Justification of contractual retirement ages
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Justification of contractual retirement ages

25/08/2015

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Ireland

It has for a long time now been the accepted practice that employers are free to set contractual retirement ages, however more recently employers have become conscious of the requirement to objectively justify the imposition of retirement ages (please refer to our earlier article on this topic: Mandatory Retirement - Where are we now?).  Nonetheless, the requirement to objectively justify retirement ages was not expressly stated in the Employment Equality Acts 1998 - 2011 (the “EEA”) and it had become the accepted practice through case law from the Court of Justice of the European Union and the Irish courts.  It is now proposed to amend the EEA to expressly require employers to show that any contractual retirement age is objectively justified by a legitimate aim and secondly, that the means of achieving that aim are appropriate and necessary.  The Equality (Miscellaneous Provisions) Bill 2013 (the “Bill”) which introduces this amendment is currently at the second stage before the Dail (see the full text of the Bill here). The EEA currently permits employers to offer a fixed-term contract to a person over the compulsory retirement age.  The Bill also proposes to introduce a requirement that any such fixed-term contract would need to be objectively justified.  With the increase in the State Pension age to 66 from 1 January 2014 and the additional increases due to take place on 1 January 2021 (to age 67) and on 1 January 2028 (to age 68), employers are facing increased resistance to the imposition of contractual retirement ages and this is particularly the case where the contractual retirement age is set at 65 years.  In some cases, employers have addressed this issue by offering a fixed-term contract for one year following retirement at 65.  If the Bill proceeds to introduce this objective justification requirement in respect of fixed-term contracts, employers would need to proceed with extreme caution where they propose to offer fixed-term contracts to employees over the contractual retirement age.  To do so, would undermine any objective justification argument which could be advanced in respect of the original contractual retirement age of 65 years.