European ageism ruling could change UK law on retirement

A ruling by the European Court of Justice (ECJ) in a Spanish case last week could strengthen the hand of an age pressure group appealing against UK retirement laws, according to an employment law expert.

Pressure group Heyday is taking the UK Government to the ECJ over retirement laws introduced last year. The ECJ ruled last week that Spanish rules on compulsory retirement were lawful, but while that might seem like a blow for Heyday, the detail of the ruling gives Heyday cause for hope, according to Catherine Barker of Pinsent Masons, the law firm behind OUT-LAW.COM.

"I think the cases are quite different," she said. "The ECJ's ruling in the Spanish case said that compulsory retirement ages did come within the scope of the Equal Treatment Directive, and Heyday's case is that the UK retirement laws are not compatible with that Directive."

The ECJ backed the Spanish employer in the case of Felix Palacios. He was forced to retire at 65 under the terms of his employment contract, but objected and took a case against his employer, arguing age discrimination. The Spanish court referred the case to the ECJ.

When cases are before the ECJ, an Advocate General will issue an opinion that proposes a legal solution. The Advocates General are members of the ECJ but they act independently of its judges. Their opinions are not binding on the judges, but they are highly influential and usually followed.

When an Advocate General gave his opinion earlier this year in Palacios's case, he said that the Directive's general principle of non-discrimination did not extend to national laws that [allow / set] compulsory retirement ages. The full court, unusually, did not follow this opinion when it gave its judgment, meaning that national laws relating to compulsory retirement ages can be examined and will need to be objectively justified.

The Spanish Government saw the case as having wider significance for its national laws. It became an interested party and made submissions to the ECJ, as did the Irish, Dutch and UK Governments. The ECJ noted that the policy behind the Spanish Government permitting compulsory retirement ages to be contained in employment contracts was to promote better access to employment, thereby promoting full employment, by better distribution of work between the generations. The ECJ agreed that this was a legitimate aim.

The ECJ also found that the means of the Spanish Government achieving that policy objective did not go further than is appropriate or necessary. They noted in particular that in Spain compulsory retirement can only take place if the person had also qualified for a state pension. The ECJ took note that Spanish legislation allowed managers and union representatives to take account of local labour markets when deciding at what age to fix retirement in local employment contracts.

Though employers may be relieved that the compulsory retirement laws in Spain have been backed, Barker said that this does not mean that the ECJ will back the UK's retirement laws, contained in the Age Discrimination Regulations.

"Because the Advocate General's opinion has not been followed by the full court, the UK provisions are definitely now open to scrutiny and it will be for the UK Government to show that the UK retirement provisions are appropriate, necessary and go no further than they need to to achieve a national aim," said Barker.

The UK Age Regulations, introduced in 2006 to implement the age-related parts of the Directive, create a default retirement age of 65 for those companies which do not specify a retirement age. Heyday is objecting to that, as it says that this can effectively force employees out of the job market at that age, even if they wish to carry on working. It says that this is age discrimination. Heyday also objects to the fact that UK companies can in some cases still specify a retirement age of under 65.

Barker said that elements of the ECJ ruling backed Heyday's case. "Arguably the UK Government does not have the same social policy aims in having a default retirement age of 65 and therefore the justification defence that the Spanish Government could make out."

Age Concern, the charity behind Heyday, said that it would continue with its case. "There are significant distinctions between the Heyday case and the case of Felix Palacios," said Gordon Lishman, director general at Age Concern. "The legal advice we are hearing is that Heyday should forge ahead with its case undeterred."

"We remain hopeful that the European Court of Justice will agree with Heyday's interpretation of the EU Directive in finding parts of the regulations relating to mandatory retirement age unlawful. Forcing an ageing workforce to retire on grounds of age alone is unlawful, discriminatory and absurd," he said.

The legal uncertainty has created some confusion for companies and employment tribunals alike. Barker said that companies who spent significant time putting together policies that complied with the new law last year have been in limbo since the lodging of the Heyday case. "It was lodged in December 2006 and might not be ruled on by the ECJ till 2009," she said. "People who have cases now before employment tribunals are asking for their cases to be stayed until that ruling. There would appear to be inconsistency at tribunal level as to whether cases are being put on hold or struck out."

"I think if you have a tribunal case at the moment about retirement dismissals and the employee is alleging direct age discrimination, there may now be stronger grounds to argue a halt of proceedings is appropriate than there were when the Advocate General's opinion came out," said Barker. "If you are the employer, of course, you will seek to argue that the employee's prospects of success remain too remote, given that the ECJ did say in the Spanish case that it is for member states to find the right balance between the competing interests involved."

"For the time being, employers and employees remain in limbo if faced with unfair retirement dismissal claims," said Barker.