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Comment : Age Discrimination

(October 2006)

John Sprack, a fee-paid Chairman of Employment Tribunals assigned to the London (South) Region, talks about the recent Employment Equality Regulations. John is the author of the Guide to the Age Discrimination Regulations 2006 (published by Tottel).

The Employment Equality (Age) Regulations 2006 were approved by Parliament in March, and came into force on 1 October 2006. Like the Sexual Orientation Regulations and the Religion or Belief Regulations, they aim to implement the EC's Council Directive 2000/78 on Equal Treatment ('the Directive'). Many of the provisions of the Regulations also reflect those of the legislation prohibiting discrimination on grounds of sex, race and disability.

It is important to point out, however, that the Regulations do not deal with discrimination on the grounds of age in relation to the supply of goods and services. Their ambit is confined to employment (broadly defined: see below) and vocational training. They do, however, cover institutions of further and higher education, whether the courses concerned are vocational or not (see reg 23).

The protected groups

As far as employment is concerned, the following groups are given protection by the Regulations (some of the individual regulations only operate in respect of some of the groups in question):

employees, who are defined (reg 2) to include:
1. those under a contract of service;
2. apprentices;
3. those under a contract personally to do any work;
office-holders;
contract workers;
police officers including staff of the Serious Organised Crime Agency;
barristers;
Scottish advocates;
partners;
members of limited liability partnerships;
persons in Crown employment;
members of staff of both Houses of Parliament.

The way in which the Regulations are framed means that people who are applying to be an employee (or to be recruited as a member of one of the other groups listed above) are protected.

The prohibited activities

The regulations make the following activities unlawful:

direct discrimination
indirect discrimination
victimisation
harassment; and
instructions to discriminate.

The definitions of the various categories of unlawful activity generally follow those which are familiar from other strands of discrimination law, although there are some distinctive points which are worth noting.

Direct discrimination is defined as less favourable treatment by A of B 'on grounds of B's age'. This is defined to include 'B's apparent age.' A major difference from the other strands of discrimination law is that direct discrimination on grounds of age is capable of being justified. In the case of the various other forms of discrimination (e.g. on grounds of sex or race), direct discrimination cannot be made lawful by a process of justification. However, in the case of age discrimination, the Regulations make it clear that the employer is entitled to show that its discriminatory treatment of an employee is justified. If it succeeds in doing so, then it will have a valid defence, and its actions will not be unlawful.

This sharp difference from discrimination law generally poses the question: is this major exemption allowed by the EC's Equal Treatment Directive which the Regulations aim to implement? In fact, it is. The Directive (Article 6) allows member states to permit justification of differences of treatment on grounds of age, without distinction between direct and indirect discrimination, if:

'they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary'.

Indirect discrimination is the application of a provision, criterion or practice 'which puts or would put persons of the same age group as B at a particular disadvantage when compared with other persons'. 'Age group' means 'a group of persons defined by reference to age, whether by reference to a particular age or a range of ages'. If indirect discrimination can be justified by the employer, then it will not be unlawful. In this case, however, the situation mirrors that for other forms of indirect discrimination (e.g. on grounds of sex, race etc), which are also capable of being lawful if justified.

The Age Regulations do not in fact use the term 'justification'. Instead they refer to:

'a proportionate means of achieving a legitimate aim'.

However, it is clear from the case law, both European and domestic, that justification involves establishing that the employer had a legitimate aim which it sought to achieve by proportionate means.

The provisions in relation to victimisation and harassment are similar to those for other types of discrimination law. In addition, reg 5 makes unlawful less favourable treatment on the grounds that an employee has failed to carry out instructions to commit an act which is unlawful by virtue of the Regulations, or has complained about such instructions.

General exceptions

There are general exceptions to the operation of the Regulations in respect of:

statutory authority (reg 27)
national security (reg 28)
positive action (reg 29)
genuine occupational requirements (paragraphs of particular regs).

Age discrimination in recruitment

The prohibited areas of discrimination for applicants and employees are set out in regulation 7. It makes unlawful any discrimination in relation to the process of recruitment for the categories of person set out as (a) to (j) in the list of "Protected groups" above.

There is, however, an exception to the prohibition on discrimination in the recruitment process set out in regulation 7(4). This lays down that it is not unlawful to discriminate in the recruitment process against those who are:

over 65 if the employer does not have a normal retirement age (NRA);
over the employer's NRA if that is over 65;
within six months of the NRA or (if there is none) the age of 65 on the date of the application for employment.

This important exclusion from the right for job applicants not to be discriminated against applies only to those who, if they were appointed, would be subject to a contract of employment, in Crown employment, or members of Parliamentary staff. As a result, it would still unlawful to discriminate against those aged 65 etc who are seeking other positions (such as an applicant for office or a partnership).

Age discrimination in relation to terms of service

Discrimination is prohibited in relation to terms of employment, opportunities for promotion, transfer, training and other benefits. However, there is an exception in relation to benefits based on length of service, which is set out in reg 32 (reproduced below). In summary, this states:

discrimination on the basis of length of service is permitted; but
if the person alleging discrimination has 5 years service or more, it must 'reasonably appear' to the employer that his use of the criterion of length of service 'fulfils a business need of his undertaking' (e.g. by encouraging loyalty or motivation or rewarding experience).

The exception contained in reg 32 applies only to those in categories (a) (b) (d) (g) (h) (i) and (j) in the list in the section on "Protected groups" above.

There are also exceptions to the prohibition on discrimination in relation to benefits in respect of:

the national minimum wage – employers can pay workers aged 16/17 less than those aged 18/21 and both age bands less than those aged 22 and over;
enhanced redundancy pay – this can be based upon the present formula for statutory redundancy pay, which gives increased benefits to older workers; and
life assurance cover for workers who have retired early on grounds of ill health.

Retirement

The most controversial provisions in the Regulations deal with retirement. In particular, the issue which took up most of the extensive process of consultation was whether employers should be able to retire employees compulsorily at a certain age, without putting forward any justification (in the sense of a legitimate aim achieved by a proportionate means). Broadly, during the process of consultation, the trade unions and groups representing the interests of older workers, such as Age Concern, argued that there should be no general compulsory retirement age, and that each compulsory retirement should have to be individually justified. The employers' organisations were in favour of a 'default retirement age' over which any employer could retire an employee compulsorily, without the need for individual justification. At the end of the day, the government came down in favour of the arguments of the employers – at least for the time being. As a result, the Regulations specify that it is not unlawful to dismiss someone who is over the age of 65 where the reason for the dismissal is retirement (reg 30). The impact is that any such dismissal is excluded from the ambit of the prohibition against age discrimination. It may, however, constitute unfair dismissal, as the age limit for unfair dismissal claims has now been removed (sch 8 para 25). However, the government has promised to review this issue in 2011. Further, the provisions in question are currently subject to challenge (see the "Conclusion" section below).

Regulation 30 applies only to employees within the meaning of s.230(1) of the Employment Rights Act ('ERA') 1996 (those under a contract of employment but including Crown employees and members of Parliamentary staff). Its ambit is much narrower than that of the Regulations generally. With regard to office holders, for example, any retirement age would have to be justified (in the sense that the retirement was based upon a legitimate aim achieved by proportionate means).

Unfair dismissal

The Regulations bring about major changes in the law of unfair dismissal. At the considerable risk of over-simplification:

Employees over the age of 65 are now entitled to bring a claim for unfair dismissal
'Retirement of the employee' becomes a fair reason for dismissal
There is a duty placed upon the employer to consider whether the employee should continue after the retirement date
A procedure is laid down for such consideration which replaces the statutory dismissal and disciplinary procedure (DDP) in respect of retirement dismissals
There are various presumptions as to whether retirement has been established as the reason for the dismissal
There is a special test for fairness in respect of retirement dismissals.

The "duty to consider" procedure

An important part of the Regulations is the introduction of a duty on employers to consider requests from employees who are coming up for retirement to continue working for a longer period. The stated purpose of the government is to bring about a culture change, so that employers consider the positive benefits of extending the working life of their employees, rather than enforcing a strict retirement age. Whether it will achieve this purpose remains to be seen. The model which the government has in mind is the duty under "family friendly legislation" to consider a request for flexible working by a worker with childcare commitments.

Under the "duty to consider" procedure in the Employment Equality (Age) Regulations:

The employer who intends to retire an employee must notify the employee of the date upon which he intends him to retire, and of his right to make a request to continue working after that date
The notification must be given between six months and one year before the intended date of retirement (sch 6 para 2). Failure to notify within these limits constitutes a separate right of action for which a tribunal shall award compensation up to eight weeks' pay
Thereafter, the employer remains under a continuing duty to notify, until the fourteenth day before the intended date of retirement (sch 6 para 4)
The employee may make a request to the employee not to retire on the intended date
The employer has a duty to consider the request
The employer must hold a meeting to consider the request within a reasonable period after receiving it
If the request is refused, the employee must be told of his right to appeal. No reasons for the refusal need be given
Notice of appeal must be given as soon as is reasonably practicable after notice of the refusal, setting out grounds of appeal
The employee is entitled to be accompanied by a worker employed by the same employer at both the initial and the appeal meeting

Compulsory retirement can be for a "fair reason"

As mentioned above, employees over the age of 65 will now be able to bring claims for unfair dismissal. However, where the dismissal is by reason of retirement, that will be a fair reason for dismissal (although, as described below, failure to adopt the correct procedure may still mean that the dismissal is unfair).

The employer must show that the reason is retirement, but certain presumptions are set out in ss.98ZA to 98ZH, which are inserted in the Employment Rights Act ("ERA") 1996 by Schedule 8, para 23.

In summary, retirement is deemed to be the only reason for dismissal where:

The employee has no normal retirement age (NRA), the employer gives the required notice (i.e. in accordance with para 2 of sch 6) and the dismissal takes effect on or after the employee's 65th birthday and on the intended date of retirement (s.98ZB(2));
the employee has an NRA which is over 65, the employer gives the required notice and the dismissal takes effect on or after the employee has reached the NRA and on the intended date of retirement (s.98ZD(2));
the employee has an NRA which is below 65 but does not amount to unlawful age discrimination, the employer has given the required notice and the dismissal takes effect on or after the employee has reached the NRA and on the intended date of retirement (s.98ZE(4)).

On the other hand, there are a number of circumstances where retirement is deemed not to be the reason for dismissal:

where the employee has no normal retirement age, but the dismissal takes effect before the employee reaches the age of 65;
where the employee has no normal retirement age, the employer gives notice in accordance with paragraph 2 of Schedule 6, but the dismissal takes effect before the intended date of retirement notified to the employee;
where the employee has a normal retirement age (whether above or below 65), but the dismissal takes effect before the employee reaches that age;
where the employee has a normal retirement age over the age of 65, the employer gives notice in accordance with paragraph 2 of Schedule 6, but the dismissal takes effect before the intended date of retirement date so notified;
where the employer does not notify the employee in accordance with paragraph 2 of Schedule 6, but he does notify the employee of an intended date of retirement, but the dismissal takes effect before that intended date of retirement;
where the employer has a normal retirement age which is below the age of 65, the dismissal takes effect after that age, but it is unlawful age discrimination for the employee to have that retirement age (i.e. the retirement age is not objectively justified);
where the employer has a normal retirement age which is below the age of 65, that retirement age is objectively justified, the employer has notified the employee in accordance with paragraph 2 of Schedule 6, but the dismissal takes effect before the intended retirement date.

There are a few cases (!) where it is left to the tribunal to decide whether retirement is the reason for dismissal:

where the employer has not notified the employee in accordance with paragraph 2 of Schedule 6 – perhaps he notified late or not at all (whether or not the employee has a normal retirement age); or
where the employer notified the employee in accordance with paragraph 2 of Schedule 6, but the dismissal takes effect after the intended date of retirement.

Where the tribunal concludes that retirement is the reason for dismissal, whether or not the dismissal is fair is assessed in accordance with the new s.98ZG of the ERA 1996. This test is to be applied by the tribunal once it is established that the dismissal in question is a retirement dismissal. The test amounts to a procedural fairness test. The tribunal must ask whether the employer has complied with the following duties under the duty to consider procedure:

service of notice of date of intended retirement etc.(must be by the fourteenth day before the date)
consideration of any request to continue in employment
holding a meeting to consider the request
holding any appeal if notice of appeal served.

If there has been a failure on the part of the employer to comply with any of the above, the employee is to be regarded as unfairly dismissed. If there has not, then the dismissal is fair.

The test is a rather mechanical one, depending as it does on whether certain formalities have been complied with. It should be contrasted with the usual test in unfair dismissal cases. In relation to all potentially fair reasons (other than retirement), the tribunal must ask:

whether in the circumstances (including the size and administrative resources of the employer's undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee.

As can be seen, the test for whether a retirement is fair is much simpler and, arguably, less consistent with common notions of what is fair or unfair.

Amendments to other laws

Schedule 8 makes other amendments to unfair dismissal law including:

removal of the upper age limit on bringing unfair dismissal claims;
removing the tapering of the basic award for unfair dismissal after age 64.

The law relating to redundancy payments has also been amended, but not as radically as was originally thought. The upper age limit for receipt of a redundancy payment is removed (by the repeal of s.156 ERA 1996), as are the provisions for tapering the payment after the employee's 64th birthday. The lower age limit in relation to the computing of a period of continuous employment for a redundancy payment is also repealed (s.211(2) ERA 1996).

But the expected harmonisation of the multiplier for different age bands in respect of the basic award for unfair dismissal and redundancy payments has not materialised. The law states that the amount of the statutory redundancy payment is to be determined by giving half a week's pay for each year's service when the worker was under 22, one and a half week's pay for each year's service over the age of 41, and one week's pay for other years (broadly, those between the ages of 22 and 41). This age differential will remain in place.

There are provisions that deal with occupational pensions, exempting them in a number of important respects from the operation of the Regulations. These are contained in Schedule 2. Whereas the rest of the Regulations come into effect on 1 October 2006, those relating to occupational pensions are subject to a further period of consultation, and will not be brought into effect until 1 December 2006.

Employment Tribunals are given jurisdiction in relation to claims brought under the Regulations, with the exception of those against institutions of further and higher education or qualifications bodies (reg 36), which will be dealt with in the county court. The remedies for age discrimination reflect those for other strands of discrimination including, for example, an award for injury to feelings.

Conclusion

Although the new law on age discrimination reflects other strands of discrimination law, it has features which are unique. The scope of the legislation, excluding as it does the supply of goods and services is markedly different. In addition, there are a number of exceptions, exemptions and defences, some of the most important of which are not to be found in the equivalent legislation prohibiting other forms of discrimination.

These distinctive features have already created controversy, and are likely to result in legal challenges both by way of judicial review and also in the European Court of Justice. The first major challenge has been mounted by the organisation Heyday (closely allied with Age Concern). It has sought judicial review of the Regulations on the ground that they do not implement the Equal Treatment Directive, because they give blanket justification for compulsory retirement of those aged 65 and over. Their case will be heard on 6 December 2006 in a 'rolled-up hearing' which will consider the application for permission to proceed and, if that is given, will proceed straight into a full trial.

Whatever the outcome of that hearing, it is clear that the new law on age discrimination will be of major significance for the work of the Employment Tribunals, and for employers and employees alike. In Ireland, which has anti-discrimination legislation extending across much the same fields as we do, some 17 per cent of the employment discrimination claims referred to the Irish Equality Tribunals have consistently been based upon age discrimination. Similar trends have been seen since the introduction of age discrimination legislation in the Netherlands and Belgium. There is no reason to expect that our experience will be any different.

Again, whatever the precise interpretation of the legislation, and whatever gaps it leaves, the central message conveyed by the European Union and our own Parliament is clear. Discrimination on grounds of age is grossly inefficient – lower employment rates among older workers reduce Gross Domestic Product by £16 billion per annum according to the Cabinet Office Report Winning the Generation Game: Improving Opportunities for People aged 50-65 (April 2000). Unjustified age discrimination is, in addition, irrational and harmful to the individual affected. The Regulations will now also go a considerable way to make it unlawful.

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