The High Court has ruled that the UK age discrimination laws are not in breach of European Union law by allowing employers to force staff to retire when they reach the age of 65 (R (on the application of Age UK) v Secretary of State for Business Innovation & Skills). The judge said the Government had shown that this provision was a proportionate means of meeting legitimate labour market objectives when it was implemented in 2006.

The central issue in the case, brought by the charity Age Concern, was the so-called “default retirement age” (DRA) contained in regulation 30 of the Employment Equality (Age) Regulations 2006. This allows employers to require employees who are 65 or older to retire without risking claims for age discrimination or unfair dismissal. Age Concern argued that this exception was unlawful because the EU Equal Treatment Directive did not allow it. The High Court decided to ask the European Court of Justice (ECJ) for a ruling on the interpretation of the Directive.

The ECJ said that the key question was whether the compulsory retirement age of 65 was “objectively and reasonably justified”. It was for the UK government to show that it had a legitimate social policy aim and that the means chosen to achieve it were appropriate, necessary and proportionate. The case then returned to the High Court for it to resolve whether the DRA complied with the Directive.

The Court decided as follows:

• The Government had shown that, in principle, a DRA was a proportionate means of achieving legitimate social policy objectives, such as securing the integrity of the labour market and its competitiveness.
• Whilst there were powerful reasons for adopting a DRA higher than 65, it had to be judged as at the date it was introduced. The adoption of a DRA of 65 in 2009 would not have been a proportionate measure, but on balance it was within the Government’s margin of discretion when implementing the Directive in 2006.
• The Government’s commitment to keeping the DRA under review was a significant factor. However, the result may have been different had the Government not recently brought forward the review from 2011 to 2010. The Court said it could not presently see how 65 could continue to be justified as a DRA after the review.

What happens next? Despite the outcome being a close-run thing, it appears Age Concern will not be appealing. Rather, it and the Equality and Human Rights Commission (EHRC) will be pressing for the DRA to be immediately changed using the Equality Bill currently before Parliament. A more likely outcome is that the Government’s review will take place next year as planned, leading to a decision to raise or abolish the DRA taking effect some time in late 2010 or 2011.

In the meantime, employers who wish to continue operating the DRA – or a higher compulsory retirement age of their own – may continue to do so.  Forcing workers to retire may still trigger fresh claims for unfair dismissal and age discrimination which employers will have to defend – but such claims are unlikely to succeed. Employers can argue they are merely applying legislation that has expressly been upheld as lawful and consistent with EU law.

In the longer term, employers will need to start thinking about the implications of the DRA being raised or repealed altogether. For example, they may need to change their performance management procedures for older employees so as to be in a position to justify retirement decisions on their individual merits.