The Employment Equality (Age) Regulations 2006 (‘The Age Regulations’) are currently the subject of a judicial review by the European Court of Justice (ECJ) following concerns that a number of provisions are incompatible with the European Equal Treatment Framework Directive (‘the Directive’). What is the basis of the legal challenge and how does it affect employers?
The full name of the case is R (on the application of the Incorporated Trustees of the National Council for Ageing (Age Concern England)) v Secretary of State for Business, Enterprise and Regulatory Reform, but it is more commonly known as “Heyday”. The challenge centres on the legality of the mandatory retirement age of 65 but also raises a number of other issues regarding the UK provisions. Although the case was originally filed in July 2006 the actual questions to be referred to the ECJ have only recently been submitted.
The Age Regulations, which came into force in October 2006, amended the Employment Rights Act to provide for retirement to be a fair reason for dismissal provided it takes place on the employee’s normal retirement age or, where there is no normal retirement age, on or after the employee’s 65th birthday. Provided the “duty to consider procedure” prescribed in the legislation has been complied with the employer does need to show that the retirement was also fair and reasonable as for other dismissals. Essentially, therefore, an employee is unable to challenge their retirement as discriminatory on grounds of age.
The Government contends that the introduction of a mandatory retirement age, although directly discriminatory on grounds of age, is not contrary to the Directive. The implementation of the Directive was stated as being “without prejudice to any national provisions setting down retirement ages” which may therefore fall outside the scope of the Directive. In any event, as the Directive provides that both direct and indirect age discrimination may be justified, the Government is arguing that mandatory retirement is a proportionate means of achieving a legitimate aim, namely workforce planning and avoiding adverse impact on the provision of pensions and other benefits.
The first question before the ECJ is whether the scope of the Directive extends to national rules regarding retirement ages and whether any exemption applies only to existing provisions in Member States or, as in the UK’s case, any new rules which are introduced after the Directive was made. In Palacios de la Villa v Cortefiel Servicios SA (a broadly similar case also before the ECJ) the Advocate General’s opinion was that the setting of a compulsory retirement age was not contrary to the Directive. In this case, his view was that the retirement did not amount to a dismissal and as such fell outside the scope of the Directive but, in any event, he believed mandatory retirement ages would not be unlawful as they serve “a public interest aim". The ECJ is not obliged to follow the Advocate General’s opinion and therefore the matter is still officially undecided. Even if this view is upheld, the subtle differences in the two cases may lead to a different outcome.
The remaining questions before the ECJ concern the justification for direct and indirect discrimination. Article 2 of the Directive states that indirect discrimination will not be unlawful if it is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary. Article 6 provides a defence for direct discrimination where, in the context of national law, the treatment is objectively and reasonably justified by a legitimate aim and if the means of achieving that aim are appropriate and necessary. The Directive gives specific examples of legitimate aims which would satisfy the test for justification for direct discrimination, although Members States were free to make their own express provisions.
During the initial consultation on the Age Regulations the Government gave a number of legitimate aims which it was considering including as justification for direct discrimination. However, as the response was that this approach would be too restrictive, the final version of the Age Regulations provided for same test to be used to justify both direct and indirect discrimination i.e. that the treatment must be a proportionate means of achieving a legitimate aim. As a consequence, the ECJ is being asked:
i) Is the UK’s approach to justification for direct discrimination compatible with the Directive or are Member States required to specify the actual differences of treatment which may be justified?
ii) Is there any practical difference in the test for justification for direct discrimination compared to indirect discrimination?
Employers can continue to rely on the current provisions but should be aware that employees may still lodge a claim and request the tribunal to stay the case where the ECJ ruling has a bearing. Given, the Advocate General’s opinion it is now less likely that a stay will be granted where the employee is claiming that a retirement at age 65 is unlawful, subject to the President of the Tribunal Service enforcing his powers to stay such claims as has recently been requested by Heyday’s lawyers. Either way, it is true to say that the uncertainty surrounding the fairness of forcing employees to retire will continue until the outcome of the judicial review is known, which is unlikely to be before 2009.