Retirement Age – Is it Legal?
Changes in Irish Legislation and EU case law have created the need for employers to proceed with caution in respect of enforcing retirement age.
A recent change in Irish legislation and a ruling by the European Court of Justice has brought the subject of retirement age of employees into focus for employers and employees.
Changes in Irish Legislation & ECJ Rulings
Since January 1, 2014 the age at which a person is entitled to a State Pension is 66 years. This was increased from age 65 in the Social Welfare and Pensions Act 2011.
The European Court of Justice have ruled that enforcement of compulsory retire age may be considered age discrimination.
The European Court of Justice ruling influences decisions in the Irish employment tribunals (Employment Appeals and Equality Tribunal).
Implications for Employers
The retirement age for an employee may be specified in their contract of employment or if it is not explicitly specified may be implied from custom and practice in the company, collective agreements or statutory instrument applying to their employment.
Very often the retirement age was specified at 65 years which was in line with the age for eligibility for the State Pension but as this has increased by 1 year (on 01/01/2014) to 66 years of age, the employee is faced with a year when they have an income gap as they may not be entitled to benefit from State Pension.
The employer may then be faced with a request from the employee (aged 65) to extend their contract for another year (until they reach 66 years) and this raises question about the nature of such a contract.
The employer when addressing the question needs to be mindful of The Employment Equality Acts and the European Court of Justice ruling which is that compulsory retirement age, in general, is prima facie discriminatory, unless objectively justified.
Objective Grounds for Retirement Age
There is no checklist that is universally applicable as to what are objectively justifiable reasons for a compulsory retirement age but some case law provides guidelines and examples of acceptable objective justification.
The Equality Tribunal case of Paul Doyle v ESB International (Dec-E 2012-086) provides the following guidelines in respect of enforcing a compulsory retirement age:
• Does the compulsory retirement age seek to achieve a legitimate aim?
• Is the aim legitimate in the particular circumstances of the business?
• Are the means of achievement in the aim proportionate?
Examples of acceptable objective justifications are:
• To create opportunities in the labour market
• To enable a balanced age structure in the workforce
• To encourage motivation and dynamism through the prospects of career enhancement and promotion
• To ensure the health and safety of employees
The above indicates that the Tribunal has regard for all of the circumstances of a particular case in arriving at its decision on whether compulsory retirement is justifiable.
Employers also need to consult their Pension Fund Trustees in regards to the implications of an employee earning income from employment and also drawing benefit from their pension fund.
Notwithstanding the fact that the retirement age is specified in the contract of employment, collective agreement, or by custom and practice, attempts to enforce this may be found to be discriminatory.
Employers need to assess their actions and decisons against the guidelines arising from case law as briefly outlined above.
Employers should also consult their Pension Fund advisors in respect of entitlement to earn income while drawing down pension entitlement.
If you would like help in this matter, please contact us via email or Call 01 866 6426