Age discrimination - Have Heyday had their heyday? The European Court decision in Palacios de la Villa

The issue of the legality of mandatory retirement ages is a complex one. For many non-employment law aficionados, there was an assumption that the introduction of legislation combating age discrimination in 2006 would lead to an abolition of an employer’s right to dismiss people just because they reached a certain age. After all, what could be more based on age? However, after some agonising and a suggestion at one point that there should be a ‘flexible decade of retirement’, the UK Government decided to retain the ability of employers to require their employees to retire. This is so long as a basic procedure is followed, consisting of prior notification and the holding of a meeting.

In response to this, Heyday – a membership organisation for those approaching or already in retirement – commenced judicial review proceedings arguing that the retention of the right to automatically retire was contrary to the European Directive which lies behind the age discrimination rules – Directive 2000/78/EC. Many commentators predicted failure for the Heyday challenge and many more have said that a recent decision of the ECJ supports the likely failure. However, I think that they may have missed a point.

The decision in question is Palacios de la Villa v Cortefiel Servicios SA (Case C-411/05). The case concern a provision contained in Spanish law which allows for clauses in collective agreements which provide for termination of employment where an employee has reached normal retirement age, completed the minimum period of pension contributions, and satisfied the requirements to draw a pension as set out in Spanish social security legislation. Senor Palacios de la Villa sought to challenge the fact that he was retired under such a clause, arguing that it was contrary to the age discrimination provisions in the Directive. The European Court of Justice decided that the circumstances were permitted by the Directive, but – unlike the Advocate General – it did not decide that such a situation was outwith the prohibitions contained in the Directive, rather they found that on the facts it could be possible for the retirement to be justified, even though it was based on age.

The key issue, therefore, is how the court approached justification. In short, the Court  held that the compulsory retirement clause was part of a national policy seeking to promote better access to employment by means of better distribution of work between the generations. This was clear from the context of the introduction of the law – a period of high unemployment – and statements made subsequently.

More specifically, the Court noted that the relevant law makes it possible, in collective agreements, to include clauses authorising the termination of an employment contract on the ground that the worker has reached retirement age, provided that that measure is ‘linked to objectives which are consistent with employment policy and are set out in the collective agreement’, such as ‘the conversion of temporary contracts into permanent contracts [or] the recruitment of new workers’.

Applying this case to the UK context, it does not, contrary to what some commentators have said, provide an automatic read across that the UK courts will also hold that the UK rules are justified. The decision does mean that the UK Government will have to come up with some cogent explanation why the ability for employers to retire employees at 65 (or a lower normal retiring age) were retained. Now, it may well be that in the light of the Palacios de la Villa decision, the lawyers representing the Government feel confident that they can convince the courts of similar grounds, namely the need to get younger people into the workforce and reduce unemployment – all laudible aims. The difficult I think that they will have is demonstrating proof that this is in fact the reason why we still have mandatory retirement ages. In Spain

there was a clearly documented debate around unemployment that led to the introduction of the rules and, what’s more, the collective agreement in question specifically referred to the reduction in unemployment. In the UK, the only clear statement from the Government as to why the mandatory retirement provisions were retained was as follows:

“In setting the default age, we have taken careful note of a number of representations we received in the course of consultations, which made it clear that significant numbers of employers use a set retirement age as a necessary part of their workforce planning. Whilst an increasing number of employers are able to organise their business around the best practice of having no set retirement age for all or particular groups of their workforce, some nevertheless still rely on it heavily. This is our primary reason for setting the default retirement age” – Equality and Diversity: Coming of Age - Consultation on the draft Employment Equality (Age) Regulations 2006

Now, I don’t know about you, but I would have thought that the fact that “some nevertheless still rely on it heavily” is hardly a compelling reason for continuing with an age discriminatory measure. Further, UK law does not have the specific requirements for any mandatory retirement to be collectively agreed, as occurs in Spain and a number of other European states. The days of the UK mandatory retirement age may yet be numbered. Watch this space

 

Comments

[Gary Lemonshell]

That’s very interesting; I found something more at http://www.lemonshell.com/legal/employmentlaw.aspx