Member Article

Compulsory Retirement Challenged

With Watson Burton LLP Law Firm

The European Court of Justice has published its eagerly awaited judgment in the age discrimination case of Félix Palacios de la Villa v Cortefiel Servicios SA (Case C-411/05), concerning the validity of mandatory retirement provisions in Spanish law under the EC Equal Treatment Framework Directive. The outcome is likely to significantly impact on the pending Heyday challenge to the compulsory retirement provisions in the Employment Equality (Age) Regulations 2006.

The ECJ held that the national laws on retirement are within the scope of the EC Equal Treatment Directive, notwithstanding Recital 14 which states that the Directive is “without prejudice to national laws laying down retirement ages”. Acknowledging that the retirement provisions are prima facie discriminatory, the court referred to Article 6(1) of the Directive which states that where such treatment is ‘objectively and reasonably justified by a legitimate aim…[and] the means of achieving that aim are appropriate and necessary’, then no discrimination will be taken to have occurred. The Spanish provision allowing collective agreements to provide for compulsory retirement was however held to be objectively justified by a legitimate aim- that of promoting recruitment and reducing unemployment.

The ECJ’s willingness to uphold the lawfulness of mandatory retirement under Spanish law may bring some comfort to the UK Government as it prepares to defend the UK’s retirement provisions against the Heyday challenge. Indeed, the ECJ placed emphasis on the “margin of discretion” afforded to member states to justify inequalities based on legitimate policy aims.

However, commentators argue that the significant differences between the UK and Spanish legislative frameworks make the outcome of the Heyday challenge unpredictable. Under the Spanish provisions, compulsory retirement ages must be set out in collective agreements, which allows for a bargained framework with representation by unions and management to apply retirement ages flexibly according to particular market conditions. This allows a considerably more tailored approach than the “one-size-fits-all” approach of UK law, which simply allows an employer (subject to following a procedure) to decide, on an individual basis, whether or not to retire a particular employee. Furthermore, while the Spanish law imposes a safeguard condition that a worker’s employment could only be terminated at the compulsory retirement age if the worker qualified for a pension, the absence of such protection under UK law might push the court towards a different conclusion from that reached in Palacios.

If you have any comments or questions about this article or any other employment related matter, please contactnicola.marriott@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .