UK - Retirement Rules Change 11 Apr 2011 - What are you doing about it?

I just received this update from Bird & Bird (thanks).  I haven;t heard many people in the US talking about this and I wonder how companies are handling this change in the retirement rules in the UK.  Does this impact you at all? ~Dan

Update on retirement provisions - take action before 5 April 2011

March 2011



The Employment Equality (Repeal of Retirement Age Provisions)
Regulations 2011 as originally drafted have been repealed and replaced
with a new draft issued on 1 March 2011.  The replacement regulations
were brought in to provide clarification and deal with a significant
lacuna in the original drafting.



The new arrangements



On and after 6 April 2011, it will no longer be possible for an employer
to notify an employee of the intention to retire that employee.  On or
after 6 April 2011 (subject to the transitional arrangements below) it
will amount to age discrimination and unfair dismissal to dismiss an
employee for reasons of age (i.e. retirement).  Employees will be
entitled to carry on working until such time as they choose to retire
voluntarily or are dismissed for another reason, regardless of whether
they qualify for a state or company pension.



Transition arrangements



It will still be possible to retire an employee provided that
notification of the intention to retire that person is given on or
before 5 April 2011 AND the employee will be aged 65 or over (or, where
relevant, have attained or will be older than the employer's Normal
Retirement Age of over 65) before 1 October 2011.  Retirements under
these provisions, provided the notification is issued before 5 April
2011, will be non-discriminatory and constitute a potentially fair
reason for dismissal.  The employer can give between six and 12 months'
notice of the intention to retire the employee.



It may also be possible to retire an employee in accordance with these
timings where the employee has reached or is over an employer's Normal
Retirement Age where this is lower than 65, even where that employee
will not have attained the age of 65 by 1 October 2011.  However, making
use of this provision will depend on whether the employer's lower
Normal Retirement Age was objectively justifiable in accordance with the
old regime, which should be considered with care on a case by case
basis.



Right to request to continue working



If a notification from an employer is validly issued before 5 April
2011, employees then have an opportunity to request to continue working
in accordance with the old provisions' retirement framework.  The
employee must make this request at least three months in advance of the
intended retirement date.  The last possible date for such a request -
assuming that notice is given by the employer on 5 April 2011 of a
retirement in 12 months' time - is 5 January 2012.



The employer and employee are then permitted to agree one extension of a
maximum of six months to run from the employer-notified retirement
date.  The last possible date from which such an extension can run is 6
April 2012, which will result in automatic retirement of the employee in
accordance with the provisions on or before 5 October 2012.*  Any
extension of a period of longer than six months will mean that the
employer is no longer able to force that employee to retire.  At the
expiry of an extension of longer than six months, the employee would be
entitled to continue working if they do not wish to retire, and an
employer is not able to issue a further notification of the intention to
retire the employee.



*NB: there is some debate as to whether the final possible date an
employee may be lawfully retired is 3, 4 or 5 October 2012.  Our view is
that an agreed 6 month extension from 6 April 2012 expires on 5 October
2012.  However, in practice, it is advisable that any extension running
from 6 April 2012 is stated to expire on 3 October 2012 to avoid any
potential pitfalls.



Action for employers to take now



Employers should carefully consider whether they wish to make use of the
ability to compulsorily retire employees and take action before 5
April.  In particular:

Review the workforce.

Consider whether any employees will attain 65 or the employer's Normal Retirement Age on or before 1 October 2011.

Where the Normal Retirement Age is lower than 65, consider whether this Retirement Age could be objectively justified.

If any employee falls into these categories, consider whether there is a
desire to effect a retirement (even if there is no immediate wish to do
so, employers ought to consider whether issuing 12 months' notice on or
before 5 April is advisable in order to protect the ability to use the
retirement provisions).

Exemptions



Some employers will be entitled to set what will be known as an Employer
Justified Retirement Age (EJRA) if they are able to objectively justify
this step.  However, the circumstances in which this will be permitted
may be limited.  It is anticipated that some employers requiring an
exceptional level of physical fitness such as the fire brigade, or
mental agility such as air traffic control, may be able to justify
setting a retirement age for their employees.  Use of a EJRA is likely
to be exceptional and employers should take advice before making the
decision to apply one to their employees.  Case law is likely to develop
quickly in this area, which will allow employers to consider whether
setting an EJRA is feasible for them.



Group insured benefits will be exempt from the requirement for equal
treatment for the over-65s, in that employers will be entitled to
decline to extend health insurance or death in service benefits to those
above the age of 65.  The age limit for this exemption will increase as
the State Pension Age increases.  Employment contracts should be
updated where necessary to reflect this change to avoid creating a
contractual obligation to employees aged over 65.



What next?



It should be remembered that all employees in the UK can be dismissed
fairly if the dismissal is for one of the remaining potentially fair
reasons for dismissal and a proper procedure is followed (retirement no
longer being a valid reason).  The potentially fair reasons are
capability (including ill health or performance), conduct, redundancy,
illegality or 'some other substantial reason'.  This means that if an
older employee's performance is slipping or they are no longer in good
enough health to perform their role, there are options to ensure a
legally compliant exit from the business.  As with all dismissal
situations under UK employment law, the issue of whether a fair and
transparent process is followed is normally the key indicator as to the
fairness of the dismissal.



Many employers have traditionally allowed concerns about the performance
of those close to retirement to go unchecked on the basis that the
employee will be retired in any event.  However, it will now be very
important for employers to ensure that their performance management
systems are properly utilised, including in relation to older employees,
in order that action can be taken to rectify performance issues at an
early stage. Discussing future plans with employees is also permitted
for the purposes of management, provided that older employees are not
singled out for questioning on the issue.









Contact us



If you have any queries on the subject of this briefing please contact Ian Hunter via ian.hunter@twobirds.com or on +44 (0)20 7415 6140.

http://mail.twobirds.com/ve/ZZV91L83Cb91B92W871