Tuesday 3 April 2012

How do you inform an employee of their right not to retire?

Under the now defunct Employment Equality (Age) Regulations 2006, an employer had to follow a prescribed procedure if he planned to retire the employee, new case law in the form of, R&R Plant (Peterborough) Ltd v Bailey tells us how much the employer has to say under the old rules.

Under para 2 of Schedule 6 of the Employment Equality (Age) Regulations 2006, an employer who was intending to retire an employee had to notify that employee in writing of (a) the employee's right to make a request; and (b) the date on which he intends to retire the employee. That letter triggers the employee's right to make a request not to be retired. If the employer fails to send that letter, then the dismissal will usually be unfair.

The new judgment applies quite an onerous burden on the employer in that it makes clear that it is not enough state 'If you wish to continue working beyond this date, you are required to make an application to the company in writing'. The letter must go further. It must refer the employee to para 5 of Schedule 6, of the Employment Equality (Age) Regulations 2006which sets out the obligation for the employee's request to be in writing "and state that it is made under this paragraph".

The Government announced in July 2010 that as from October 2011 (with phasing in from April 2011) the exemption which allowed enforced retirement of employees at age 65 or over (in Age Regs 2006 reg 30) would be abolished. This was formally confirmed in January 2011. Appropriate regulations removing the age 65 so called "default retirement age" (or "DRA") were made on 5th April 2011 and came into effect the following day, 6th April 2011, subject to transitional provisions (the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011, SI 2011/1069).

Subject to transitional arrangement in the 2011 regulations, as from 6th April 2011 it is therefore unlawful to require a person to retire by reason of age unless the requirement can be justified as a proportionate means to achieve a legitimate aim (see Age discrimination/2006 regulations/justification defence ).

The Court of Appeal has handed down an important decision reported in LNUK last week on whether employers can objectively justify age discrimination when making a significant costs saving, in a redundancy situation. It upheld the decision of the Employment Appeal Tribunal in Woodcock v Cumbria Primary Care Trust that the objective justification test was met on the facts and the Trust had not directly discriminated against the claimant.

Charles Price is a Direct Access employment Barrister of 11 years Call.

New judgments on retirement and age related redundancy

Employers sighs of relief with Woodcock judgment



Today, the Court of Appeal has handed down an important decision on whether employers can objectively justify age discrimination when making a significant costs saving, in a redundancy situation. It upheld the decision of the Employment Appeal Tribunal in Woodcock v Cumbria Primary Care Trust that the objective justification test was met on the facts and the Trust had not directly discriminated against the claimant. The treatment of this all important costs issue will give comfort to employers in similar circumstances.

Thanks to Rachel Dineley, employment partner and head of the equality and discrimination unit at DAC Beachcroft LLP, for sending me her comments:

“This is a sound and unsurprising decision. Crucially, the Court of Appeal has stated that an employer cannot justify discriminatory treatment “solely” because the elimination of such treatment would involve increased cost. That simply means that saving or avoiding cost will not, without more, amount to achieving of a “legitimate aim”, and reflects European law.



The reality is that it will very rarely be the case that an employer seeks to avoid or save cost without good reason. If to do so will adversely impact on employees of a particular age, the employer must be able to show that its actions are a proportionate means of achieving a legitimate aim. The challenge is in striking the balance. This decision does not provide a formula for determining what is proportionate. It could not do so. In every instance, the employer must weigh its particular issues and consider the available options. This will continue to be a difficult exercise, particularly when trying to balance the conflicting interests of groups of employees, the workforce as a whole and the needs of the business or organisation. There is no magic wand. Nonetheless, it is good news for employers.”



The facts

Mr Woodcock's role as Chief Executive of North Cumbria Primary Care Trust became redundant as a result of an NHS reorganisation. He remained employed for some months but no alternative role was found. As he was entitled to 12 months notice, and his 49th birthday was looming, the decision was taken to give him notice, to expire before his 50th birthday, when he would otherwise have benefited from an enhanced pension. This saved the Trust over £500,000. The Employment Tribunal found that the Trust's action was objectively justified in the circumstances. There was no doubt that the reason for dismissal was redundancy for which Mr Woodcock was paid £220,000. The avoidance of the additional cost in that context was a proportionate means to achieve this.



On appeal the EAT had held that the tribunal had not decided the issue on the basis of "cost alone" but had applied the "cost plus" test consistent with the 2005 case of Cross v British Airways. That’s said, in the EAT's view it could not be said that cost considerations can never by themselves constitute sufficient justification or why they need the addition of some other element in order to be legitimised. To adopt such an approach would tend to involve parties and Tribunals in artificial game-playing ("find the other factor").



The Court of Appeal has not picked up this important thread. It looked carefully at the facts and confirmed that Mr Woodcock’s treatment could not be characterised as aimed at avoiding cost and no more. If it had, it would not have been a means of achieving a legitimate aim and would not have been capable of justification.



What does this mean for employers?

While the Court’s approach leaves employers more readily able to justify their actions in comparable circumstances it will still be a tricky balancing exercise in many cases. The onus remains firmly on the employer to demonstrate that the action taken is warranted, despite the adverse impact on employees. This judgment will be of comfort to employers, including those in the increasingly costs-conscious public sector, where significant enhanced payments may become due under a pension scheme at a given age . Taking these costs into account when reaching a decision on the timing of a redundancy may be essential in seeking to balance the books .

The decision is also consistent with the EAT's decision last month in Benson v HM Land Registry, which held that in a cost -cutting exercise, conducted in conjunction with a rationalisation of the employer's office premises, nationwide, it was a matter for the employer to determine its budget for achieving a reduction in headcount, and that it could take cost into account when determining who should be selected amongst those who had volunteered for redundancy.

The practical lesson is to plan ahead, to anticipate issues and address them. In a compulsory redundancy situation that will include all the reasonable steps to be taken in seeking suitable alternative employment for affected employees whether at a comparable level or a different level, in appropriate cases.