Traditionally in Ireland an employer could introduce a retirement clause into an employee’s contract, without fear of an equality claim. However this has begun to change in recent years as people are living longer lives and influences from a European Union directive which provides that it will only be satisfactory to have a compulsory retirement age where that policy can be “objectively and reasonably justified”. What does this mean for employer? Read the full article here.
Retirement - Can You Justify It?
On the face of it, retirement is a bit of an equality issue; employers are requiring an employee to leave the company purely as a result of them hitting a particular age. However, traditionally in Ireland an employer could introduce a retirement clause into an employee’s contract, without fear of an equality claim. Indeed, the Employment Equality Acts clearly states that “it shall not constitute discrimination on the age ground to fix different ages for the retirement”. However, this position is beginning to evolve in Ireland. It is a simple fact that people are living longer lives and the attraction of retiring in one’s 60s isn’t as prevalent as it was in the past, especially given that from 2014 citizens will not be able to draw a State pension until they turn 66, with this age increasing to 67 from 2021 and then 68 years old from 2028. In addition there has been strong influence from a European Union Directive which provides that it will only be satisfactory to have a compulsory retirement age where that policy can be “objectively and reasonably justified”. So what does all this mean for employers? Here we seek to remove the confusion in order to allow you as an employer to manage any retirement related issues.
Current Position in Ireland
In a number of important cases the Irish High Court and the Equality Tribunal have stated that Irish employers must, as per the EU Directive, have objective and reasonable justification before they can enforce a retirement policy. Thus, an employer may only safely retire an employee where they (a) have a written retirement policy in the employee’s terms and conditions, and (b) have objective and reasonable justification for such a policy.
What is Objective and Reasonable Justification?
It’s important to be mindful that objective and reasonable justification is not a “one size fits all concept”. What might be deemed objective and reasonable justification for a retirement policy in one organisation may not be deemed objective and reasonable justification in another. Another issue is that an employer may be able to objectively and reasonably justify a retirement policy for certain categories of employee but that does not mean they could necessarily justify a policy for other categories of employee within the same organisation. However don’t let this confuse you; as highlighted above this article is aimed at helping you manage retirement within your organisation.
In the case of
Donnellan -v- Minister for Justice, Equality and Law Reform [2008] IEHC 467 the requirement for a Garda Commissioner to retire at 60 was challenged. The High Court stated that the policy was allowable as it was necessary in order to ensure “
motivation and dynamism through the increased prospect of promotion” within the Gardaí. In the case of In
Saunders -v- CHC Ireland Limited (DEC- E2011-142) it was recognised that a policy requiring a helicopter winch man to retire at 55 was objectively justified as such winch men are required to engage in search and rescue missions involving a “
high level of physical capacity”. Therefore, as physical capacity “
diminishes with age” it was held that this policy could be justified.
How Can Employers Manage Retirement?
Employers who wish to maintain or introduce a retirement policy can follow these steps:
- Firstly you will need to consider why the policy is required. Essentially, apart from simply wanting a policy, can you actually justify why you need to retire a particular employee in a particular role at a particular age? Is there an actual legitimate business need? For many companies, the need to be able to recruit new talent may be important and for others the ability to retain talent through promotion opportunities and to effectively manage succession planning may also be important. This may be particularly the case where you are seeking to retire a senior manager role. Another key concern is health and safety and the need to ensure that the employee can render effective service. Take the winch man example above which could also apply to other roles and industries such as security, construction, fire fighters etc.
- Secondly, engage in workplace appraisal and discussion with your staff to identify what their own plans are for the short, medium and long term.
- If you have an employee who is 60 years of age then having a discussion with such an employee may allow you to identify, without directly asking, if that employee intends to retire over the coming years or draw down their pension. Importantly, ensure that these discussions are held with all staff and not just the older employees in order to avoid any suggestion of discrimination.
- If the employee indicates that they have no intention to retire then they might instead outline that they want a reduction in hours or change in working duties. If mutually agreeable then the employer may be able to free up the role anyway. On the other hand if it doesn’t suit the employer to cut hours or change roles then such discussions may lead to the employee indicating an intention to retire with an amicable agreement being reached.
- It may be the case where you do not have a written retirement policy and/or you may not be able to objectively justify a policy in the first place. However, you still have options:
- Do bear in mind that if the employee is performing poorly then you could look to to terminate their employment through your normal disciplinary procedures. Crucially, do ensure all employees are subjected to such performance procedures, not just the older employees, and also ensure that the decision to dismiss is fair in the circumstances. A dismissal is more likely to be fair if the employee was given a series of prior disciplinary warnings on their performance and also where the employer had sought to improve the employee’s performance through re-training.
- If you have an issue with persistent medical absenteeism or where the older employee’s poor performance may be attributed to a medical issue, then you may be able to terminate their employment on the basis that they are medically incapable of performing their duties. It is important that the employer seeks appropriate medical advices before taking such a decision to dismiss.
- Given the ever-changing technological world that we now operate in, it may be the case that the employee is no longer suitably qualified to perform the role that they were employed into. It may also be the case that the employer needs to restructure the employee’s role to perform additional work for which the older employee is not suitably qualified to complete. In such cases, an employer may look to make the older employee redundant. In doing so, the employer must actually have a genuine business need for making the position redundant and the employer must also be mindful that the longer an employee’s service then the more redundancy pay they are entitled to.
- However, do appreciate that older employees still have a lot to offer. Try avoiding a mentality that the employee needs to retire simply because “that’s the way it has always been done around here” or because “it’s the industry norm”. Remember that with an older workforce you are generally less likely to have a higher turnover of staff; you have experienced employees who can also assist in training younger recruits; you have a body of employees who are likely to have built up strong relationships with long serving customers; and such employees may still be able to render effective service well beyond the traditional retirement age of 65.
Conclusion
Employers should not fret when it comes to retirement. Remember that you have options and you can still have a retirement policy. When it comes to retirement then it is crucial for employers to have awareness: aware of your retirement policy, aware of why it is needed and aware of what your employees’ intentions are. In any event, employers are strongly encouraged to seek advice before looking to retire an employee and if you have any queries then please phone the 24 Hour Advice Service on 01 855 50 50 and one of our experienced advisors will be happy to assist.
