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Friday 30 September 2016
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An age-old dilemma?

Insight: HR

JULIE DAVIES

Employment Partner
Veale Wasbrough Vizards

Julie has expertise in all aspects of employment law – contentious and non-contentious – including discrimination, dismissal, breach of contract, pay and benefits and equal pay

When the default retirement age (DRA) was introduced in 2006, it allowed employers to compulsory retire employees at age 65, without this either being unfair or discriminatory on grounds of age, provided a specific prescribed procedure was followed.

However, as a consequence of an ever-ageing population, and recognition of the economic, social and health benefits of working, the government established a need for a 'culture change' in relation to older workers. The result of this is that the concept of a DRA is now being phased out, and the transitional provisions mean that unless practices have employees who will reach age 65 on or before 30 September 2011 and have already started the retirement procedure with those employees on or before 5 April 2011, the ability to use the default retirement procedure has been lost.

Of course, none of this prevents an employee from opting to retire by giving notice to terminate their employment in the usual way. However, what it does mean is that practices will no longer be able to compel employees to retire. GP practices are perhaps better placed than many to deal with this new era of working without a DRA as the concept is not new to them, given that GP partners have always been exempt from the default retirement rules as they are not 'employees'. Practices should therefore be familiar with some of the considerations they will need to take into account when deciding whether to set a fixed retirement age, or abandon the idea of a retirement age altogether, for their employees.

Setting a compulsory retirement age
Practices may decide that, notwithstanding the removal of the DRA, they opt to retain a retirement age for staff, in the same way that many partnership agreements still retain a retirement age for the partners.

This approach should be taken with caution. To avoid being discriminatory on grounds of age, a practice would need to show that a legitimate aim (ie, a real business need) is being met, having the particular retirement age meets that aim, and that it is proportionate to use that retirement age as a means of achieving that aim.

The test is therefore a careful balance between the discriminatory implications for the employee and the genuine business needs of the practice. If a fixed retirement age is tested, the justification test will be sensitive to the particular facts of the case. Of the few cases so far, the UK courts have been rigorous in their approach to justification arguments.
So far, the following have been found to be legitimate aims for setting a fixed retirement age:

  • Workforce planning.
  • 
Facilitating the recruitment and retention of younger employees.
  • Having an aged-balanced workforce.
  • 
Protecting the dignity of older workers by avoiding performance management procedures.
  • Ensuring continued competence.

The last two of these are quite surprising, given that they seem to be tainted with discrimination by making stereotypical assumptions about there being a correlation between age and competence. These legitimate aims were of course all specific to the facts of the particular case and business that was seeking to rely on a fixed retirement age.

Practices will not simply be able to assert one of these aims in order to pass the justification test in the future – it will be necessary to provide persuasive evidence to back up the assertion being made. For example, is there evidence of not being able to recruit younger employees because of concerns over promotion? Why is it important to know the plans of older workers for workforce planning when there is, and always has been, uncertainty over how long employees may stay?

Even if the legitimate aim hurdle is overcome, the specific retirement age also needs to be justified as being a proportionate means of achieving it. A practice would therefore need to consider alternative ways of achieving the aim being asserted and persuade a tribunal that setting a retirement age – at the particular cut-off point set – was fair and proportionate in the circumstances. For example, if trying to rely on declining performance to justify a retirement age, consideration would need to be given to whether performance could be measured by tests instead and also produce evidence to support an assertion that performance declines at a certain age.

With all this in mind, it's difficult to see how many practices – or indeed many employers – will be able to justify a set retirement age for all or any of its staff. While there is some guidance from partnership cases to give an idea of the types of justifications that may be valid, it is inevitable that this will vary from business to business, and even within one business a justification for one set of employees may not work for another. As such, the concept of setting a practice-wide retirement age is a risky strategy. It is possible that there are one or two pockets of employees within a practice – maybe clinical staff or where there is a clear promotional structure – where a retirement age could potentially be justified but should be set with caution.

Even where a retirement age is set, and justified in accordance with discrimination principles, to rely on a retirement termination practices would still then need to ensure the termination was handled fairly in all the circumstances to avoid allegations of the dismissal being unfair under unfair dismissal principles. This should include giving plenty of notice of retirement and, if the circumstances allow, giving consideration to the employee working on for longer or swapping roles to allow them to stay in work.

No set retirement age
In light of the difficulties associated with justifying a retirement age for most, if not all, employees within a practice, it is most likely that the concept of a retirement age will be removed completely. If this approach is adopted, then practices would have to rely on employees choosing to retire, or otherwise would have to comply with usual unfair dismissal and discrimination principles to avoid recourse if a termination is initiated by them.

In order to effectively adapt to life without a retirement age, regular workplace discussions and effective performance management will need to become the norm. For some, this will mean a significant culture change as these conversations are historically often avoided.

Regular discussions with all employees – regardless of their age to avoid arguments of inconsistent treatment – about their future aims can, however, be a huge benefit to the practice. They help to identify an employee's aspirations, training or development needs, as well as an opportunity to discuss their performance, how they see their contribution to the practice, and any future plans. For those holding regular formal appraisals, these discussions about short-, medium- and long-term plans are simply part of that management process. For those who do not have a formal appraisal system or regular reviews, it is recommended that one be introduced.

The discussions can include a general discussion about where the employee sees themselves in the next year or two. For older employees, this may give an indication of whether they intend to retire, although any direct questions on retirement should be avoided. However, even if an employee indicates that they intend to retire at a certain point, they cannot be held to this in the absence of their written notice of resignation, or a binding agreement that waives their employment rights.

Workplace discussions only take practices so far, allowing them to have an overall view of employees' intentions and aspirations for work. Practices will also need to ensure their other procedures are up to scratch as, in the absence of a resignation, a practice wanting to terminate the employment of an employee – regardless of their age – needs to rely on one of only a limited number of fair reasons for doing so.

One such reason is an employee's ability to carry out their role. As such, effective performance management – a process that many are often reluctant to go down – will become ever more important. To avoid arguments of discrimination, all staff should be treated the same regardless of their age. Effective performance management includes establishing the reasons for it, ensuring employees are aware of the standards required of them and where they are falling short, setting improvement goals and review periods, and providing training and development where appropriate. In time, if performance fails to improve, a fair capability dismissal should be established, and provided all employees are treated consistently, any arguments of discrimination should be dismissed.

Another issue to bear in mind is that as employees get older, it is possible that they acquire impairments that qualify for protection under disability discrimination legislation. Where this arises then, as would be the case with any other employee regardless of age, care should be taken to avoid discrimination on grounds of their disability. There must also be a positive obligation to make reasonable adjustments to remove any disability-related barriers to their performance.

Tips for adapting to the DRA

  • 
Where contemplating retaining a retirement age, ensure there is sufficient evidence to justify why it is needed, and why it has been set at 
that age.
  • 
Assuming no retirement age is set, manage the culture change by:
    
– Letting staff know there is no longer a retirement age applicable to them.
    – 
Deleting references to a retirement age in documentation.
    
– Amending appraisal documents to allow for workforce-planning discussions.
    – 
Updating performance management procedures and ensuring managers understand the importance of using them.