In cases of compulsory retirement, NHS organisations should provide clear, legitimate reasons for their decisions to avoid future litigation, particularly given the uncertainties surrounding this area of law. Jean Sapeta explains

Health sector managers must be wondering which way to turn as the legal saga on age discrimination unfolds.

All age-related claims in employment tribunals are currently being stayed, pending the Heyday decision. Heyday, an organisation related to Age Concern, is challenging the introduction of the default retirement age of 65. The decision from the European Court of Justice is not expected before spring 2009.

Meanwhile, employers who are conscientiously following the process that allows them to retire employees at or before age 65 are potentially open to claims in the future.

Justifying decisions

Even under current legislation, retiring an employee at a normal retirement age below 65 could be unlawful direct age discrimination unless that normal retirement age can be justified.

While some employees will happily retire at the age of 65 or earlier, or be willing to work on after 65 on a wind down/step down basis, others will not want to retire at 65, even though their employer does not wish to employ them any longer.

The reality is that many employees have issues relating to capability or conduct, or they may be displaced by organisational change. Employers have often ducked dealing with these matters on the basis that the person will retire at 65 in any event.

Given that employees have the right to request to work beyond age 65, it is vital for managers to clearly identify the reason for not permitting them to do so, or requiring them to retire before 65.

Employers must preserve clear evidence of either an agreement to retire, agreement to amend contractual terms and conditions after 65, or grounds for refusing the individual the right to work after 65.

Legal precedents

The EC directive from which the UK age legislation is derived does permit direct discrimination on the grounds of age, so if the default retirement age is not sustainable, then the issue will be whether the discrimination against that employee can be objectively justified.

EU law requires an employer to show that the discriminatory practice (compulsory retirement) had a legitimate aim and that the treatment of the employee was a proportionate means of achieving that aim.

Legitimate aims might include health, safety and welfare, facilitation of employment planning, or business needs and efficiency. Recent court cases have shown that an employer cannot rely solely on cost considerations.

The wisdom of retaining a retirement age may be reviewed in any event. Although the default retirement age at 65 was introduced in 2006, it is due for review in 2011. If large numbers of employees decide to continue to work beyond 65, then a national default retirement age would appear to be irrelevant.

Steps to take

In the Heyday challenge, the European Court of Justice will look at the general aim of the legislation and whether the means employed by the UK are appropriate and necessary to achieve that.

The NHS has often been hit by mass claims after the event - for example part-time pension claims and to some extent current equal pay litigation. So what should managers do to protect their organisation?

It is vital not to destroy the records of retiring employees. Evidence of the legitimate aim behind the compulsory retirement and the way in which the compulsory retirement contributes to that aim must be retained.

If employees are really being asked to leave for reasons not related to retirement, it would be more appropriate to follow a transparent process that deals with the actual reasons for dismissal (capability or conduct, for example), rather than hide behind the screen of retirement.

Lessons can be learned from previous mass litigation. As always, for individual employers who may be caught up in age discrimination years after employees have retired, the key is good record keeping and clarity of decision making.