performance, developmental or training needs and future aims and aspirations. However, it is important not to single out older workers, and so annual appraisals might be an opportune time to raise these sorts of discussions with all staff.

The second option is for employers to have an EJRA and to continue to retire employees at a set age – either across the workforce as a whole or a group of employees. However, this option is risky. An employer would have to show that it had a ‘legitimate aim’ in choosing that particular age and also, that it acted ‘proportionately’ in relation to its aim. Legitimate aims might include promoting retention and recruitment by ensuring a clear career path for younger workers, facilitating long term employment planning etc. However, the real test would be for the employer to demonstrate that it had acted ‘proportionately’, i.e. showing that there was not a less discriminatory way of trying to achieve its aims. Both the government and ACAS have indicated that it is likely to be very difficult for employers to justify an EJRA, except in specific sectors such as air traffic controllers, for example.

Confusion continues…

Earlier this year, the government confirmed that transitional provisions would allow employers to continue to issue notices of intended retirement up to and including April 5 2011 for employees who were 65 on or before 30 September 2011. This meant that employers would have to give the six months’ notice by no later thanMarch 30 2011 or else risk claims of compensation from employees.

Last week, confusion spread amongst HR practitioners with the release of the transitional provisions. First, it now appears that employers can in fact give up to 12 months’ notice of retirement on or before 5 April 2011 (meaning that retirement dismissals could still be being effected up to April 5 2012). More confusingly however, it appears that the transitional provisions only apply to those employees who turn 65 between April 6 2011 and September 30 2011 inclusive.

Employment lawyers are now querying this with the government in the hope that this is just a drafting error which will be rectified. However, there now remains a lot of confusion for employers as to whether notices of retirement already issued will become invalid for those employees who will already have turned 65 by April 6 2011.

Lisa Jinks is an associate and Laura Burke is a solicitor with Greenwoods Solicitors LLP’s employment and employee benefits team.

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