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 and the Labour Court. Many employers still set a contractual retirement age, as is permitted under the Irish employment equality legislation where it can be objectively justified. A challenge many employers face is understanding how the concept of objective justification is to be applied.
In Seamus Mallon v The Minister for Justice, Ireland and the Attorney General [2024] IESC 20, the Supreme Court upheld the mandatory retirement age of 70 for sheriffs and, in doing so, confirmed that mandatory retirement ages can be lawful if they are objectively justified (by a legitimate aim, and the means of achieving that aim are necessary and appropriate). Crucially, the Supreme Court held that no individual assessment was required when setting a retirement age and that such mandatory limits can be set in relation to defined groups based on general probabilities of age, health and competence. While this case pertains to a retirement age in the public sector, it is still very useful for private sector employers who set a contractual retirement age.
What is a Mandatory Retirement Age?
Mandatory (or contractual) retirement ages are set according to the terms of the employment contract. In Ireland, employees in the public sector are subject to a statutory mandatory retirement age whereas in the private sector, mandatory retirement ages will be discriminatory unless the employer can show that they have a contractual basis which are (a) objectively and reasonably justified by a legitimate aim, and (b) the methods employed to achieve this aim are appropriate and necessary. To satisfy this, employers typically use the following examples of legitimate aims:
(a) Health and safety (generally more safety critical occupations);
(b) Intergenerational fairness (allowing younger workers to progress);
(c) Preservation of personal and professional dignity by avoiding capability issues with older employees;
(d) Succession planning; and,
(e) Creating a balanced age structure in the workplace.
It’s important to remember that if the only reason for requiring an employee to retire is their age, without having regard to other objective criteria to justify it, then employers are at risk of claims for age discrimination. As such, employers need to justify mandatory retirement age properly. If not, they could face having to pay compensation to aggrieved employees of up to two years' remuneration, or they might even have to reinstate the employee which is what happened in one such case before the Workplace Relations Commission earlier this year.
The Supreme Court decision
In the Mallon case, Seamus Mallon, a solicitor and revenue sheriff for Cavan and Monaghan since 1987, contested the mandatory retirement age of 70 which was specified in statute. He argued that the mandatory retirement age of 70 was discriminatory based on age and claimed there were no sufficient objective and reasonable grounds to justify it, making it contrary to the Employment Equality Acts and incompatible with the EU Employment Equality Directive. He sought to have this age raised, but the Minister for Justice refused, on the basis that most public service roles have a retirement age of 70. It should also be borne in mind that this is also beyond the current State pension age of 66. In the High Court, 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 Court 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 to the Supreme Court which focused on a number of issues, the most relevant being:
1. Whether the statutory provision setting the retirement age aligned with the EU Employment Equality Directive.
2. The criteria for assessing the validity of mandatory retirement ages.
3. The appropriateness of setting mandatory age limits based on general factors as opposed to individual characteristics on an individualised assessment.
The Supreme Court recognised several legitimate reasons for having mandatory retirement ages, including:
(a) Promoting the employment of younger workers;
(b) Promoting the access of young people to the professions;
(c) Balancing workforce age structures;
(d) Avoiding possible disputes over employees’ fitness to work beyond a certain age;
(e) Avoiding employers having to dismiss employees on the ground that they are no longer capable of working which may be humiliating for the employee;
(f) Standardising retirement ages.
It concluded that the relevant statutory provision setting the retirement age pursued legitimate aims, such as 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 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.
A departure from individual assessments
It was in the 2008 case of Donnellan v Minister for Justice, Equality and Law Reform and Others [2008] IEHC 467, that it was suggested 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 in determining whether the imposition of the mandatory retirement age was proportionate.
One such case of note from earlier this year was Thomas Doolin v Eir Business Eircom Limited, where the complainant’s request to continue working beyond the company’s mandatory retirement age was rejected by his employer. Despite both parties acknowledging the existence of a company-wide retirement age which had been communicated through the retirement policy, the complainant challenged his compulsory retirement under the company's retirement policy. The objective justification relied upon by the employer was intergenerational fairness among staff and safeguarding of career pathways. The WRC held that a retirement age should be individually assessed on a case-by-case basis and that the objective justification relied upon by the company did not apply to the complainant who, as a junior staff member, would not impede others’ career progression. The complainant was ultimately reinstated into his position which was a particularly stark reminder to employers of the difficulties in justifying a mandatory retirement age.
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.
What does this decision mean for employers?
Going forward, this means that employers can set a mandatory retirement age without needing to conduct individual assessments for each employee. As long as the retirement age is justified by legitimate aims, it will be considered lawful. This simplifies the process for employers and provides clear, predictable rules for employees about when they will retire. However, it also places an onus on employers to ensure their retirement policies are fair, justified and proportionately applied. It also does not remove the requirement to consult individual employees who are approaching their retirement age to determine their plans in accordance with the WRC’s Code of Practice on Longer Working (the “Code”).
What happens if an employee requests to work beyond the mandatory retirement age?
Where an employee makes a request to work beyond the mandatory retirement age, employers still need to refer to the Code. 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.
Where an employee makes a request 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.
Other developments
In 2024, other measures have been introduced, or plans to introduce have been announced, by the Irish Government 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, Irish 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. This change also has the effect of allowing people to improve their social insurance record and potentially increase their pension rate when they retire, along with allowing those who started working later in life to make additional contributions to qualify for a pension.
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 Irish 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.
For further information, please contact one of our team at Lewis Silkin.