Court rulings allow bosses to set blanket retirement ages for staff
Síobhra Rush, partner and head of the Dublin Office with law firm Lewis Silkin Ireland.
The issue of retirement is one which comes up regularly for employers and has come under increasing scrutiny in recent years, particularly in cases before the Workplace Relations Commission (WRC) and the Labour Court.
Age discrimination claims in the WRC increase year on year as the workforce ages. Many employers still set a contractual retirement age, as is permitted under Irish employment equality legislation, where it can be objectively justified.
A challenge frequently facing employers is understanding how the concept of “objective justification” is to be applied when actually doing this in practice, (as the issue normally only comes up when the retirement of an employee is approaching).
In this Q&A interview, Síobhra Rush, partner and head of the Dublin Office with law firm Lewis Silkin Ireland, explains how the recent High Court and Supreme Court rulings in 'Mallon v Minister for Justice' case have now allowed employers to set blanket retirement ages for staff.
In this case, Mr Mallon challenged a mandatory retirement age set at 70 for sheriffs. The State argued that the retirement age was justified by legitimate aims, such as promoting efficiency in the public service and ensuring a predictable and orderly turnover of staff.
The High Court affirmed that the mandatory retirement age was justified and proportionate. The decision emphasised that the policy served several legitimate aims, including achieving intergenerational fairness and avoiding difficulties within the workforce occasioned by health and capacity issues. Mr Mallon appealed the decision to the Supreme Court and one of the questions to be considered (which was of most interest to employers) was whether it was appropriate for an employer to set a mandatory retirement age based on general factors as opposed to individual characteristics on an individualised assessment.
The Supreme Court concluded that the relevant statutory provision setting the retirement age pursued legitimate aims such as, in this case, effective succession planning and maintaining intergenerational fairness. It found the mandatory retirement age of 70 appropriate and necessary, and rejected the proposal that there was a need for individual assessments in setting that age. The Supreme Court emphasised that requiring individual assessments would, in fact, undermine the consistency and predictability provided by a general retirement age rule and substantially negate the benefit of having such a rule in the first place.
Going forward, this means that employers can set a mandatory retirement age without needing to conduct individual assessments for each individual employee. If the retirement age is objectively justified by legitimate aims and is proportionately applied, it will be considered lawful. This simplifies the process for employers and provides clear, predictable rules for employees about when they will retire.
Prior to this ruling, the WRC had largely followed the approach set out by the High Court in the 2008 case of Donnellan v Minister for Justice, Equality and Law Reform and Others [2008] IEHC 467, which was authority for the approach that individual assessments would be preferred over blanket age rules, where possible. There had been a growing number of age discrimination cases before the WRC since Donnellan where the WRC emphasised the importance of considering mandatory retirement on an individual basis to determine whether the imposition of the mandatory retirement age was proportionate.
What is significant about the Supreme Court decision in Mallon is that it has clarified that an employer is not, in fact, required to justify the application of a general retirement age to an individual employee on a “case by case or role by role assessment”. The Supreme Court pointed out that recent CJEU rulings did not support this approach, and that avoiding individual assessments can be a legitimate way to prevent disputes and maintain dignity, marking a notable shift from the Donnellan approach. The decision emphasises that a mandatory retirement age is acceptable if the policy is justified by legitimate aims and is applied proportionately.
We have already seen the Mallon approach being applied in a recent WRC decision — Tony Farrell v Mondelez Ireland Production Limited (2024, ADJ-00046789).
However, employers should be live to the fact that engaging on a 1:1 basis with employees who are approaching retirement will still be required, in accordance with the Code of Practice on Longer Working (“the Code”).
Although the ruling in Mallon somewhat simplifies the process for employers insofar as setting a “blanket” retirement age is concerned, it also places an onus on employers to ensure their retirement policies are fair, justified and proportionately applied. In Mallon, the Supreme Court noted that financial hardship would be a key factor in determining proportionality. In this case, the mandatory retirement age was 70, which the Court noted was higher, and in many cases considerably higher, than the thresholds for mandatory retirement considered at EU level and it is significantly higher than the pensionable age for the purposes of the State pension.
As mentioned above, employers should also note that this ruling does not remove the requirement to consult individual employees who are approaching their retirement age.
The Code advises employers to notify employees about their upcoming retirement six to twelve months in advance and suggests they offer support like pre-retirement courses, flexible working options, and counselling to help with the transition.
When an employee requests to continue working beyond the mandatory contractual retirement age, employers are expected to handle these requests thoughtfully and based on clear, objective criteria. Any employee seeking to work beyond their retirement date should make the request in writing at least three months before the intended retirement date to enable an appropriate consultation process to be undertaken. If the employer agrees to extend the employee's work period with a fixed-term contract, the contract's duration and legal basis should be clearly outlined. If the employee’s request is denied, the employer should meet with the employee to explain the decision, provide the reasons for refusal and offer a right to appeal.
While the Code isn’t legally binding, it is likely to have evidential value in any cases dealing with compulsory retirement and failure to adhere to it will cause difficulties when defending claims by employees for unfair and/or discriminatory compulsory retirement.
As outlined in the previous question, employers should review their employee contracts and retirement policies to ensure any contractual mandatory retirement age is fair, justified and proportionately applied. Any requests to work beyond the mandatory retirement age should be dealt with fairly and consistently and in line with the Code.
Employers should note some other measures that have been introduced or are planned in response to recommendations made previously by the Pension Commission. These include maintaining the State pension age at 66 but introducing a new flexible pension age model. Since 1 January 2024, employees have the option to continue working up until the age of 70 and defer claiming the State pension in return for a higher pension rate at the later age.
While there is no corresponding obligation on employers to allow employees to continue working up to the age of 70, there will no doubt be an increase in the number of requests from employees to do so. Many employers, particularly those who still have a mandatory contractual retirement age, may find this challenging.
The Government also announced plans to introduce legislation allowing employees to work until the State pension age, if they wish. The proposed legislation aims to bridge the gap between contractual retirement ages and the State pension by providing that, in general, an employer cannot set a compulsory retirement age below the State pension age if the employee does not consent to retire. This element of consent reflects the fact that many employees may still want to retire at the contractual retirement age. While only at the heads of bill stage, employers will need to review their retirement ages once this is eventually implemented.
