Staying Compliant: Adapting to New Retirement Laws and Standards

This surge reflects the growing recognition of retirement as a critical aspect of employment law, requiring careful navigation by employers to avoid legal pitfalls. As the field continues to evolve, staying ahead of these legal developments is essential for employers, ensuring that retirement policies comply with the latest standards and protect the interests of all stakeholders involved.

Retirement Legislation and Case Law

While public sector workers in Ireland are subject to a statutory mandatory retirement age there is no statutory retirement age in the private sector. Instead, employers typically agree a retirement age with their employees which usually takes the form of a clause in a contract of employment. The legislation surrounding retirement is shaped primarily by the Employment Equality Act 1998 as amended (“EEA”) transposed from the EU Employment Equality Directive (“Directive”), which allows employers to impose a mandatory retirement age, provided it is specified in the contract of employment. While the EEA does not deem it discriminatory to enforce mandatory retirement ages, any such age must be objectively and reasonably justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary. When transposing the EU Directive, the Court of Justice of European Union (CJEU) made it clear that Member States have a wide margin of discretion not only in terms of choosing the legitimate aims they wish to pursue, but also in terms of defining the means of achieving these legitimate aims.

Recent case law illustrates the importance of this objective justification for setting a mandatory retirement age. For instance, in Thomas Doolin v Eir Business Eircom Limited, the WRC examined the circumstances surrounding the retirement of an employee who joined the company in 2019 at 61 years of age as a Desktop Support Agent with a salary of €35,000. Shortly after his employment began, the company’s retirement age was raised to 65 to align with its pension schemes, and employees were notified of this change in 2020. As the employee approached his 65th birthday, he requested to continue working beyond the retirement age, but his request was denied despite his appeal. The employer cited reasons such as intergenerational fairness, succession planning, and upholding the employee’s dignity in what was described as a “safety critical” role.

However, the WRC noted that three other employees had been allowed to work beyond 65 for exceptional reasons and highlighted that the employee’s desk-based role was neither safety-critical nor senior enough to impact succession planning. The WRC concluded that the reasons provided in the employer’s retirement policy did not objectively justify the employee’s retirement, as there was no application of objective justification specific to his circumstances.

Conversely, in the 2023 case of Tommy Browne v MSR-FSR Managed Engineering Solutions, the WRC upheld a mandatory retirement age of 66 for technicians in physically demanding roles, citing health and safety concerns as a legitimate justification. Therefore, when establishing a mandatory retirement age in an employment contract, it is crucial for employers not only to have a specified clause in the contract but to ensure they can demonstrate that the retirement age is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.

Code of Practice on Longer Working

As mentioned previously, Ireland does not have a statutory retirement age for private sector workers, meaning that retirement is often dictated by expressed or implied contractual terms, policies in the company handbook, custom and practice, or the normal retirement age within an occupational pension scheme. Employers must tread carefully to avoid potential age discrimination when enforcing retirement policies, ensuring they comply with the EEA. The WRC’s Code of Practice on Longer Working (“the Code”), published in 2017, provides valuable guidance for employers on how to manage this complex area. The Code helpfully outlines potential legitimate aims that have been accepted by the CJEU for imposing a mandatory retirement age, such as

• Intergenerational fairness
• Motivation and dynamism through the increased prospect of promotion
• Health and safety
• Creation of a balanced age structure in the workforce
• Personal and professional dignity
• Succession planning.

The Code also outlines best practices for employers in managing employee engagement as retirement approaches and handling requests for extended working past the retirement age. It emphasises the importance of being prepared to manage requests from employees wishing to work beyond the normal retirement age, developing age-inclusive workplace practices, and staying updated on the evolving legal framework on retirement.

The Code stipulates that compulsory retirement ages must be objectively justified by a legitimate aim, with appropriate and necessary means of achieving that aim. For instance, if an employer cites intergenerational fairness and succession planning as reasons for enforcing a retirement age, they should provide evidence of younger staff being promoted or hired to support this claim. Failing to do so could result in claims of age discrimination.

Employers should not only establish objective justifications for a mandatory retirement age prior to its implementation but must also engage in consultation, as outlined in the Code of Practice, with employees approaching retirement, as was shown in the Brendan Beirne v Rosdera Irish Meats Group (2023) where the employer failed to consult or negotiate with the employee who was awarded €30,000 for discriminatory dismissal based on age. The consultation process ensures that employees are fully informed of the retirement policy and the justifications for setting a particular retirement age well before the retirement date.

A recent landmark Supreme Court case of Seamus Mallon -v- The Minister for Justice, Ireland, and the Attorney General [2024] IESC 20 provided welcome clarification that an individual assessment is not needed in order for a general mandatory retirement age to be lawful pursuant to the Directive and the EEA. In fact, conducting individual assessments can undermine the consistent and systematic nature of a mandatory retirement age, making it appear disproportionate. Following the Donnellan v Minister for Justice, Equality and Law Reform [2008] IEHC 467, certain WRC decisions have highlighted the importance of assessing the mandatory retirement age on an individual basis. When such assessments were not carried out, the WRC concluded that the employer could not prove that the mandatory retirement age served a legitimate aim or that these aims were proportionate to the particular circumstances of the employee. However, the Mallon case confirms that there is no obligation for such individual or case by case assessments.

The evolving employment landscape has seen employers increasingly offer post-retirement fixed-term contracts to retain experienced employees, recognising their value in a competitive talent market. However, employers need to be mindful that offering a fixed term contract to a person over the compulsory retirement age must also be objectively and reasonably justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary. In addition, offering post- retirement fixed term contracts universally could create a precedent which may undermine the requirement for a mandatory retirement age in the first place and lead to age discrimination claims.

What Comes Next?

The ageing population is reshaping the workforce landscape, prompting the Government to propose measures designed to encourage employees to remain in their jobs for extended periods. By incentivising longer working lives, these measures aim to alleviate the financial burden on state pensions and reduce the contributions needed to support retired individuals. This shift not only seeks to address the economic challenges posed by an ageing demographic but also aims to sustain a more balanced and robust labour market.

The Government has recently committed to a series of pension reforms, including the Employment (Restriction of Certain Mandatory Retirement Ages) Bill (the “Bill”). When enacted, this legislation will introduce a statutory provision which allows, but does not compel, an employee to stay in employment until they can access the State Pension. The Bill, once drafted, will apply to clauses in contracts of employment, whether express or implied, which oblige an employee to retire at an age which is below the age at which the employee can first access the State Pension (currently 66). Where an employee does not consent to the contractual retirement age set below the State Pension age, they will have the right to provide notice to the employer in writing of their intention to work to either an age of their choice between the contractual retirement age and the State Pension age or to the State Pension age. Once the employer has been so notified in line with the timeframe and guidelines set out in the Bill, they must not retire the employee before a date to which the employee consents or before the employee reaches the pensionable age, whichever first occurs.

Another initiative intended to encourage employees to remain in the workforce for a longer period, thereby helping to reduce the financial pressure on the pension system is the possibility of deferring the state pension. Starting from January 2024, individuals have the option to begin claiming their Contributory State Pension at any time between the ages of 66 and 70. This flexibility allows individuals either to fulfil the qualifying condition of 520 PRSI contributions (equivalent to 10 years) or to receive a higher state pension to financially assist both individuals who plan to retire and the pension system.

Moreover, the recent decision by the Tánaiste and Minister of Defence to raise the retirement age from 60 to 62 for Defence Forces, Fire Fighters and Prison Officers further supports the push for employees to remain in work longer and significantly enhances retention efforts.

Another major reform such as Auto-Enrolment Retirement Savings System represents a pension reform aimed at addressing the situation of approximately 800,000 people who are not currently members of a pension scheme and who are planning to rely solely on the State Pension. Expected to start in the first quarter of 2025, all employees aged over 23 and under 60 who earn more than €20,000 per year and are not already part of an occupational pension scheme or PRSA will automatically be enrolled in the auto-enrolment scheme. This significant reform marks a new phase in the Irish pension landscape, complementing other measures designed to support both the ageing workforce and retired individuals. For further details on auto-enrolment, please read our blog here.

Key Considerations for Employers

Employers should prepare for an evolving workforce that will want to stay in employment longer. They should ensure that a contractual retirement age is clearly stated in employment contracts, ensuring that the retirement age selected can be objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary It is advisable for employers who have a mandatory retirement age to align it with the State Pension Age (if applicable) to avoid unnecessary administrative burden of having additional requests under the General Scheme (Restriction of Certain Mandatory Retirement Ages) Bill 2024.

It is important to review and update the retirement policy to align with the contractual retirement age, ensuring that it complies with the Code of Practice on Longer Working Lives and clearly articulates the legitimate business reasons for setting that retirement age. Additionally, steps should be taken to make sure that this policy is well-communicated and understood by all employees.

Employers must engage with and consult employees who are approaching the contractual retirement age in a timely manner, so they are fully aware of the retirement policy and its justification. Furthermore, employers should exercise caution when unilaterally enforcing contractual retirement ages and seek professional advice, as the financial awards in such cases have shown to be substantial.

This article was written by Mislav Magas, HR Consultant at Action HR Services.

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DISCLAIMER:
The information in this article is provided as part of the Action HR Services Blog. Specific queries should be directed to a member of the Action HR Services Team and it is recommended that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct on 4th September 2024.