UK: Age Discrimination - One Year On

The Employment Equality (Age) Regulations 2006 (the "Age Regulations") came into force on 1 October 2006. The Age Regulations prohibit discrimination on the grounds of age and are a far-reaching piece of anti-discrimination legislation - it is not limited to protecting only one particular group, but every employee (at one time or another) could potentially bring a claim under the Age Regulations. In addition, age discrimination may well be one of the most wide-spread (and, at least until the Age Regulations came into force, probably the most accepted) form of discrimination in the workplace.

So how have the Age Regulations fared in their first year of being? Well, according to the Employers Forum on Age, there have been 2000 age discrimination claims lodged in the first year. Some of those have begun to filter through the Tribunals but very few are thought to have yet reached the appellate courts. In this month's Briefing we look at the most recent, and probably most high-profile, Tribunal decision on age discrimination, and recap on the Age Regulations generally, particularly in relation to retirement procedures.

Peter Bloxham, a former partner at the law firm Freshfields Bruckhaus Deringer, brought a claim against the firm alleging that the firm had discriminated against him on the grounds of age when it changed its pension scheme. Mr Bloxham, who opted to retire during a transitional period between the old and the new scheme, claimed that had he been 55 years or over (he was 54), he would have received a higher proportion of profits by way of a pension, and that that was less favourable treatment on the grounds of age. The Tribunal agreed. It said that as a 54 year old, Mr Bloxham was treated less favourably than a 55 year old and that this constituted less favourable treatment on the grounds of age.

Under the Age Regulations, both direct and indirect discrimination may be objectively justified by the employer. In order to do so, the employer must show that it is pursuing a "legitimate aim" (for example, encouraging loyalty, rewarding experience, or maintaining health and safety) and that the means of pursuing this aim are "proportionate". This means that the business benefit must be sufficient to outweigh the discriminatory effect; and that if there are two ways of achieving a similar aim, the least discriminatory one must be chosen.

The Tribunal hearing the Bloxham case found that the reform of the pension scheme that caused the less favourable treatment was in pursuit of a legitimate aim (namely to redress an unfairness to younger partners and to provide a more financially sustainable scheme) and that the treatment was a proportionate means to achieve that aim. As such, the less favourable treatment was justified and the complaint of discrimination was not upheld.

It is important to note that in determining whether the treatment was justified, the Tribunal in this case looked closely at the procedures followed by Freshfields in implementing the change, including extensive consultation and consideration of all the options. In particular, the Tribunal pointed out that there was no less discriminatory way in which the aims could be achieved.

What this case highlights is that in order to be able to rely on objective justification as a defence to otherwise age discriminatory treatment, an employer must be able to show that it has properly considered all the options and their likely effects (for example by undertaking surveys or audits) and, ideally, consulted those likely to be affected. The employer must in most cases be able to back this up with documentary evidence.

The Age Regulations and retirement procedures

In addition to making direct and indirect discrimination on the grounds of age unlawful (unless it can be justified) and prohibiting harassment (which can never be legally justified), the Age Regulations also set out retirement procedures that employers must follow before dismissing an employee on retirement.

Compulsory retirement ages are, in principle, discriminatory. However, the Age Regulations currently permit employers to set a normal retirement age of 65 or over. An employer cannot opt for a retirement age below 65, unless that can be objectively justified for the particular role (which will be difficult in most cases). Where the employer has not set a retirement age, the Age Regulations provide for a default age of 65.

Employers must follow a statutory procedure, which includes a right for employees to request to continue working beyond the retirement age, before they can terminate an employee's employment on retirement grounds. The procedure, in outline, is as follows:

• The employer must give 6-12 months written notice of retirement and of the right to request to continue working.
• If an employee makes a request in writing 3-6 months before the retirement date, the employer must hold a meeting to consider it (unless the employer agrees to the request in full) but is under no obligation to grant it. The employee has a right of appeal.
• If the employer grants an employee's request, it will have to follow the procedure again for the new retirement date if employment is extended for more than six months.

Failure to follow the procedure can result in a successful claim for unfair dismissal, and in some cases the dismissal will be automatically unfair – but the focus is on the process, not the substantive reasonableness of the decision to dismiss. Provided the employer has followed the procedure, any dismissal will be fair and will not give rise to a claim for age discrimination. The procedure therefore provides some protection for the employer when dealing with retirement of employees at 65 or over.

For those employers who did not do so when the Age Regulations came into force, it is still not too late to take action to ensure that practices, policies and procedures comply with the Age Regulations. This would include reviewing recruitment procedures, contracts, handbooks and other policies, termination procedures and retirement ages (including introducing a retirement policy and a "prompting system" to ensure that the deadlines outlined above are met) and training staff on the law. As with all forms of discrimination, employers who take preventative action and who have considered (and improved where necessary) their practices stand a much better chance of defending any claims that may arise (and indeed avoiding them in the first place).