Employment: Compulsory retirement at 65 and other landmark ruling

The UK’s highest court passes two landmark rulings on age discrimination.  In the first case, the Supreme Court rejected an appeal by the former senior partner of a law firm that he was forced to retire at 65.  The firm relied on its partnership agreement which required partners to retire at 65, justifying this as necessary for succession planning, allowing promotion opportunities for younger solicitors.

The claimant ceased to be a partner on 31 December 2006.  He brought a claim alleging, under the Age Regulations (which have since been repealed but substantially re-enacted under the Equality Act 2010) that his forced retirement was an act of direct age discrimination.  There was no dispute that the compulsory retirement age was direct age discrimination.  The issue was whether it could be justified as a proportionate means of achieving a legitimate aim.  The employment tribunal considered so and dismissed the case.  Mr Seldon appealed the case all the way to the Supreme Court.  The Supreme Court held that the law firm was entitled to set its own retirement age and considered that its objectives of allowing promotion opportunities for younger solicitors by succession planning were legitimate.

The influential judgment will be welcomed by employers looking at whether they can set their own retirement ages at a time when many older workers delay retirement because of shrinking pensions.  However, the judgment still leaves open the big question of whether 65 (or any other age) would be a justifiable retirement age across the board.  Whilst in Mr Seldon’s case, the firm may have been justified setting a retirement age for positions at the top of the firm on the grounds of succession planning, the Court would probably have come to a different conclusion if Mr Seldon had been a junior employee in a sedentary role.  Employers will have to consider the specific factors of each case.

A second highly significant age discrimination judgement was also published on 25 April.  The claimant, a former policeman who worked as a legal adviser for the Police National Legal Database, claimed that he was indirectly discriminated against because of new rules that employees needed a law degree to get on the highest pay grade.  The claimant was aged 62 at the time and had been due to retire at 65 making it impossible for him to gain any increase in pay from the degree before he retired.  The Supreme Court held that the pay rules constituted indirect discrimination.  The question of whether they were objectively justified was remitted back to the employment tribunal.  The case highlights a need to review benefits offered taking into account their value for older workers compared with younger workers.

Cases referred to: Seldon (Appellant) v Clarkson Wright and Jakes (A Partnership) (Respondent) and Homer (Appellant) 2012 v Chief Constable of West Yorkshire Police (Respondent) 2012

Judgements at http://www.supremecourt.gov.uk/decided-cases/index.html

Sarah Winter
Senior Solicitor 

Common Sense Reforms to Accident Reporting System

In an effort to move towards a more common sense approach to health and safety law, the UK Government has announced changes to the accident reporting regime. These changes were implemented following recommendations made by Lord Young in his report “Common Sense, Common Safety”. The changes are effected by the Reporting of Injuries, Diseases and Dangerous Occurrences (Amendment) Regulations 2012 which came into force on 6 April 2012.

Under the previous system, employers were obliged to report to the Health and Safety Executive (HSE) any injuries at work which resulted in the worker being absent from normal duties for more than three consecutive days. Under the new system, employers are only obliged to report injuries to the HSE when the worker is incapacitated for seven or more consecutive days (not including the day of the accident). Incapacitation means that the worker must be absent or unable to do work that they would reasonably be expected to do as part of their normal duties.

The change will align the reporting system with the current ‘fit note’ system which requires someone who is absent from work because they suffered a reportable injury to provide a medical assessment. Ministers claim that the change will reduce the number of incidents which must be reported by around 30% which will in turn save business an estimated 10,000 hours per year.

Employment Minister Chris Grayling stated “We want less red tape for business… We are freeing them from the burdens of unnecessary bureaucracy, while making sure serious incidents are properly investigated”. According to Judith Hackitt, Chair of the HSE “The change to the RIDDOR regulations will cut paperwork, help employers manage sickness absence and ensure that the reporting system is focused on risks which have resulted in more serious injury”.

A further change is that the timescale within which employers must report such an accident to the HSE is extended from 10 to 15 days. Employers are responsible for keeping a record of all injuries resulting in more than three days of absence.

This requirement remains unchanged and it is therefore still important for employers to log such injuries in some form of accident book.

Jack Boyle
Solicitor – Employment Law

Were the US authorities trigger happy?

When is there a need to collectively consult? 

Where an employer proposes to make 20 or more employees redundant within a period of 90 days or less, it must consult on its proposal with representatives of the affected employees. 

When should such collective consultation commence? 

The legislation states that this obligation to consult must begin “in good time.”  The Advocate General recently provided some guidance as to the meaning of this legislation. 

What were the circumstances surrounding the Advocate General’s recent guidance?

Ms Nolan was employed at a military base in Southampton.  A decision to close the base was communicated by the Secretary of the US Army on 13 March 2006.  This decision was reported by the British media on 21 April 2006.  The commanding officer of the base apologised to Ms Nolan and others at a meeting on 24 April 2006 for the way in which the news about the closure had been made public.  The US authorities advised the workforce representatives on 14 June 2006 that the starting date for the consultations had been 5 June 2006. 

What was the question put to the Advocate General? 

Does the employer’s obligation to consult about collective redundancies arise:

  1. when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies; or
  2. only when that decision has actually been made and the employer is then proposing the consequential redundancies? 

What was the Advocate General’s response?

Neither.  The Advocate General has stated that an employer’s duty to conduct consultations with the workers’ representatives arises when a strategic or commercial decision which compels it to contemplate or to plan for collective redundancies is made by a body or entity which controls the employer. 

Does this recent guidance assist employers in understanding the legislation?

In Ms Nolan’s case, the decision to close the base was made by a separate entity from the direct employer which slightly limits the usefulness of this guidance for employers who are not governed in this way.  However arguably this does suggest that employers do not require to consult with the workforce when reaching the commercial decision as to whether to close the business and, instead, the requirement to consult only commences after this decision has been reached. 

Nevertheless this guidance does indirectly reinforce the requirement for an employer to meaningfully consult with its workforce during a redundancy process.

Simon Allison
Partner – Employment Law

First Tenancy Deposit Scheme Approved

Further to my previous articles regarding the introduction of the Property Factors (Scotland) Bill and the Tenancy Deposit Schemes (Scotland) Regulations 2011, I can now report that the first tenancy deposit scheme has been approved by Housing Minister, Keith Brown.

The first tenancy deposit scheme to be approved is the Letting Protection Service Scotland. Two further schemes are also being considered with the intention of starting all three schemes, which will operate across Scotland, from 2 July 2012.  In order to provide landlords with time to prepare, the legal requirements to submit deposits into a scheme will come in to effect from November 2012.

Once in place, landlords or their agents must pay deposits to an approved scheme and provide their tenants with key information about the tenancy, the deposit and the scheme which is protecting it. The schemes will be free to participate in and will provide access to a free and independent dispute resolution service.

Please refer to my previous articles for a more in-depth discussion of what this all means for landlords and tenants.

http://blackaddersbusinesslegalnews.com/2011/05/04/the-tenancy-deposit-schemes-scotland-regulations-2011/

Nicola McCafferty
Senior Solicitor
Business – Commercial Property

Reforms to the Employment Tribunals system

In an effort to promote business growth and encourage smaller employers to take on new employees, the Government has proposed changes to the rules of the Employment Tribunal system. In early October 2011 George Osborne, Chancellor of Exchequer announced the Government’s plan to increase the qualifying period in unfair dismissal claims from one year to two years.

In February 2012 a draft of the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012 was released. The effect of this legislation will impact on all employees who commence employment on or after 6 April 2012. For such employees the qualifying period of continuous employment for unfair dismissal claims will increase from one year to two years. Any employees whose period of continuous employment commenced on or prior to 5 April 2012 will be subject the old one year qualifying period.

There has been mixed reaction to this. The Government hopes that the number of unfair dismissal claims will decrease by approximately 2000 per year and that this will save businesses an estimated £6 million per year. Employees with less two years’ continuous service will be more vulnerable to dismissal without the employer following the appropriate procedure. Some fear that the change will result in a ‘hire and fire’ culture.

The change will no doubt result in an increased number of employees attempting to shoehorn unfair dismissal claims into discrimination or whistleblowing jurisdictions where there is no qualifying service requirement. For diligent employers who make use of probationary periods and dismiss poor performers relatively quickly the change might not make much difference. However, the increase in the qualifying period certainly allows more time within which an employer can assess new employees before deciding whether or not to retain them. The change might also act as an incentive for employers to select employees with less than two years’ service for redundancy ahead of those with longer service whose dismissal would be more costly because of the need to make statutory redundancy payments (but employers will still need to be careful to avoid age discrimination towards younger employees who are more likely to have shorter service).

A further change which came into force on 15 February 2012 is an increase to the maximum employment tribunal deposit order from £500 to £1000. If an employment judge considers that a claim has no reasonable prospect of success, the tribunal rules of procedure allow the judge to order the party concerned to pay a deposit. This is essentially a payment to allow that party to proceed with the case. If the claim is not successful, the deposit is not refunded.

There is a further significant change on the horizon. The Government is currently consulting on proposals to introduce a fee structure into the Employment Tribunal system. The proposals are aimed at encouraging early resolution of workplace disputes and shifting some of the costs associated with the system from the taxpayer to those who use the service.

Bringing a claim is currently free of charge. This is different from the position with ordinary court actions which involve a lodging fee (and further fees at each stage of the procedure). The consultation is seeking opinions on two separate charging options but makes it clear that the concept of fees being introduced is not up for discussion. The first option involves payment of an initial fee at the point when a claim is lodged (the amount of which will depend upon the nature of the claim and would be between £150 and £250). Option 1 would also involve a second charging point shortly in advance of the hearing (again the level of fee would be based on a sliding scale depending upon the nature of the claim from £250 to £1,250). The second option involves one main fee to be paid by the claimant at the time a claim is lodged irrespective of whether the claim progresses to a hearing. This fee would depend upon the nature and value of the claim and could range from £200 to £1,750. The second option would also involve a higher level of fee for those seeking to recover in excess of £30,000. Both options allow for the successful party to recover any fees paid from the unsuccessful party. The consultation period closes on 6 March 2012. Fees will not be introduced before 2013-14 so watch this space.

Jack Boyle
Employment Solicitor