As most employers will now be aware, legislation comes into force on 1st October 2006 preventing discrimination on the grounds of age.
As with any legislation it is worth taking a few minutes to examine the social background.
Following the publication, in 2002, of the Government’s pension green paper, research undertaken by the Department of Work and Pensions indicated that at the age of 50, some 32% of the potential work force was economically inactive. The Office of National Statistics in July 2005 showed a total of 12 million people aged over 50 out of the work place. The percentage of those inactive over the age of 50 was 61.7%, although that in itself was a reduction of 4.3% on the previous 12 months. The Government estimates that by 2024, the percentage of the population over 50 will be some 40%. The graph showing the breakdown of employment rates is reproduced below.
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Despite an ageing population, the labour market participation of men and women over the age of 50 has decreased markedly since the late 1970s, although the trend has been halted to a degree with increasing labour market shortages and awareness of the problems.
Clearly the social demands created by having an ageing population along with the well publicised difficulties in providing adequate pensions, have created the dynamics for change. When universal pensions were first introduced, almost a century ago under the Liberal Government of David Lloyd George in 1908, the pension varied between 2 and 5 shillings a week and was available from age 70. The retirement age was not set at 65 until 1925 with the pension being fixed at 10 shillings. When the old age pension was first introduced, the average male drew his pension for 2 years following a working life of over 50 years. Currently with the increased numbers in tertiary education, if there is no change of the numbers of over 50s employed, a very high percentage of the population will have worked for 25 years to fund a retirement of over 20 years.
Employers have become used to operating in an environment where they have to be aware of diversity issues and avoid discrimination and so are there any particular considerations for age? Clearly age discrimination applies across the board. It is possible that younger people will complain of age discrimination against them, we nevertheless believe that the vast majority of claims will come from the over 50s. Apart from the possibility of a double discrimination hit, i.e. race and age, sex and age, being pleaded together, the fact is that the over 50s are likely to be the most litigious group on the employment scene. The statistics that we have quoted show that the over 50s have most to fear from losing their job. Somebody at the outset of their career may well feel that they have been unfairly dismissed or discriminated against, but are much more likely to take any setback philosophically as they stand a very good chance of being able to move swiftly into another job and probably are fearful of rocking the boat. Over 50, the prospect of losing a job without, say the option of early retirement, begins to look very much like staring over the precipice. If one believes that there is only a 1 in 3 chance of working again, then there is every incentive to launch into litigation to try and minimise the damage. Added to this is the fact that the compensation cap of £56,800 will not apply if the award is going to be based on discrimination. The potential losses stretching into the future become enormous. Furthermore just before this terminal drop, the employee is likely to have been at the optimum earnings level, and so both the multiplier and the multiplicand are potentially high.
That higher income is, of course, an issue in relation to the affordability of legal fees. According to figures published by the Women and Equality unit at the DTI, medium income for men peaks at the age range of 40 – 44 and is only 6% lower by age 49. The graph is a classic bell curve with earnings for men aged 45 – 49 being twice that of those aged 20 – 24. The picture for women is rather more depressing, since statistically they are earning less at age 45 – 49, than they would have been at age 25 – 29. At that point their earnings are approximately half of men’s. However, undoubtedly there is a strong element of historical time lag in these figures and as changed working patterns feed into the statistics, one could imagine that female earnings will be creeping up over the next decade. So we are presented with the classic picture of an empty nester with mortgage either paid off or largely paid off and by now with some accumulated savings or trickle-down wealth through inheritance. Legal fees are not likely to provide much disincentive to taking action, compared with a young parent.
Having looked at why the social dynamics have created the impetus for legislative change and why we believe employers need to be worried, we will break our overview into two separate parts.
- The Age Discrimination regulations
- Pensions
1. The Regulations
The regulations were finally published after consultation on 3rd April 2006. The full regulations can be accessed here. From a practical point of view the regulations that will most impact on employers are:
Regulation 3 – discrimination on grounds of age.
The definition of discrimination on grounds of age is very much as it has been with sex and race. The definition is “for the purposes of these regulations, a person (A) discriminates against another person (B) if:
a) on the grounds of Bs age, A treats B less favourably than he treats or would treat other persons
b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but (i) which puts or would put persons of the same age group as B at a particular disadvantage compared with other persons and (ii) which puts B at that disadvantage
AAnd A can not show the treatment or as the case may be provision, criterion or practice is to be a proportionate means of achieving a legitimate aim.
A youth club, for example, for all manner of reasons might properly exclude persons over the age of 18. However, a bingo club might struggle to justify excluding members below the age of 60.
Regulation 4 - discrimination by way of victimisation.
Discrimination occurs if it is on the grounds that an individual has, either brought proceedings for age discrimination, made allegations that a breach of the regulations has taken place or given evidence or information in proceedings.
Regulation 6 - harassment on grounds of age.
This is defined as subjecting another person to harassment on grounds of age by engaging in unwanted conduct with the purpose of violating dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment.
The regulation goes on to say that conduct shall be treated as such if the victim reasonably considers it to have the effect.
Age discrimination has been in force in the United States for some time now and it is possible that examples from the US will creep into use as examples of unacceptable conduct here. In one case in the US a female president of a company was held to be discriminating against a male vice president by sending him pamphlets on erectile dysfunction. Given the volume of emails received on a daily basis, employees should think twice before forwarding them as a joke to older members of staff.
Regulation 7
This regulation provides that it should be illegal to discriminate against a person in making arrangements for determining whether employment should be offered, the terms on which employment should be offered or by refusing to offer employment. The regulation goes on to outlaw the offering of less attractive terms of employment or promotion and/or training opportunities. The regulation also states that it shall be unlawful to dismiss somebody on the grounds of age or subject to any other detriment.
The regulations also have a number of specialist requirements and no doubt many of our regular readers will be pleased to know that the regulations will apply to workers employed in the Norwegian sector of the Frigg gas field provided of course that the employer is a UK company or based here! However, this ground may well have been covered subsequently by the Serco v Lawson case.
The regulations also specifically provide that the provisions extend to barristers, advocates and partnerships. As the writer was told by an experienced barrister once, “If you think you’re old because the policemen look young, wait until you think the judges look young.”
Discrimination is also prohibited in relation to vocational training and the recruitment by employment agencies.
Regulation 24
Provides that it should be unlawful to discriminate against an individual, post termination of employment or to subject that individual to harassment. This will cover things like refusing to give references.
The regulations also provide that it will be treated as done by the employer if it is done by a person in the course of his employment. Effectively therefore, employers have vicarious liability for the acts of their staff. It will however be a defence to demonstrate that all such steps as were reasonably practical to prevent the employee from that act or from doing so in the course of his employment, have been taken.
Regulation 30
This regulation provides that a dismissal will not be unlawful over the age of 65 where the reason for dismissal is retirement.
A retirement age below 65 will be unenforceable unless it can be justified as appropriate and necessary and employees will have the right to request to work beyond a set retirement age with employers having a legal obligation to consider such requests.
As with the other areas of discrimination legislation a person aggrieved can serve a questionnaire. The failure or refusal to answer a questionnaire within 8 weeks of service will allow the tribunal to draw an inference of discrimination from this.
A moment’s reflection will show categorically that this regime is likely to require the biggest single change of mind set in recent history. A CIPD survey in 2004 found that age prejudice impacted at both ends of the spectrum. 25% of under-35s have either been told they are too young to be considered for a job or believe this to be the reason for refusal, whereas 20% are discouraged from applying for jobs because they are too old. The result of this is that there seems only to be 5 golden years between 35 and 40 when one is either not too young or not too old. Recruitment, promotion and training opportunities are going to have to be afforded across a level playing field. In particular recruitment, selection and promotion will all need to be based on aptitude, ability and potential with all employees regardless of age encouraged to take part in training opportunities. Redundancy selection will need to be clearly measured by job related criteria. It may become difficult to justify a “last in, first out” approach as this will impact unfairly on younger members of staff. There may be a reluctance to make older workers redundant due to the cost allied to length of service and so perversely some older workers may now have less job security.
Employees will now be able to claim unfair dismissal after the age of 65 and will be entitled to redundancy payments.
If age is to be applied as a criterion or condition in employment, it must be justified as a proportionate way of achieving a legitimate aim. A DTI fact sheet on objective justification offers practical examples. Generally requirements suggesting youth can be more effectively dealt with by individual assessment. Perhaps not many 60 year olds would be fit or strong enough for working as a scaffolder but some might be.
Useful advice can be obtained from the Age positive website, Acas or the DTI. It is clear that a great deal of thought will need to be given to the wording of job adverts and application forms since adjectives that are stereotypically descriptions of the young or older employees will be very difficult to justify. Think twice about words like mature. Equally terms and conditions that are simply allied to length of service may come under scrutiny. If there is no qualitative justification other than the number of years with the company, there may well be scope for challenge. In any event there is a very real possibility of a challenge on sex discrimination as such practices may amount to discriminating indirectly against women who statistically find it more difficult to build up lengthy careers if they have taken career breaks for child care reasons.
2. Pensions and retirement
Retirement
Employees will be able to work beyond a default employment date of 65 if they make a request to do so. Employers must consider such requests reasonably and look at the situation objectively. If an employee has been properly notified of their retirement they must make their request to continue working at least three months before the proposed retirement date. We would expect the obligation to be interpreted in much the same way as requests for flexible working. Bear in mind the statutory grievance procedures when dealing with any requests.
Employers should notify employees of their intended retirement date not more than one year, but no less than six months in advance. If they do not, the employee may be able to claim for compensation.
A failure to notify the employee within 2 weeks of the retirement date will make the dismissal automatically unfair with ramifications for compensation. Between October 2006 and 2007 transitions provisions apply. Details can be seen here.
Pensions
On 25th May 2006 the Government announced changes to the state retirement age. The current retirement age will rise to 66 in 2024, 67 in 2034 and plateau at 68 in 2044. No doubt by this stage life expectancy will have increased again and the retirement age will be up for review again. State pensions will be linked to earnings by 2012. Unusually the moves seem to have been welcomed by unions and employers alike. It is of course not obligatory to take the state pension at 65. If the option to retire is postponed for at least 12 months, then the employee is given the option of increasing his state pension by at least 10% for each year of deferment. The alternative is to take a one off taxable lump sum payment comprising the un-drawn state pension plus interest.
Different rules apply for occupational pensions. Though most pension schemes will have a normal retirement age of between 60 and 65, frequently it is possible to take a pension from any stage from 50. From April 2010 it will not be possible to take early retirement before the age of 55 although there are some exceptions for ill health.
Another important change as of April 2006, it is possible to continue working for an employer whilst drawing an occupational pension. This change makes the possibilities of flexible retirement a real possibility. Subject to negotiated agreement, it may be possible to work for some months of the year, or part time whilst drawing the occupational pension.
The age positive website has specific information available about the different pension possibilities.
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