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Subject to complying with certain conditions, under current law employers can lawfully require employees to retire at age 65 - commonly called "the default retirement age".

If it were not for a special rule in the Age Discrimination rules this would be a breach of the regulations (the Employment Equality (Age) Regulations 2006, SI 2006/1031) and would be likely to be unfair dismissal as well. When the then government introduced those regulations it promised a review in 2011, later announcing that it was bringing the review forward to 2010. The new coalition government is fulfilling that undertaking and has announced a consultation. The consultation expires on 21st October 2010.

The main part of the consultation concerns a proposal to abolish the default retirement age, phasing it out over the 6 months 6th April 2011 to 1st October 2011.

Before looking in a little more detail at what this means it is worth noting an interesting point about the timing of the announcement that the review of the regulations would be brought forward from 2011 to 2010. The government announcement was made in summer 2009 three few days before the final court hearing of the heavily publicised Heyday case which the government then won (it will be rememberd that Age Concern was trying, unsuccessfully, to persuade the Courts that the default retirement age was contrary to EU law and therefore should be scrapped). It may not be over cynical to think that that timing reflected a deliberate attempt by the then government to sway the Court to find in its favour, especially bearing in mind that a costs award against it would have been likely if it had lost.

Given that background, it may not now be over cynical to think that there may be more to the current proposal than meets the eye. This is especially so as the proposal to abolish the default retirement age appears to be against all advice from business organisations, including the CB I and the EEF. The obvious alternative is to raise it from 65 to, say 67 or 68 but this would not have the same potentially beneficial effect on the public sector accounts. Abolishing the default retirement age completely will no doubt substantial reduce the cost of final salary public service pensions. This may be little more than an accounting trick as the salary bill will be increased at the same time but the reduction in deferred pension costs will have a more immediate effect on reducing the public sector deficit.

The current proposal is to phase in abolition of the default retirement agebetween 6th April 2011 and 1st October 2011. Notices given before 6th April 2011 requiring employees to retire on reaching age 65 before 1st October 2011 will operate under current rules. Once the rules have been changed employers wishing to impose a compulsory retirement age - not necessarilly 65 - will still be able to do so if, and it is a big if, they can objectively justify it as "a proportionate means of achieving a legitimate aim". If they fail to do so they will be likely to face claims of both unlawful age discrimination and unfair dismissal. The consultation paper points out that “ it is not easy to demonstrate that a retirement age is objectively justified, so the employer should be confident that it can be objectively justified before deciding to use a retirement age”.

The BBC and others noted an apparent conflict in newspaper reports on 29th July, when the government consultation paper was published. The Daily Mail front page headline, focussing on the consultation paper, said "Now the right to work past 65". On the same day the Daily Express front page headline said the opposite: "Workers can be forced out at 65". In fact both were right. The explanation is simple. On the day the government announced abolition of the default retirement age, the Court of Appeal handed down a judgment holding that, on the facts of the particular case before it, a partnership was justified in requiring a partner to retire at age 65 under the normal rules (which as noted above provide that it is lawful to require a person to retire at any age when this can be shown to be objectively justified). We look at that decision in the next item in this newsletter.

As noted in the immdediately preceding item in this newsletter, on the same day as the government announced its plans to abolish the default retirement age, the Court of Appeal handed down a judgment holding that (on the facts of the particular case before it) a partnership was justified in requiring a partner to retire at age 65. The partnership concerned had therefore acted lawfully and was not in breach of the Age Regulations.

That decision will develop into one of very considerable significance if the government poceeds with its plan to abolish the default retirement age as noted in the immdediately preceding item in this newsletter.

Solicitor Mr Seldon was senior partner of law firm Clarkson, Wright & Jakes. A clause in the firm's partnership agreement provided that partners had to retire at age 65. Mr Seldon reached 65 but didn't want to retire. His partners required him to do so, pointing to the clause in the partnership agreement. He sued on the basis that the clause was unlawful in that it contravened the Employment Equality (Age) Regulations 2006 SI 2006/1031, pointing out that the age 65 "default retirement age" exception allows employers to require an employee to retire at age 65 but does not apply to partners in a partnership. In reply, his former partners agreed that point but argued that they were justified in requiring him to retire. This, they argued was a "proportionate means to achieve a legitimate aim" and therefore was lawful under the regulations even though they could not make use of the "default retirement age" provision.

An employment tribunal agree that the partners were objectively justified in requiring Mr Seldon to retire. Doing so was a proportionate means of achieving the following legitimate aims:

Various complications followed. For example the Tribunal also found that the partnership was justified in fixing the relevant age at which the partners should be retired at 65 because performance would drop off at around that age. Mr Seldon appealed to the Employment Appeal Tribunal and won - but only on this last point. The EAT remitted the case back for rehearing. At the same time related issues were being considered by the European Court in the context of deciding whether the part of the 2006 Age Regulations which allows an employer to require an employee to retire at age 65 (subject to fulfilling conditions) was compatible with EU law.

To cut a long story short, Mr Seldon was allowed to bring an appeal to the Court of Appeal. In essence the Court of Appeal agreed with the original employment tribunal and so Mr Seldon lost.

The judgment is likely to become increasingly important. The government's plan to abolish the "default retirement age" will mean that the same defence of justification will soon become the main defence open to employers who dismiss an employee who reaches a particular age, just as it was the main defence for the partners of Clarkson, Wright & Jakes in the claim brought against them by Mr Seldon.

Two particular points arising from the Court of Appeal's judgment are worth special note:

Separately Boris Johnson, the mayor of London, recently announced a 25p increase in the London living wage to £7.85 per hour. There is of course no statutory compulsion on London employers to pay more than the national minimum wage.

Separatey, new minimum wage levels for agricultural workers have been proposed, also from 1st October, by the Agricultural Wages Board. A main proposal is for the Grade 1 (Initial Grade) pay rate for workers over compulsory school age to rise by 2.4% from £5.81 to £5.95 per hour. However this is likely to be the last year when agricultural workers get special treatment - the coalition government is proposing to abolish the Board as part of its cost-saving program.

Any trainee solicitors reading this newsletter may like to note that the Solicitors Regulation Authority has announced that the minimum salary level for trainee solicitors is to remain at the level set last year (£18,590 for those working in Central London - £19,040 recommended - and £16,650 for those working elsewhere in England and Wales - £16,940 recommended.

It looks as though a serious row is brewing over cutting the cost of public services by reducing numbers of Civil Servants. This note tries to explain some of the legal background.

Civil servants are not entitled to statutory redundancy pay. Instead they have their own, generally more favourable, arrangements under the Civil Service Compensation Scheme ("CSCS") set up under the Superannuation Act 1972 . The last government proposed amendments to the CSCS, intending that changes would apply from 1st April 2010. The amendments were to be made with a view to reducing the benefits receivable in some cases by civil servants who are made redundant, are compelled to take early retirement or are dismissed on grounds of structural reorganisation or in similar circumstances.

The benefit levels the government sought to reduce had generally been set at a time when the pay of civil servants was less than that of people of similar status in the private sector. At that time, along with greater job security, the CSCS was seen as a compensating "perk". Most unions representing civil servants agreed to the proposed 2010 changes, perhaps accepting the argument that the generous benefits offered by the CSCS are no longer appropriate now that civil servants generally have similar pay to those of similar status in the private sector. However the biggest civil service union, the PCS, does not accept that position and did not agree the proposed changes. Mark Serwotka, its general secretrary, is reported to believe that "The civil service is nearly 7% behind comparable jobs in the public sector and even more in the private sector, because the balance used to be [that] we got less pay but some of the other conditions were slightly more generous".

The PCS union took a strong line and eventually sought judicial review of the amendments proposed by the government. PCS argued in the High Court in May 2010 that the Superannuation Act 1972 ss.1(3) and 2 required the consent of its members before the government's proposed amendments could be made. No such consent had been obtained. The High Court agreed and handed down a ruling accordingly (Public & Commercial Services Union, R (on the application of) v Minister for the Civil Service [2010] EWHC 1027 High Court (Admin)).

The High Court ruling effectively sent the new coalition government back to the drawing board, leading to headlines such as one in the Daily Mail on 10th May which read "Unions warn of Greek-style riots in Britain against public sector cuts after court victory over capping of redundancies".

The coalition government then announced, in early July, that it would introduce a Bill to revive the amendments which the High Court had ruled were improperly implemented. The intention is to set a cap of an amount equal to twelve months pay for compulsory redundancy for civil servants and fifteen months for voluntary schemes. This has not gone down well with the PCS Union. Mr Serwotka has warned that any renewed attempt to force through amendments could result in industrial action.

A report in the Sunday Telegraph of 17th July concerning redundancies in the National Health Service, says that around 30,000 administrators are expected to lose their jobs as 152 primary care trusts and 10 strategic health authorities are abolished in the reorganisation and that "NHS organisations have been ordered to divert £1.7 billion from the front line into a fund to pay for the redundancy deals". It suggests that redundancy payments to chief executives will generally be between £300,000 and £400,000, with a few up to £900,000. Even more recently Cabinet Office minister Francis Maude is reported to have said that some civil servants are so "prohibitively" expensive to make redundant that they are being left "in limbo" without a proper job (the Guardian 27th July 2010).

Against this background the reports of the recently set up official Review of Fair Pay in the Public Sector (Chairman Will Hutton ) and of the Public Services Pensions Commission (Chairman John Hutton) will be of particular interest when they are published.

Separately a report from a similarly named but unconnected and non-official Public Sector Pensions Commission suggests that the government has been using optimistic actuarial valuation methods to calculate the cost of public sector pensions. It finds that public sector employers and employees are "not charged the full current service costs of the liabilities the pension schemes are taking on each year" and goes so far as to suggest that the current arrangement is "like an unstable Ponzi scheme". The report says that public sector pensions are worth on average at least 40 per cent of salary and warns that contributions may need to rise sharply if benefits remain unchanged. It sets out various options for reform. Suggestions include that:

A new law (the Equality Act 2010 s.60) will soon make it unlawful for a prospective employer to ask a job applicant about his or her health before offering work. In fact this goes wider than just "employers" in the technical sense - it covers applications for a position as a partner, as a contract worker, as a pupil barrister or for a personal or public office and, interestingly "membership of a stable". "Offering work" specifically includes making a conditional offer of work.

Most employers routinely ask job applicants pre-employment health questions as a matter of course, many of them requiring completion of health questionnaires before a formal job offer is made, so this new law is likely to have wide implications. Acas has advised that "from October employers should no longer send out pre-health questionnaires with employment application packs".

There is a very limited protection for employers in that a contravention of the provision noted above is enforceable only by the Equality and Human Rights Commission. However in practice this will generally be make no difference as an individual job applicant can bring proceedings against a potential employer if he or she is refused a job after being asked a health related question to which they gave an unsatisfactory answer - more accurately, if "in reliance on information given in response" to a health related question the potential employer contravenes (specified provisions of) general anti-discrimination law the rejected job applicant can sue.

For practical general purposes this means that an individual who thinks he was not offered a job because of an answer he gave to a health related question will be able to sue the potential employer. It is worth emphasising that the new rule is about what happens before a job offer is made ("offering work" specifically includes making a conditional offer of work). Disability discrimination rules applying after a job offer has been made will continue more or less as at present once the new law is in force.

An employer who is sued under the new provisions will have an uphill struggle to avoid liability. This is because the burden of proof will generally be reversed. A specific provision ensures that an employment tribunal must treat the allegations in a rejected job applicant's complaint as "facts from which the court could decide, in the absence of any other explanation" that the employer was in breach of the rules - in other words, the employer will generally be treated, as it were, as "guilty" unless he can prove himself innocent.

There are 5 limited exceptions to the new rules. These exceptions make it lawful for an employer to ask health related questions before making a job offer where this is necessary to:

The general purpose of an award of compensation by an employment tribunal is to put a wronged employee, so far as possible, in the same financial position as he would have been in if he had not been wronged. It is well established law that if an award of damages or compensation would be tax free whereas the money for which it is compensation would have been subject to tax, the damages or compensation must therefore be reduced accordingly. If it were not so the wronged employee would make a windfall profit (technically, this is known as the "Gourley principle" after the name of the 1956 House of Lords case in which the rule was established).

A recent disability discrimination case shows how this principle works in both directions, up and down. Personal injury and injury to feelings awards resulting from an employer's failure to make reasonable adjustments before dismissing an employee who suffered from a disability are not taxable and the EAT has ruled that therefore they should not be grossed up. What had happened was this:

In June 2009 an Employment Tribunal awarded a Mrs Cuerden a substantial amount of compensation for disability discrimination. This included awards for loss of earnings, loss of pension, injury to feelings, personal injury (psychiatric illness) and interest.

It was necessary to gross up part of the award (to ensure that net compensation which Mrs Cuerden would retain after tax would, as nearly as possible, put her in the same financial position as she would have been in if she had not suffered from her employer's wrongful acts or omissions). The Tribunal grossed up the whole award at a flat rate of 40% (representing the top rate of income tax at the material time). This added over £50,000 to what the award would otherwise have been, bringing it to a total of just over £170,000.

The employer, Yorkshire Housing Ltd, appealed to the EAT against various parts of the tribunal's decision. In its July 2010 decision in the case the EAT reduced the "grossing up" part of the award from this £50,000+ to £17,928.54

Counsel for Mrs Cuerden conceded that the awards for personal injury and injury to feelings were not taxable if they resulted from the employer's failure to make reasonable adjustments prior to the termination of Mrs Cuerden's employment. It was found that that was the case. The award in respect of these heads of loss was therefore not a taxable "termination payment" - and that meant it was not taxable at all. The EAT therefore found that the awards for personal injury and injury to feelings should not have been grossed up and so reduced them accordingly.

On the other hand the EAT accepted Yorkshire Housing Ltd's argument that the Tribunal had erred by grossing up at a flat rate of 40% without allowing for that part of Mrs Cuerden's income which would have been taxed at a lower rate.

The overall effect of those points in the appeal on which Yorkshire Housing succeeded was, as noted above, to reduce the "grossing up" part of the award to Mrs Cuerden from £50,000+ to £17,928.54

There was a useful reminder in the Employment Appeal Tribunal recently of the differences between tribunals and courts when it comes to awarding costs.

As is well known, the general rule in the Courts is that "costs follow the event" - in other words, the winner of a case is usually entitled to an order that the other party pays not only any damages awarded but also the winner's reasonable legal costs of the winner.

Employment tribunals (and the EAT) work differently. The general rule has long been that they simply do not award costs at all. They have discretion to do so in some cases, notably where a party (or his representative conducting the proceedings) acted "vexatiously, abusively, disruptively or otherwise unreasonably, or that the bringing or conducting of proceedings was misconceived". However traditionally this discretion has been rarely exercised and each party has generally had to pay its won costs regardless of who won.

In recent years tribunals have become more inclined to order costs than previously. The importance of the recent case mentioned here is that it is a reminder that the wording noted above means that a tribunal can, and sometimes does, award costs against the winner of a case. That is something which is almost unheard of in court cases.

In the case in point a Mr Nicolson won a claim of unfair dismissal but even so costs were awarded against him on the basis that it had been wholly unreasonable of him to bring his claim even though he won. What had happened was this:

Mr Nicolson was employed as a retail manager by Nicolson Highland Wear Ltd, a quasi-partnership between himself and a Mr Chalmers. In October 2008 Mr Chalmers visited the shop and found Mr Nicolson was running a competing business from the same premises. He found that Mr Nicolson had been passing off his own business as the company's business and was diverting orders to it.

Mr Chalmers summoned Mr Nicolson to a disciplinary hearing on 28th October 2008. This ended in Mr Nicolson's dismissal. He then brought an unfair dismissal claim in the Employment Tribunal. The tribunal held that the dismissal was automatically unfair because the employer had not complied with the statutory, compulsory, standard disciplinary procedure then in force (revoked/repealed in April 2009) but made a finding of 100% contributory fault against Mr Nicolson.

The company then applied for expenses (costs in English parlance - this was a Scottish case). The Tribunal refuse essentially on the grounds that Mr Nicolson's success in winning his unfair dismissal claim meant that it must have been reasonable for him to have brought it even if he got no compensation.

The company appealed to the EAT and has won. The EAT held that the original Tribunal had erred in holding that the finding of 'technical' unfair dismissal was a complete answer to the company's contention that Mr Nicolson had behaved unreasonably by persevering with a claim in which he was unlikely to recover any compensation. The EAT judge said:

"I am .... satisfied that the decision that [Mr Nicolson] did not act unreasonably was perverse. It was plainly wrong. It was reached on the basis of irrelevant considerations. It failed to take proper account of the context ..... The only conclusion open to the Employment Judge was that [Mr Nicolson] acted unreasonably in bringing the claim at all and, having brought it, by persisting with it once he had it spelt out to him that the [company] would be relying on fraud on his part and submitting that, on any view, he should receive no award of compensation. The unreasonableness was such as would have led any reasonable Employment Judge to conclude that an award of expenses ought to be made".

The legal right for employees of more than six months standing to ensure that requests they make for flexible working arrangements (such as part-time work or working from home) are taken seriously by their employers was introduced in 2003. Originally the right was only for parents and others (such as guardians) who were responsible for looking after children aged under 6 (or under 18 if the child is disabled) but it has been gradually extended.

From 6th April 2007 the right to request flexible working was extended to employees with responsibility for caring for spouses/ partners, adult relatives and adults living at the same address as the employee. Then from 6th April 2009 the right was extended to all those with parental responsibility for children aged under 17.

There are various grounds on which an employer can lawfully refuse such a request. Otherwise the employee will have the right to apply to an employment tribunal for compensation and/or an order that the employer reconsider his refusal to allow flexitime.

The current Coalition Government's programme published in May 2010 included the statement that "We will extend the right to request flexible working to all employees, consulting with business on how best to do so". Also in May 2010 a PricewaterhouseCoopers (PwC) survey - Managing Tomorrow’s People: Where will you be in 2020? - found that flexible working is the most valued benefit for employees, ahead of material perks such as bonuses. Flexible working arrangements were rated the most important benefit by 47% of those surveyed, whilst performance related bonuses were only rated as the most important benefit by 19%.

Since then there have been various confirmations in and out of Parliament that a consultation document will be issued on the subject in the fairly near future. For example:

So it seems that leading politicians of all parties are agreed that there should be further extensions to the legal right for employees to have requests for flexible working arrangements taken seriously. It must be highly likely that this will soon happen in one form or another in the foreseeable future and the purpose of this note is to draw attention to this. It should be noted that the consultation is likely be more than a mere formality - the TUC appears to be wary about possible misuse of the law by employers if the rights of those working flexibly are not carefully protected. A TUC briefing document of 29th July on "Flexible forms of work" notes that "non standard employment tends to be associated with lower rates of pay, since many workers in this category of work are in relatively low-skilled jobs. This form of work also impacts on receipt of bonuses and with workers' social security coverage and entitlements".

You can also find on our website notes on employment law related Acts of Parliament and statutory instruments.

The Equal Pay Act 1970, the first modern piece of anti-discrimination legislation, may not sound like the stuff from which box office hits are made. However the events which led up to it have inspired a major new film, "Made in Dagenham". The UK premiere is timed for 1st October 2010 to coincide with the likely date for the repeal and replacement of the 1970 Act by the Equality Act 2010 (the USA premiere is not due until November).

The film is directed by Nigel Cole who made "Calendar Girls", with leading parts played by big name actors Miranda Richardson (as a fiery Barbara Castle), Bob Hoskins and Rosamund Pike. Rita O'Gardy, the leader of the Dagenham girls, is played by Sally Hawkins. The film is said to have cost over $7m to make. Reports from those who have seen previews suggest it was worth it and that it should be great viewing. The fact that the censors have given it an over 15 certificate suggests it may be a bit spicy.

August 2010 newsletter