Employment
Abolition of Default Retirement Age
The Default Retirement Age (DRA) will be abolished with effect from the 1st October 2011. The employer will have to justify the retirement of any employees on or after the 1st October 2011, as stipulated under the Equality Act 2010 (EqA 2010).
There is a six-month transitional period (6th April 2011 to 1st October 2011). Any retirements the employer already has in progress can continue through to completion, provided that the following conditions were met:
• The notification of retirement was issued to the employee before the 6th April 2011
• The date of employee’s intended retirement falls before the 1st October 2011
• All requirements of the statutory notification of retirement procedure have been met.
The last date for issuing a written notice informing the employee(s) of their retirement under the current statutory procedure was the 5th April 2011; the last effective date for these retirements is the 30th September 2011. The short notice provisions, which enable an employer to give less than six months notice of intended retirement, was abolished on the 6th April 2011.
The last day to provide the six months' notice required by the DRA provisions was actually the 30th March 2011. If the employer gave notice of retirement between the 31st March and the 5th April, then the short notice provisions would apply (under which an employee may claim compensation for up to a maximum of eight weeks' pay).
Transitional provisions: your last opportunity to use the DRA
What the changes mean are:
• Only employees who turn 65 within a strict six month window (6th April 2011 to 30th September 2011) will be covered by the transitional provisions which phase out the DRA. The notice of retirement must have been given on or before the 5th April 2011, but the amount of notice which can be given has been extended from 6 to 12 months. This means that the last possible date to retire an employee under the DRA will be the 4th April 2012.
• If you have an employee who is already 65, and whose retirement is expected to take place on or after the 6th April 2011, the only way the employer can require the employee to retire under the DRA was by re-issuing them with 'short notice' - which brought their employment to an end on or before 5th April 2011. To be potentially fair the short notice must have been given at least 14 days before the retirement date, so the last 'effective' date upon which this 'short notice' could have been given was the 22nd March 2011, for a retirement date of the 5th April 2011.
The retirement will not automatically be regarded as a fair retirement. The employer would first have to convince an Employment Tribunal that the retirement was the real reason for the employee leaving; and the employee had received written notification of their right to request to work beyond their retirement date, and the employer had considered the employee’s request before the employee’s retirement commenced.
If the employer can show this, then the employee’s retirement may be considered fair. However, the Tribunal may award the employee up to eight weeks pay, capped at £400 per week, as a penalty if the employer cannot show these steps were taken, or that the employer had failed to give the employee their full 6 months' notice.
• The default retirement provisions do not apply to any employee who is expected to turn 65 on or after the 1st October 2011.
As such, if the employer has any impending retirements, or if they wish to bring forward the retirement of an employee over 65; we strongly urge you seek independent legal advice.
What are the implications of the DRA abolition?
Retirements may be discriminatory at any age, as there will no longer be a "safe" age at which to retire employees. The employer will instead have to show that there is a fair reason and objective justification for retiring an employee at 65 or indeed any age the employer chooses for retirement. Regardless of whether the employer decides to keep a fixed retirement age(s) or decides when to retire people on a case-by-case basis, they will have to objectively justify the decision to retire the employee.
Employees will be able to bring discrimination and unfair dismissal claims in relation to any retirement.
No formal "duty to consider" provisions
The "duty to consider" framework will cease to exist. The ACAS guidance, “Working without the Default Retirement Age”, confirms that, "if circumstances permit", employers should give consideration to any request by the employee to stay beyond the fixed retirement age. However, as the "duty to consider" procedure will be abolished, employers will not be obliged to consider such requests, even less to grant them or give reasons for not considering or granting them. The phrase "if circumstances permit" suggests that it will ultimately be for the employer to decide whether it is practicable to give consideration to requests. It is unlikely that employers will end up having to justify a failure to consider such requests, but a failure to act consistently between employees may be relevant to the fairness of their retirements.
No legal framework for discussion about retirement
The employer’s culture in terms of workforce planning will probably need to change. Unless the employer can set (and justify) a fixed retirement age, employees will not be able to anticipate when they will be expected to retire. Likewise, there will be no obvious legitimate point at which the employer can have a discussion with older workers about their future plans and when they might retire. Indeed, it is possible that initiating a discussion about retirement may be perceived as discriminatory in itself. This may make it more difficult for the employer to anticipate future workforce requirements, make succession plans etc. It may also lead to younger employees becoming disgruntled about an inability to predict their future career progression.
In respect of retirement planning discussions, the ACAS guidance, “Working without the Default Retirement Age”, recommends the following:
• Retirement planning discussions could be built into the appraisal system and should be conducted at least annually.
• Avoid asking questions which could be seen to be discriminatory, such as "why don't you retire to avoid an undignified sacking?" or by indicating that the employee is blocking younger workers from progressing.
• Ask open questions about the employee's future plans for the short, medium and long-term.
However, the ACAS guidance correctly points out that, even if an employee indicates that they wish to retire in future, they are free to change their mind up until the point that they have given notice of their retirement. In reality, this is likely to prevent an employer from being able to make reliable plans for succession planning.
Finding a fair reason for dismissal
Retirement will no longer be a fair reason for dismissal in its own right, so most if not all "retirements" will have to be treated as either a dismissal under the heading of Some Other Substantial Reason (SOSR) and retirement will effectively become one of the accepted reasons for dismissal under SOSR; or on the grounds of capability based on the employee’s declining performance.
Fixed retirement age v individual retirement age
Employers will have two options in the future:
• Retain a fixed retirement age(s). If the employer decides to retain fixed retirement age(s), whether it is company-wide or used for particular positions, then the employer will dismiss employees for SOSR and the employer will need to be able to objectively justify the retirement age; or,
• Abandon the concept of fixed retirement. Employers will still need to show, on a case-by-case basis, that they acted fairly when deciding to retire a particular employee and that the retirement was not age discriminatory (that is to say it was objectively justified). Employers could retire employees, on a case-by-case basis, most commonly on the grounds of performance (if this has declined) or for SOSR (if retirement is because of succession planning for example).
Recruitment
Employers need to reconsider any maximum recruitment ages they may have. They will no longer be able to refuse a candidate on the basis that they are within six months of 65 (or the normal retirement age if higher). Rather than having an automatic response, refusing to consider such applicants, employers will have to be able to justify refusal according to the normal principles.
Appraisals and performance management
Employers need to review their appraisal and performance management procedures across the whole business; and make sure that older workers are not receiving greater scrutiny than others. The ACAS guidance suggests that good management practice across the whole organisation, of dealing with any performance problems as they arise, will protect the organisation from allegations that older workers are being singled out.
Objectively justifying retirement
To objectively justify retirement - either via a fixed retirement age or on a case-by-case basis – employers will have to be able to show:
• That there is a real business need, i.e. a legitimate aim, is being met.
• That having the particular retirement age meets that aim.
• That it is proportionate to use that retirement age as a means of meeting that aim.
So far, the following have been found in case law to be legitimate aims in the context of retirement:
• Workforce planning
• Facilitating the recruitment and retention of younger employees
• Contributing to a pleasant workplace and protecting the dignity of older workforce by not requiring them to undergo performance management procedures.
• Avoiding adverse impact on pension and benefits, i.e. the increased cost of extending such benefits to older workers.
• Ensuring a high quality of service or ensuring continued competence
• Having an age-balanced workforce and intergenerational fairness or sharing job opportunities amongst the generations.
However, it must be remembered that employers will have to identify their own individual legitimate aim; what is legitimate in one workforce may not be legitimate in another. Employers will also need to show that a balancing act has been carried out, weighing the discriminatory effect on the employee against the benefits achieved for the business and considering whether the aim can be met by less discriminatory means e.g. a slightly older retirement age.
Fair retirement
If employers choose not to have a fixed retirement age then any dismissal based upon poor performance or declining health should be handled in the usual way. If employers are dismissing for SOSR e.g. because the person has reached the fixed retirement age, a fair procedure must be followed.
On the procedural side, the ACAS guidance suggests that employees should be given "adequate notice" of their impending retirement. This suggests that the employee should be warned (and possibly consulted) about the proposal which informs them of their forthcoming retirement. It has to be said that if you have a fixed retirement age which is a proportionate means of achieving a legitimate aim, it is debatable what warning and consultation could add. However, it is an opportunity for the employee to raise issues which the employer may not have thought about when the retirement age was fixed and as such employers would be well advised to follow the ACAS guidance in this regard. An analogy may be drawn with the expiry of fixed-term contracts. Even though the parties expect the contract to come to an end (contracts with a fixed retirement age will usually be stated to expire automatically when the person reaches that age), a fair procedure still needs to be adopted to ensure that the reason the employee is leaving the company is fair.
Note that following an employment tribunal decision which held that the ACAS Code of Practice on Disciplinary and Grievance procedures applies to SOSR dismissals (but which is not binding upon future tribunals); there is scope for uncertainty about whether the ACAS Code applies to retirements.
Checklist: prepare for the DRA abolition
Imminent retirements / workforce planning
• Identify which employees will be retiring in the foreseeable future: are you covered by the default retirement procedure, given the transitional provisions?
• If any retirements that have been planned or set in motion fall outside the default retirement procedure, for example because the retirement will take effect on or after the 1st October 2011, these will have to be revisited. This may entail postponing the retirement altogether, retracting the letter notifying the employee of their intended retirement and seeking the employee's voluntary wishes regarding retirement.
• Any promotions which have been planned on the back of any proposed retirements) will also have to be re-considered.
Retirement age in contractual documents
• If a fixed retirement age is being abandoned by the employer, then this needs to be removed from the employees’ contract of employment and all the staff should be notified of the change. If the contract of employment is stated to terminate automatically on the person reaching the fixed retirement age, seek a variation of the employment contract which requires the employee / employer to give the notice requirement stated within the employee’s contract.
• If a fixed retirement age is being retained or revised upwards, consider what objective justification there is for this. This will involve identifying the business needs being met by having a fixed retirement age and considering whether there are other ways of meeting this aim.
• If a fixed retirement age is being abandoned, any future retirement policy is likely to be an aspiration, with the focus being on "workplace discussions", as per the ACAS guidance.
• Review any share / bonus scheme and any associated documents and consider whether the "good leaver" and "bad leaver" provisions need amending, in particular whether retirement is defined flexibly enough to include retirement in the absence of the DRA and / or retirement through choice.
• Give employees a notice of any changes to their terms and conditions under s4 Employment Rights Act (ERA) 1996.
Compromise agreements
In some specific circumstances, employers might want to consider the possibility of entering into a compromise agreement now, which will settle any potential claim for unfair dismissal upon retirement after the default retirement age has been abolished.
Providing the appropriate notice provisions are observed, any employee reaching the age of 65 before the 1st October 2011 may still be asked to retire on the wishes of the employer. However, if a request to work beyond the normal retirement age is granted by the employer; the employer will not have the opportunity to rely upon those provisions in the future.
Employers may therefore wish to consider entering into discussions between now and October 2011 to require that any granting of a right to work beyond the normal retirement age will be subject to the signing of a compromise agreement settling any and all future claims. Case law suggests that where a compromise agreement is appropriately drafted, it will validly settle claims which have not yet arisen, and which relate to circumstances which have not yet happened.
Change of culture
• If necessary, change the culture with regard to appraisals and performance management across the whole organisation. Aim to demonstrate that any criticism and performance management reviews is applied consistently, regardless of the employee’s age.
• Build discussions about future retirement aspirations and plans into the appraisal process so that such discussions are not focused on people in a certain age group.
Fiona Hamor - Pannone Solicitors
The Equality Act (Obtaining Information)
The Equality Act 2010 (Obtaining Information) Order 2010 came into force on the 1st October 2010. The Order prescribes the forms in which employees may ask questions of their employer; and it will also help employees to determine whether or not they have been discriminated under the Equality Act 2010.
There are two forms which an employee can use to pose questions to their employer. The first regards acts of discrimination (that does not involve equality of terms/equal pay); and second concerns terms of equality and Equal Pay. The forms replaced the old individual discrimination and equal pay questionnaires.
The Government has also produced the forms which employers should use to reply to an employee's 'Questions Form'. The 'Answers Form' enables employers to confirm whether or not they agree with the employee's allegations, and if they do not agree; to explain the reasons why.
Additionally, the Order sets out the time limit and manner for serving the forms. This is either before the Employment Tribunal proceedings have commenced, or otherwise within 28 days of them commencing (unless the Employment Tribunal provides for a later time).
An employer is not obliged to complete the Answers Form. However, a question or answer on a form is admissible as evidence in the Employment Tribunal proceedings. If an employer does not reply to an employee's Questions Form within eight weeks, or gives an evasive or equivocal answer; then the Tribunal will draw their own conclusions from this.
Further information regarding the Equality Act can be found on the Department of Works and Pensions website – www.dwp.gov.uk
Changes to Holiday dates 2011
Easter
The Construction Industry Joint Council (CIJC) and the Trades Unions have agreed that the fixed close down during the Easter week will be discontinued releasing 3 days holiday to be taken at another time by agreement with the employer. If the employer wishes to continue with the Spring close down then the workforce affected should be notified at the beginning of the year.
Similarly if the employer wishes to have a close down at some other time, the operatives affected should be notified of the dates at the beginning of the holiday year.
The Royal Wedding on April 29th is classed as a Public Holiday.
Winter Holiday and Associated Public Holidays.
The Working Rule Agreement states that there shall be seven working days taken in conjunction with Christmas Day, Boxing Day and New Years Day to give a winter holiday of two calendar weeks. The winter break in 2011 will therefore extend from Saturday 24th December 2011 to Sunday 8th January 2012 inclusive.
Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations 2010
The Flexible Working (Eligibility, Complaints and Remedies) (Amendment) Regulations 2010 have been published and came into force on the 6th April 2011. They amend the main Flexible Working (Eligibility, Complaints and Remedies) Regulations 2002 by widening one of the conditions under which employees may request a flexible working arrangement. At the moment, that condition states that, in order to be able to make a request, an employee must care for a child under 17 or, if disabled, under 18. From the 6th April 2011, that condition is to be changed to the child being under 18.
What this means in practice is that the current statutory right to request flexible working is being extended to parents of children under 18 from the 6th April 2011 (it currently applies to parents of children under 17, parents of disabled children under 18 and also to carers of certain adults).
New statutory payment amounts announced for 2011 / 2012
The Government has announced the proposed new rates for Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) for the tax year 2011 / 2012. The new rates are as follows:
● The standard weekly rate of SMP and the weekly rates of SPP, SAP and Maternity Allowance will rise from £124.88 to £128.73; however, it is not yet clear whether this increase will be from Sunday, 3rd April, or Sunday, 10th April 2011.
● The weekly rate of SSP will rise from £79.15 to £81.60 from the 6th April 2011.
● The lower earnings limit for qualifying for SSP, SMP, SPP and SAP will rise from £97.00 to £102.00 per week from the 6th April 2011.
New Compensation limits announced for 2011
The Employment Rights (Increase of Limits) Order 2010 has been published and came into force on the 1st February 2011. The Order increases the limits applying to certain awards of Employment Tribunals and to other amounts payable under employment legislation. The main changes are:
● Maximum amount of a 'week's pay' for the purpose of calculating a redundancy payment or the basic or additional award of compensation for unfair dismissal or payments to employees in the event of insolvency - increases from £380 to £400.
● Limit on the amount of compensatory award for unfair dismissal - increases from £65,300 to £68,400.
● Limit on the daily amount of statutory guarantee payment - increases from £21.20 to £22.20.
The increases apply where the event giving rise to the entitlement to compensation or other payment occurs on or after the 1st February 2011. The date is determined differently depending on the type of claim brought. In unfair dismissal claims, this date is the effective date of termination of employment. In guarantee payment claims, it is the day in respect of which the payment is due.
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For 2011, there is an extra day’s Public Holiday in the United Kingdom for the Royal Wedding on April 29th.
