Michael Doyle of Arthur Cox, legal advisors to the CERS pension arrangement, has provided this article particularly aimed at employers to help explain some of the changes of the Equality (Miscellaneous Provisions) Act 2015 and what they might mean to them. 

Irish law does not provide for a national retirement age – a private employer is therefore free to set its own retirement age. However, legislation was recently introduced in Ireland that now means a mandatory retirement can constitute unlawful age discrimination unless the imposition of that retirement can be objectively justified. The primary risks associated with enforcing compulsory retirement ages are:

(a) An unfair dismissals claim;
(b) An age discrimination claim; and
(c) An injunction.

Establishing the Mandatory Retirement Age

In order to be in a position to defend a compulsory retirement age discrimination claim, an employer must, in the first instance, be able to establish that a normal retirement age does in fact exist within its organisation and that the employee was aware or ought to have been aware of its existence.

An employee’s “retirement age” may arise as a result of one or more of:

(a) An express term in contract of employment;
(b) An implied term in contract of employment; and
(c) Custom and practice.

The Unfair Dismissals Acts 1977–2015 do not apply to a dismissal that arises where an employee reaches “normal retiring age for employees of the same employer in similar employment”. The onus is on the employer to establish what the normal retiring age is, and in this regard, regard will be had to what retirement age is applied by the employer as a matter of practice.

In Ireland, it is not a requirement that the normal retirement age is set out in contracts of employment, although ideally it should be. In Molloy v Connacht Gold [1], the Employment Appeals Tribunal held that "normal retirement age" was a definite or particular age in the relevant employment and not simply the retiring age that may be specified in a contract of employment. In McCarthy v HSE[2], the Employment Appeals Tribunal held that the employee’s retirement age was established by custom and practice and by reference to the retirement age in the HSE’s pension scheme.

Statutory Requirement to Objectively Justify Retirements

The Equality (Miscellaneous Provisions) Act 2015 provides from 1 January 2016 that:

“it shall not constitute discrimination on the age ground to fix different ages for the retirement (whether voluntarily or compulsorily) of employees or any class or description of employees if – (i) it is objectively and reasonably justified by a legitimate aim, and (ii) the means of achieving that aim are appropriate and necessary.” In other words, it is now necessary for employers to be in a position to establish a legitimate aim for having a retirement age and to establish that the imposition of the retirement age is appropriate and necessary.

Acceptable Legitimate Aims

In Donnellan v Minister for Justice, Equality and Law Reform[3] the High Court held that the following constituted “legitimate aims” for compelling the retirement at age 60 of the Assistant Commissioners in An Garda Síochána:

• ensuring motivation and dynamism through increased prospect of promotion; and

• the creation of the most useful pool of candidates possible for appointment to the position of Commissioner.

In Paul Doyle v ESB International[4], the Equality Tribunal found that compulsory retirement at age 65 within ESB International was “objectively justified” because ESB International:

• had a practice of retiring staff at 65;

• had a policy that enabled staff over 65 to remain on in certain circumstances;

• carefully considered why retirement is capped at age 65 and had a policy in place supporting that cap; and

• must be in a position to offer new promotion opportunities to ensure “retention, motivation and dynamism amongst its staff”.

“Justifications” that have failed

In practice, it is relatively easy to establish a legitimate aim for having a mandatory retirement age but much more difficult to establish retirement at that age is necessary and appropriate. The following are examples of arguments run by employers in defence of statutory claims that have not succeeded:

• That it would be perverse for an employee to continue in employment beyond 65 as her pension was payable from age 65;

• That a retirement at age 65 was justified on health and safety grounds as no evidence had been adduced as to the health and safety risks that arose when an employee worked beyond age 65.

Recommendations

For those employers who have established mandatory retirement ages, it is generally advisable to:

• Have a retirement policy in place which is shared with all employees and reviewed on a regular basis;

• State the compulsory retirement age in employees’ contracts of employment;

• Ensure that the compulsory retirement age is well communicated to employees;

• Engage with retiring employees well in advance of retirement;

• Ensure that if a compulsory normal retirement age is being imposed on employees that it is (i) objectively and reasonably justified by a legitimate aim and (ii) the means of achieving that aim are appropriate and necessary;

• Consider requests from employees to work beyond their retirement date carefully and consistently and provide a rationale for whatever decision is made in writing.

• Consider pensions implications of working beyond retirement and advise employee of any implications.

• Ensure employees who work beyond retirement do so on a fixed-term basis.

Working Beyond Retirement

In considering applications from employees to work beyond normal retirement age it will be important to bear the following in mind:

• Employees working beyond normal retirement age may dilute the legitimacy of the employer’s normal retirement age. Employers should grant such requests exceptionally so that normal retirement age is not undermined and so that a precedent is not established;

• Ideally, if a request is granted it should be by way of a fixed term contract. However, if an employer is to grant same it must ensure that the grant of the fixed-term contract is (i) objectively and reasonably justified by a legitimate aim and (ii) the means of achieving that aim are appropriate and necessary;

• Be clear about the length of any fixed-term contract entered into after the normal retirement age and the reason for entering into it;

• Be aware of the implications of renewing fixed-term contracts, i.e. fixed-term contracts which are renewed, such that the total duration of the contracts exceeds 4 years, may become contracts of indefinite duration by operation of law; and

• Ensure that the fixed-term contract entered into complies with the fixed-term legislation by providing no less favourable treatment to permanent comparators.
  
  [1] EAT UD891 2009
  [2] Unreported, 19 March 2010
  [3] [2008] IEHC 467
  [4] [DEC-E2012-086]
  
  
  CPAS recommends that you take the appropriate professional advice on all legal and financial matters.