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Default retirement age will have critical impact

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A review of the default retirement age (DRA) has been on the cards for 2011 for some time now. Since Labour's age discrimination laws came into force five years ago, it has been clear that its removal was heavily trailed, so few should be surprised at the latest developments.

Indeed, partners, consultants and other non-employers have been in this situation from the inception of the age discrimination laws – it is only employers that will be affected as of 1 October 2011. However, this does not change the fact that this will have a major impact, and will be a critical change to employment law.

In essence, the DRA simplified the procedure of dismissal, proving a fair and lawful way of removing people at the age of 65 or above. Indeed, the retirement procedure provided a very effective mechanism for employers to remove underperforming workers without the need to go through performance management, or cut staff numbers without a lengthy and costly redundancy process.

The change does not mean that businesses can force its employees to keep on working against their will. However, it does mean that companies will have to justify discrimination objectively, with a legitimate aim in mind. There is a range of reasons why an employer could legitimately retire its workers compulsorily, such as succession planning, health and safety, or ability to do the job. But it must be a genuine business need and the forced retirement must be proportional to achieving the aim. For example, if a decision is made that an older employee is no longer able to perform his or her role due to physical ability, the employer might be expected to try to find a new, less physically demanding role within the company.

A case worth noting when making decisions is that of Seldon v Clarkson Wright Jakes, which was heard in the court of appeal last year. The law firm was challenged when it made a partner retire at the age of 65, and sought to justify its decision – which was eventually upheld by the tribunal. The firm won its case based on the idea that the forced retirement of partners enabled junior staff to move up the ladder to more senior positions, facilitated workforce planning and avoided the need for performance management, which would have been detrimental to the congenial and supportive culture of the firm.

There are a number of lessons to be learned from this case, which shows that there are ways to get around the removal of the DRA. Although employers can no longer rely on a fixed retirement date, they will find that there is flexibility if there is a generally understood policy in place. HR professionals have an important role to play in communicating this policy and, discussing retirement plans with individuals at an early stage.

It is vital, therefore, to establish dialogue with workers and offer them clear guidance in the context of clear and effective policy. If older employees are not working at the level expected of them, the DRA will no longer be a convenient excuse to sweep problems under the carpet – it is now time to be a great deal more proactive and address issues of poor performance head on.

Ashley Norman, partner at Cobbetts LLP