Covers: rationale for a retirement age in a contract of employment, retirement ages and the Employment Equality Acts 1998-2015 including the new requirement for objective justification under the new Act and tips for employers on to protect themselves from challenges to their retirement age clauses.

There is no fixed mandatory retirement age in Ireland. Employers are permitted to set their own retirement age whether by contract, policy or custom and practice. Certain professions do however have a statutory retirement age such as the Gardaí, the fire fighters and defence forces.

The usual retirement age up until recently was 65. The state pension age changed on 1 January 2014 to 66 and will increase incrementally to 68 by January 2028. The change to age 66 means that there is an increased possibility that workers may find themselves in a situation of being obliged to retire and not being entitled to a state pension for a further 12 months.

If an employer wishes to have a mandatory retirement age, then it should be set out in a contract of employment. By stipulating a retirement age at the commencement of the employment relationship, you are putting the employees on notice from an early stage that the company's retirement age is 65 (or whatever age is set for the business).

The entitlement to retire an employee at a retirement age is usually dependent on a contractual provision providing for it. So, if the employee's contract does not provide for retirement at a given age, then the situation is more problematic for the employer and the employee could remain employed by the company indefinitely. If forced to retire by the company the employee could assert unfair dismissal or age discrimination.

If a contract is silent, then generally there is no date at which an employee can be forced to retire. Previously Section 2(1)(b) of the Unfair Dismissal Acts 1977-2015 excluded employees who were over the age at which they could claim a state pension. This was amended in 2004 and failure to clearly establish the normal retirement age may lead to claims of unfair dismissal.

In an Employment Appeal Tribunal (EAT) determination (O’Carroll v Sovereign Security Limited (UD1131/2009)) an award of €25,000 was made to a security guard who alleged he had been constructively dismissed after his employer reduced his hours when it was discovered he was past the state pension age. The EAT noted in particular the lack of any mandatory retirement age in his original contract of employment. It was also clear from the evidence that no mandatory retirement age could be shown to exist within the company.

Even in the absence of an express contractual retirement age, custom and practice can provide sufficient evidence of the existence of a retirement age. An example of this was where the Equality Tribunal upheld a compulsory retirement age of 65 despite the lack of a written policy or contractual clause on the basis of a well established practice of compulsory retirement and entitlement to pension at age 65 (Paul Doyle v ESB (DEC E2012-086)).

If a retirement age is not clearly established in the contract or the employee handbook the onus will be on the employer to show a well established practice to avoid an unfair dismissal finding or entitlement to redundancy.

Where an employer has passed the first hurdle of establishing a normal retirement age for its business it must then bear in mind potential challenges to its retirement age on the ground of age discrimination. The recently commenced Employment Equality (Miscellaneous Provision) Act 2015 signals a change for employers with regard how they set retirement ages going forward.

The new regime - objective justification

The new Section 34(4) of the Act still retains the ability to set compulsory retirement ages, however, provided they are capable of being objectively justified. Similarly the offer of fixed term contracts post retirement will also have to be objectively justified. The amendment brings the Irish position in line with the Grounding EU Directive on equal treatment and case law from the Court of Justice of the European Union (CJEU) and Irish courts and tribunals.

Prior to the new Act, there was a large body of case law which held that the setting of a compulsory retirement age must be objectively justified by the existence of a legitimate aim and evidence that the means of achieving that aim are appropriate and necessary.

The case law is far from clear as to what will satisfy the objective justification in each and every case. An employer's justification can be a business centric one.

One of the more recent cases from the Equality Tribunal (Dunican and Spain v Offaly Civil Defence (DEC E2013–027)) illustrates this point. Here the Tribunal endorsed the reasoning of a prior CJEU decision that a justification test cannot be directed at the circumstances of an individual employee only. It must be based on clear policy grounds which relate to the needs and objectives of a particular organisation including the specific mental and physical requirements of different roles within the organisation. An organisation must have well thought out considered reasoning for the particular retirement ages which are applicable to their business.

Other reasons which have been accepted by courts and tribunals in the past include:

  • health and safety reasons
  • succession planning (that is, the promotion of younger personnel through the business)
  • inter-generational fairness and creating a balanced age structure in the workforce

Some employers have also successfully relied on a number of the above justifications not just one reason.

So what can employers do to protect themselves from challenges to their retirement age clauses?

  • Ensure all contracts of employment specify a retirement age and engage in dialogue with employees in relation to setting this age.
  • Have an objective justification for the specific retirement age. The objective justification must be one which pursues a legitimate objective such as labour market objectives. The means of achieving that aim must be proportionate and reasonable.
  • Reserve the right to vary the retirement ages as the needs of the business evolve and develop.
  • Where employers receive a request from an employee to work past their retirement age they need to carefully consider how they respond to this. The new legislation does not prevent offering a worker past retirement age a fixed term contract. However, the end of this contract must also be capable of objective justification. Such requests should be dealt with on a case by case basis with employers being mindful that the granting of such contracts may create a precedent for other employees who may request such extensions and may make it more difficult for employers to enforce their normal retirement age.

Employment law

Our employment law updates and factsheets keep you up to date and informed on key employment law issues

Read more