Out with the old ... Top tips on handling retirement

Since October 2006 when the Employment Equality (Age) Regulations 2006 (the “Regulations”) came into force, it has been unlawful to discriminate against workers, employees, trainees and job applicants on the grounds of age.

The Regulations also introduced a default compulsory retirement age of 65 and made “retirement” a sixth potentially fair reason for dismissal (along with, for example, conduct, capability and redundancy).  The statutory dismissal procedures do not apply to retirement dismissals.  Instead, employers are required to follow a different procedure, commonly referred to as the “duty to consider” procedure.  This means that, if an employer can show that the reason for the dismissal of an employee was retirement and that it followed the relevant procedure in dismissing the individual in question, that dismissal will not be unfair.  It is therefore important that the correct procedure is followed in retiring employees.  

Tip 1: Consider offering a compromise agreement

The default retirement age of 65 introduced by the Regulations (which is due to be reviewed in 2011 and may be abolished), means that, although discriminatory on the face of it, employers may compulsorily retire their employees when they reach age 65 (or later). 

It is possible for employers to have a contractual or normal retirement age below 65, but this would have to be objectively justified, which is difficult to do.  Employers should, therefore, avoid having a normal retirement age below 65, if at all possible.

The default retirement age is currently subject to challenge on the ground it is incompatible with the EC Framework Directive the Regulations were intended to implement.  That challenge has been referred to the ECJ and a decision is currently pending.  The President of the Employment Tribunals has recently given a Direction that any employment tribunal claims which depend on the validity of the retirement defence should be stayed pending the ECJ’s decision in that case.  Where employers are concerned that an employee is likely to be unhappy with his/her proposed retirement, pending a decision on the legality of the default retirement age, they may wish to either avoid such dismissals (unless they are confident that they can justify the dismissal on an objective basis if required to do so), or enter into a compromise agreement with the relevant employees at the point of retirement.

Tip 2: Ensure compliance with the “duty to consider” procedure

This procedure only applies to employees (i.e. not to workers) and there is no qualifying period of service in order to be covered by it.  However, if the dismissal is to be challenged as being unfair, the employee will need to have the requisite one year’s service to bring an unfair dismissal claim.

Step 1: The employer should notify the employee of the date that it intends to retire the employee.  This notification must be in writing and made to the employee at least six months but not more than 12 months before the intended date of retirement.  If an employee wishes to work beyond the intended retirement date (whether for a fixed period or indefinitely), he/she must notify the employer (in writing) of that wish and should do so more than three months before the intended date of retirement stated on the employer’s notification.  Such a request must comply with the statutory requirements by, for example, stating the proposed period for which he/she is requesting that the employment continue.

Step 2: If the employee requests not to be retired on the date of the proposed retirement, that request must be considered before the employee is retired.  Failure to do so will render the dismissal automatically unfair.  The employer must hold a meeting with the employee to discuss their request (unless it is not practicable to do so).  This meeting must be held within a reasonable period of the employer receiving the employee’s request not to be retired.  The employee has a right to be accompanied at the meeting by a fellow colleague.  The employer must give the employee written and dated notice of its decision as soon as practicable after the meeting.  Note that there is no requirement on the employer to give reasons for refusing the employee’s request (although it would be good practice to do so).  If the employer does decide to give reasons, it should be careful not to give the impression that it is discriminating against the employee on any of the forbidden grounds (i.e. race, sex, disability, sexual orientation, religion or belief).

Step 3: The employee has a right to appeal against the employer’s decision to refuse his/her request to work beyond the intended retirement date.  If the employee appeals, an appeal hearing should be held within a reasonable period of time.  The employee has a right to be accompanied at the appeal meeting and the employer should give the employee written notice of its decision as soon as reasonably practicable after that meeting and, if dismissing the appeal, should confirm the date on which the retirement will take effect.   

If, at any point during the process, the parties agree a specific period of further employment and the period of the extension from the original proposed date of retirement is six months or less, there will be no need for the employer to continue the process, or to restart the procedure in respect of that amended date.  The amended date effectively supersedes the original date as the intended date of resignation.

However, if the agreed extension in the above scenario is for a period greater than six months from the original date of intended retirement, the employer will need to restart the above procedure in respect of that new date.  Similarly, if the parties agree to an indefinite extension of employment, the employer will need to restart the procedure if it later decides to retire the employee.

Tip 3: Objective justification requires serious consideration for non-employees

The default retirement age and the ability to compulsorily retire employees once they reach that age only applies to employees and not to, for example, agency workers, office-holders or partners.  This means that, if a non-employee has their contract terminated once they reach a certain age, that person will have a claim for direct age discrimination.  It will then be for the employer to show that that discrimination is justified.  In this respect, non-employees are in a stronger position than employees (since employees can be compulsorily retired on reaching the age of 65 – provided the relevant procedures have been followed). 

There has been a recent case in which the compulsory retirement of a Recorder by the Lord Chancellor and Ministry of Justice was held to be unlawful discrimination.  The employment tribunal did not accept the Ministry of Justice’s argument that a compulsory retirement age of 65 was a proportionate means of achieving the legitimate aim of (among other things) ensuring a reasonable flow of new appointments in the judiciary.  The Ministry of Justice has, however, appealed to the Employment Appeals Tribunal. 

Another recent case has held that the compulsory retirement of a partner in a law firm was not unlawful discrimination on grounds of age.  The compulsory retirement of partners was held to be a proportionate means of achieving a legitimate aim, that aim being to ensure that associates stay with the firm and are given the opportunity of partnership after a reasonable period (an argument similar to that made in the above case). 

Whilst neither of the above cases are binding authority, they do offer some guidance to organisations retiring non-employees and highlight how important it is that the organisation can objectively justify any mandatory retirement age.

Breaches, Overstay and re-entry bans: keeping it clean

Tough penalties for employers and employees who breach the immigration rules are of a recurring theme in this Immigration Special.  This week’s Top Tips looks at some new threats to employers recruiting or retaining key non-EEA Nationals – and how to avoid them.

If there was any doubt that the Government meant business, immigration minister Liam Byrne dispelled it when he announced tough new measures in a statement on 6 February 2008:

“We are changing the immigration rules to make it easier to keep out those we do not want….  we will not tolerate those who do not play by the rules”.

He then set out re-entry bans on individuals who have breached their conditions of stay or made false representations in immigration applications.  Even by recent standards, these are draconian measures.  Robust representations from lawyers and other stakeholders have since won some ministerial concessions and clarification – but these are limited in scope and duration.  The message is clear: now is the time to put your house in order and stop trouble before it starts.

Who’s banned?

Examples of individuals facing a re-entry ban include:

  • Former students who work more than their permitted 20 hours per week in term time
  • Working holidaymakers who exceeded their permitted 12 months in work
  • Business visitors who cross the line from business to productive work
  • Anyone who overstayed their immigration permission by more than 28 days
  • Anyone who used false documents or representations in an immigration application, or withheld material facts

Employers could therefore find that an employee on whose skill they intended to rely is locked out of the UK for at least a year – and, in the worst case, for ten years.  Vigilance – appropriately exercised – is needed to ensure that current employees are not in breach, and new hires are kept within the rules. 

How will the ban be imposed?

An applicant for an entry clearance visa will be mandatorily refused if they have used deception in an entry clearance application within the previous ten years. 

Automatic refusal will also follow if they:

  • Sought leave to enter or remain by deception
  • Were an illegal entrant
  • Overstayed for more than 28 days (or any period if they left at the public expense)
  • Breached their conditions of stay, for example by working illegally or in breach of conditions (see examples above)

The periods of refusal are as follows:

  • One year if the applicant previously left the UK voluntarily, and not at public expense
  • Five years if they left the UK voluntarily, but at public expense (for example through the Assisted Voluntary Returns programme)
  • Ten years if they were removed or deported from the UK

However, concessions are currently operating for those who were in the UK illegally on or after 17 March 2008 (the date on which the concession was announced) and who leave voluntarily before 1 October 2008.  This concession will not apply to anyone who “significantly contrived to frustrate the immigration rules”.  There are other circumstances in which refusals will not apply, such as cases where human rights issues have been raised, or where the person was under 18 at the time of the breach.  This has been clarified in recently published guidance.  The new guidance also clarifies that a refusal will not be issued where the application was not aware that documents submitted, or representations made in connection with a previous application were false.  Although these concessions relieve some of the most immediate and severe consequences in certain cases, we are clearly within a new regime.

Why is this particularly relevant to employers?

Although the employee faces the ban, there are obvious consequences for UK employers who were relying on that person, and for the person’s ability to perform duties under their contracts of employment.  Beyond this however, the circumstances of the breach may have wider implications for a UK employer.  For example, if the breach occurred during the course of the person’s employment, its discovery will certainly trigger Home Office investigation into its relationship to the employment.  For example, if it involved a person working significantly beyond the expiry of their leave to remain date, and employment commenced after 29 February 2008, the employer could be liable for a civil or even criminal penalty under the 2006 Act (see HRLaw Auntie), and its rating on the sponsorship register may be downgraded – or worse (see HRLaw Focus).

How should an employer approach this minefield?

The integration of employment and immigration law considerations makes this a particularly fraught area.  The employer has to balance between compliance with immigration law requirements on the prevention of illegal working with avoiding discrimination (see HRLaw Focus and Auntie).  In addition, employers will need to understand a would-be migrant employee’s history properly in order to make the necessary declarations for the issue of a certificate of sponsorship under the Points Based System.  A history of immigration problems could become apparent at this stage.  A good rule of thumb is careful, methodical observance of the Government’s guidance on avoiding illegal working, and of the Code of Practice on avoiding discrimination in recruitment.  In cases of doubt, or where troubling information comes to light, at whatever stage, there is no substitute for prompt legal advice.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.