The 2018 HR Business Agenda - New Code of Practice on Retirement AgesPosted in : Supplementary Articles ROI on 17 January 2018
Retirement ages remained very much in the news in 2017 and it is a topic that we expect to continue to dominate the HR agenda during 2018. The Workplace Relations Commission (“WRC”) has now published a Code of Practice, INDUSTRIAL RELATIONS ACT 1990 (CODE OF PRACTICE ON LONGER WORKING) (DECLARATION) ORDER 2017 (“the Code”), in consultation with IBEC, ICTU and relevant Government Departments, to guide employers, employees and their representatives on best practice in the run-up to retirement in the workplace, to include responding to requests to work beyond the employer’s mandatory retirement age. The Code now sets the standard for dealing with mandatory retirement in the workplace and requests to work beyond the mandatory retirement age and should now be the starting point for all employers and HR practitioners when addressing this issue on the HR business agenda in 2018.
Last July, the Citizens Assembly called for an end to mandatory retirement from the workforce. That recommendation, along with a number of others made by the Citizens Assembly, followed a weekend of hearings at which the Assembly discussed a wide range of issues seeking to address the challenges and opportunities created by the State’s aging population. The Citizens Assembly also recommended that the time gap between retirement and eligibility for the old age pension should be eliminated and that the old age pension should be linked to average earnings. Part of the concern leading to this issue being discussed by the Citizens Assembly in the first place arises from the widening gap between the traditional retirement age of 65 and the age at which people start to receive the State pension - currently 66 but rising to 67 in 2021 and 68 by 2028.
On the question of abolishing mandatory retirement ages, 86% of the citizen’s assembly members said this practice should be outlawed. 96% said that the anomaly whereby people who are forced to retire cannot then get the State pension age until they are 66 should be removed. A recommendation to seek the introduction of some form of mandatory pension scheme to supplement the state pension was supported by 87% and 88% said that the pension should be benchmarked to average earnings.
These recommendations will form the basis for a detailed report to be sent to the Dáil and Seanad by assembly chairwoman, Ms Justice Mary Laffoy.
Case Law Developments
There were also a number of recent interesting cases in this area in 2017 and it is an area of employment law and HR practice in which we are likely to see continuing legal developments over the coming 12 months. For example, in January 2017, the Labour Court issued its decision in the case of Transdev Light Rail Limited v Michael Chrzanowski. This case involved a Luas tram driver who was required to retire at age 65. He wished to remain employed as a tram driver for 2 years post his retirement but his request in this regard was refused by his employer. His contract did not contain a clause imposing a mandatory retirement age of 65 but the pension scheme did specify 65 as the normal retirement age. Furthermore, the employer had consistently applied the mandatory retirement age of 65 over a period of several years.
The employee argued that he had a legitimate expectation of remaining in employment beyond the age of 65 and he identified two other employees who had done so. He disagreed with the employer’s contention that the Railway Safety Act 2005 required him to retire at age 65 and argued instead that what that legislation sets out is that safety critical workers must undergo an assessment by a medical practitioner to determine their fitness to perform safety-critical tasks but does not stipulate retirement at age 65.
He also cited a transport provider as a comparator as their train drivers retired at 66 years of age. Interestingly, the Labour Court found that this choice of comparator was inappropriate. When the tram driver was forced to retire, in 2014, the transport company also had a retirement age of 65 (the transport company only increased their retirement age to 66 in 2016). Also, the transport company was not an “associated employer” as Transdev did not control that company and vice versa.
The employer, on the other hand, argued that 65 was the established retirement age for all employees, that the practice of retiring employees at that stage had been consistently applied and was an implied term of the employee’s contract of employment. It was also an express term of the collective agreement which incorporated the terms relating to the occupational pension scheme, of which this employee was a member.
The employer further argued that the retirement age of 65 was objectively justified on the following basis;
i. Tram drivers are safety critical workers and it is necessary to ensure that they are in a position to perform their roles safely to ensure the health and safety of the drivers, their passengers and the general public. The employer relied on up to date medical evidence in making this argument.
ii. The retirement age of 65 promotes better access to employment by means of better distribution of work between the generations and allows for more efficient workforce planning – in particular relating to succession planning and recruitment drives. In that regard, the employer began the recruitment of the employee’s replacement 8 months before he was due to retire to ensure the replacement would be trained up in time to maintain the resourcing levels agreed with the union.
iii. There is a genuine operational requirement for a tram driver to be young enough to carry out his/her role safely. An expert in occupational medicine was relied upon to demonstrate that the ability to operate a tram diminishes with age and this is supported in the frequency with which tram drivers are expected to undergo health surveillance examinations. The employer also produced data which demonstrated the increased frequency of medical testing and screening for employees over the age of 50. Data was also produced to show trends of increased absences due to illness for employees over the age of 60.
The Labour Court accepted the arguments of the employer outlined above and found that, on the facts of this case, the mandatory retirement age of 65 for tram drivers did not constitute unlawful age discrimination, due to the employer’s ability to objectively justify same.
The Court held that the employer was entitled to rely on the mandatory retirement age of 65 even where the mandatory retirement age was not set out in the contract of employment. The Court found that through custom and practice a mandatory age of 65 could be implied in to the contract. The Court also noted that the mandatory retirement age was incorporated into a collective agreement which the employee had signed and which in turn referred to the terms occupational pension scheme, which included a mandatory retirement age of 65. The Court referred to the case of Earagail Eisc Teo v Richard Lett where it was held that, either expressly or by implication, a term of employment regarding a retirement age can be provided in an employee’s terms of employment.
The New Code of Practice
In 2016, an Interdepartmental Group on Fuller Working Lives (“the Group”) reported to the then Minister for Public Expenditure and Reform, Pascal Donohoe, that retirement at the age of 65 was increasingly impractical. That Group said that workers and employers need to accept that working for longer is both necessary and desirable. One of the Group’s recommendations was that the then LRC issue a Code of Practice. The LRC has since become the WRC and, just in advance of the Christmas break, the WRC published the Code which sets out best practice over the following headings;
- Utilising the skills and experience of older workers.
- Objective justification of retirement.
- Standard retirement arrangements.
- Requests to work longer.
The Code reminds employers of the current legal position on setting mandatory retirement ages in the workplace.
Mandatory Retirement Ages & The Law
In that regard, Public sector workers who joined since the start of 2013 are entitled to remain in employment until they reach the age of 70. The earliest that they can retire is 66, to match the State pension age, and that age will rise to 67 and 68 over the coming years as the State pension age rises.
In the private sector, there is no mandatory retirement age and employers are free to choose the age at which employees must retire, subject to some conditions as outlined further below.
The Employment Equality Act 1998 prohibits unfavourable treatment by an employer based on 9 grounds of discrimination, and age is one of these 9 grounds. However, the Act goes on to state at s. 34 (4); “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.”
This means that, with the exception of certain public sector occupations, there is no set mandatory retirement age in Ireland. There is also no prohibition on employers setting a certain age at which employees must retire. While the State pension age has increased to 66, and will ultimately rise to 68 over the coming years, this does not mean that employers have an obligation to set a mandatory retirement age to match the State pension age. They are entirely separate issues from a legal perspective.
However, while these provisions of the Employment Equality Act 1998 gave employers the discretion to set retirement ages as they saw fit, it appeared to be in conflict with EU law (European Council Directive 2000/78/EC), which requires any form of discrimination based on age to be objectively justified. Regardless of the absence of this requirement in domestic legislation until quite recently, the Irish courts and tribunals have tended to follow the European approach of the CJEU due to the need to harmoniously interpret EU law and national law.
To address this gap in our domestic legislation, the Equality (Miscellaneous Provisions) Act 2015 (“the Act”) was enacted, which amended the rules on mandatory retirement and age discrimination in this country to bring Irish law fully in line with EU law. The Act introduced the legal requirement that mandatory retirement ages must be objectively justified by the employer. The Act was signed into law on December 10th 2015 and fully commenced on January 1st 2016.
With the introduction of the Equality (Miscellaneous Provisions) Act, 2015, while the right of employers to fix a mandatory age of retirement still exists, it is now only permitted if:
(a) it is objectively and reasonably justified by a legitimate aim, and
(b) the means of achieving that aim are appropriate and necessary.
It is also noteworthy that, prior to the Act, it was not discriminatory for employers to offer fixed-term contracts to employees once they reached the employer’s mandatory age of retirement. Under this new legislation, fixed-term contracts may still be legitimately offered to those at retirement age. However, the same requirement of objective justification that now applies in the context of setting the mandatory retirement age is now also applicable to such fixed-term contracts. The issuing of such fixed-term contracts to employees who have reached the employer’s retirement age has become more popular in recent years, perhaps due to the rising State pension age, so this legislative change is set to have a quite an impact on employers.
The Act is silent on what is needed to satisfy requirements of objective justification. However, previous decisions of the European and Irish Courts do provide some useful guidance and the Code, in turn, sets out some examples of what might constitute a legitimate aim of the employer, thereby providing the objective justification necessary for a mandatory retirement age. The examples set out in the Code are as follows;
- Intergenerational fairness (allowing younger workers to progress);
- Motivation and dynamism through the increased prospect of promotion;
- Health and Safety (generally in more safety critical occupations);
- Creation of a balanced age structure in the workforce;
- Personal and professional dignity (avoiding capability issues with older employees); or
- Succession planning.
The Retirement Process
The Code provides that it is good practice for an employer to notify an employee of the intention to retire her/him on the mandatory retirement date, within 6-12 months of that date. This allows for reasonable time for planning, arranging advice regarding people succession etc. The Code provides that the initial notification should be in writing and should be followed with a face-to-face meeting which should focus on addressing the following;
- Clear understanding of the retirement date and any possible issues arising;
- Exploration of measures (subject to agreement) which would support the pathway to retirement, for example flexible working, looking at alternative roles up to the date of retirement;
- Transitional arrangements in regard to the particular post; and
- Assistance around guidance and information.
Request to Work Longer
The Code provides that all requests from employees to work beyond their mandatory retirement age should be considered carefully and the following matters must be considered by the employer and employee in this regard;
For the Employee
- Is the employee confident that he/she can continue to perform the role to the required standard?
- Can flexible working options or alternative roles be considered?
- What is the duration of the extension being sought?
- Are there any pension implications?
- Are there contract of employment implications?
For the Employer
- Are there good grounds on which to accept or refuse the request e.g. can the retirement be justified on a legitimate and objective basis? It is important to note that the Equality (Miscellaneous Provisions) Act 2015 requires that a fixed-term contract post-retirement age must be objectively justified.
- What are the objective criteria applicable to the request? This should form the basis of any assessment of a request to work beyond retirement age to ensure an equal and consistent approach to addressing this and other future requests.
- How would the arrangements for the employee remaining on in the workforce be contractually framed (e.g. fixed term contract)?
- Could granting the request be on the basis of a more flexible working arrangement (e.g. less than full hours or an alternative role)?
Request To Work Longer Procedure
The Code sets out a procedure for engagement between an employer and an employee who has requested to work beyond their retirement date. This procedure should now be adopted (and adapted where necessary and/or appropriate) by all employers and managers should be trained on this procedure in order that requests to work longer are dealt with in accordance with the Code.
- The employee should make such a request in writing no less than three months from the intended retirement date to be followed up with a meeting between the employer and employee. This meeting gives both the employee an opportunity to advance the case and allowing the employer to consider it. It is important that the employee is listened to and that any decision made is on fair and objective grounds.
- The employer’s decision should be communicated to the employee as early as practical following the meeting.
- Should the decision be to offer a fixed-term contract post-retirement age, the period should be specified, setting out the timeframe, and the legal grounds underpinning the new contract should be made clear (i.e. fixed term contract). It is good practice to include a reference that the decision is made solely having regard to the case being made by the employee and does not apply universally.
- Where the decision is to refuse the request, the grounds for the decision should be set out and communicated in a meeting with the employee. This will help the employee to understand why the request has not been granted, and give the employee confidence that his/her case has been given serious consideration and that there are good grounds for refusing the request. The applicant should have recourse to an appeals mechanism, for example through the normal established grievance procedures in the organisation.
- An employee may be accompanied to a meeting by a work colleague or union representative to discuss a request to the employer to facilitate working longer and in any appeals process around same.
For now, employers can continue to enforce mandatory retirement ages, provided they are express or implied terms in the contract of employment and provided they can be objectively justified. Watch this space, however, as the law will continue to evolve and perhaps be amended completely over the course of the next 12 months.
However, when enforcing mandatory retirement ages, and dealing with requests from employees to remain in employment beyond the mandatory retirement age, employers and HR practitioners must operate within the guidelines set out in the Code, as outlined above. This may require amendments to be made to existing policies and procedures and will require training of managers who receive such requests on a regular basis. Our Employment Team has extensive experience in this area of employment law and HR practice and will be happy to assist you in navigating the choppy waters of this developing legal issue.
Jennifer Cashman was, of course, the keynote speaker at Legal-Island's Annual Review of Employment Law 2017. She will be joining Scott Alexander, Head of Learning and Development at Legal-Island, for a 45-minute webinar from 12.00 noon on 31st January, discussing key employment changes of the year, as well as the essential case law developments. Register here, if you haven't already done so:
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