The Legal 500

A little behind schedule, the government has now issued for consultation the draft Employment Equality (Age) Regulations 2006 (the Age Regulations), which will outlaw discrimination on the grounds of age with effect from 1 October 2006.

Summary of proposals
The key elements of the Age Regulations are as follows:

• It will generally be unlawful to discriminate directly on the grounds of age, ie where a decision is made on the basis of the person's actual or perceived age. For example, a job advertisement stating that the company will only consider applicants under the age of 30 will be discriminatory.
• Harassment, victimisation and indirect discrimination on the grounds of age will also become unlawful. Indirect discrimination arises where a blanket policy or practice causes disadvantage to a certain age group, even if the effect is unintended.
• A defence will be available to charges of both direct and indirect age discrimination if it can be demonstrated that the allegedly discriminatory act is a proportionate means of achieving a legitimate aim (ie the so-called objective justification defence).
• A national default retirement age of 65 will be introduced.
• Compulsory retirement ages of less than 65 will be unlawful unless they can be objectively justified.
• If an employer wishes to compulsorily retire an employee (at whatever age) it will be obliged to follow a new 'duty-to-consider' procedure, which will allow the employee in question to ask to work beyond the proposed retirement age.
• The current upper age limit of 65 for bringing unfair dismissal claims will be removed. Accordingly, employees with the necessary qualifying service, regardless of their age, will all have the same rights to claim unfair dismissal.
• The upper age limit will also be removed in relation to the statutory entitlement to redundancy pay.

Service-related pay and benefits
It is extremely common for employers to use length of service as a determining factor for pay levels and in relation to the award of non-pay benefits, such as holiday entitlement, staff discounts and car entitlements. Linking length of service to pay and benefits could give rise to indirect age discrimination, as some age groups are more likely to have the necessary length of service than others. Under the Age Regulations there will be three express exemptions in relation to the use of length of service as a determining factor for salary and benefits.

General exemption
There is a general exemption where the underlying aim of using length of service benefits is to reward loyalty, encourage motivation or recognise the experience of workers, and the employer considers this will benefit its business.

Specific exemptions
There are also two specific exemptions from the Age Regulations. First, any length of service requirement of five years or less will be exempted, for example, where employees have to remain in service for three years before qualifying for a staff discount card.

The second specific exemption relates to a benefit based on length of service that is:

(i) provided by the employer in place of a statutory benefit that the employer would otherwise be required to provide; and

(ii) more generous than the statutory benefit.

This would cover an employer's enhanced redundancy payment scheme that replaces the statutory redundancy formula.

Compulsory retirement age and a new pre-retirement 'duty-to-consider' procedure
The Age Regulations establish a national default retirement age of 65 that allows employers to require employees to retire at or above 65. If an employer wishes to establish a retirement age under 65 it may do so, provided that it has an objective reason, for example where there are health and safety issues. An employer will not be at risk of an unfair dismissal claim where it dismisses on the grounds of retirement provided:

(i) it has followed the new 'duty-to-consider procedure'; and

(ii) it is a planned retirement.

The duty-to-consider procedure involves the following steps:

• Six to 12 months before the proposed retirement date the employer must notify the employee (i) of the proposed retirement date and (ii) of their right to request to work longer.
• Six weeks to 12 months before the proposed retirement date the employee may make a request to continue working. The employer will then have to consider such a request and hold a meeting with the employee to discuss it. The employer has a duty not to retire the employee until this stage of the procedure has been carried out.
• Within two weeks of the discussion meeting the employer must notify the employee, in writing, of the decision. There is no duty to set out the reasons why the request is being rejected. The employee's employment will continue until notification is received, even where this is beyond the initially proposed retirement date.
• Within two weeks of receipt of the decision the employee has the right to appeal. The appeal meeting must be held within two weeks of receipt of the employee's appeal notice, but may take place after the retirement date itself. The employee must be notified in writing of the outcome of the appeal within 14 days of the appeal meeting.

A retirement will be considered to be planned if it takes effect either at the national default retirement age of 65 or at the employer's normal retirement age, or the employer has informed the employee of the retirement date at least six months in advance. This will make it much harder for employers to use compulsory retirement to avoid the statutory disciplinary and dismissal procedure when dealing with a performance or redundancy dismissal, or to avoid making statutory and/or contractual redundancy payments.

The employer will only be at risk of a successful unfair dismissal claim if:

• it is not a genuine retirement; and/or
• the employer fails to commence the duty-to-consider procedure;
• the duty-to-consider procedure has been started, but the dismissal takes effect before the meeting to discuss the request to continue working takes place;
• the employer fails to follow the duty-to-consider procedure properly.

Practical implications
The Age Regulations will affect a number of current policies and practices when they come into effect in October next year. If they have not already done so, employers should audit their current arrangements to determine whether they will contravene the Regulations and how they should be revised.

Employers should find it reasonably easy to make some changes now that will help reinforce an ethos of recruitment, promotion and reward on the basis of qualifications, experience and performance, regardless of age. In particular, the impact of the Age Regulations on the following practices should be considered:

Monitoring during the recruitment process
Employers will be allowed to target under-represented age groups by using advertising that focuses on the needs of that age group. If data is not readily available on whether specific age groups are under-represented within their company, employers may wish to review their equal opportunities monitoring procedures.

Application forms
Asking for a candidate's age or birth date is not itself discriminatory. However, the information could be used to take discriminatory decisions, and so it may be appropriate to request this information in an equality monitoring form instead.

Advertisements
Review the wording in job advertisements - do they specify age limits or age brackets, or a specific length of service or experience? If so, is this necessary or justified? Does the wording and/or imagery explicitly or implicitly suggest differences of treatment based on age, for example 'young and energetic', 'mature', etc?

Source of applications
Are university milk rounds the only source of recruitment? Can this be objectively justified?

Selection criteria
Are certain age limits (direct discrimination) or qualifications or experience criteria (potential indirect discrimination) applied to the recruitment process? Can this be objectively justified?

Service-related pay and benefits
The practice of awarding extra benefits such as holiday or pay based on length of service should be acceptable if the underlying aim is to reward and encourage loyalty or reflect experience or maintain motivation. Assess whether this is, in fact, the case.

Training
Ensure that access to training and development opportunities is not determined by age alone in the absence of objective justification for doing so.

Workplace practices
Consider whether other practices, formal or informal, may amount to unlawful direct or indirect discrimination, for example only accepting undergraduates on vacation training programmes or recruiting staff under the age of 30. Managers should be given regular training and guidance on what amounts to harassment to help spot potentially difficult situations.

Promotion
Ensure that promotion decisions are untainted by 'ageism' and are clear and well documented.

Retirement
Does the company have a compulsory retirement age? Is it under 65? Does it have an underlying justification?

Occupational pension schemes
Employers and trustees of occupational pension schemes must examine the rules of their pension schemes to identify any age-related aspects. They must then consider whether they come within the exceptions set out in the Age Regulations or, if not, whether the provisions can be objectively justified. The government anticipates that occupational pension arrangements can continue to operate in a more-or-less similar fashion; the fixing of ages of admission to occupational pension schemes and the use of age criteria in actuarial calculations will not be regarded as age discrimination under the Age Regulations.

Compulsory retirement
Consider how the new duty-to-consider procedure can be incorporated into existing pre-retirement procedures and ensure that managers are aware of the unfair dismissal implications of failing to follow the statutory procedure.

Redundancy payments
Employers who do not operate a contractual redundancy scheme must ensure that the new statutory redundancy pay formula is applied in respect of redundancies taking effect on or after 1 October 2006. Where employers operate a contractual redundancy pay scheme that is pegged to the statutory redundancy scheme, this may result in higher payment for employees aged 20-22 and for employees in the 23-41 bracket in the event of post-October 2006 redundancies. This will, however, depend on the precise nature of the scheme's wording, and the age the employee commenced employment.