The European Court of Justice has decided that national laws on compulsory retirement at a particular age must be justified in order to be lawful.
The ruling came in case from Spain concerning a clause in a collective agreement which set a compulsory retirement age of 65. It provided that the retirement age would only be extended if the employee had not yet reached the qualifying period for drawing a full retirement pension. The ECJ was asked to consider whether, in allowing such a provision, Spanish law was in breach of the Equal Treatment Framework Directive (which contains the EU age discrimination laws).
The preamble to the Directive says that it is “without prejudice to national provisions laying down retirement ages”. Despite this, the ECJ accepted that the Directive does cover national retirement ages. It said that the Directive allows the EU member states to determine retirement ages but it still regulates termination of employment at a particular retirement age. Compulsory retirement is clearly less favourable treatment on grounds of age, so the retirement age must be objectively justified in order to avoid unlawful discrimination.
The ECJ went on to decide that the retirement age in this case was justified. It was pursuing a legitimate aim – namely, promoting better access to employment by distributing work between different generations - the legitimacy which could not reasonably be called into question. The ECJ also considered that this was appropriate and necessary. In general, it did not seem unreasonable for a government to take the view that such a retirement age may be necessary to achieve the aim of promoting full employment. The ECJ also noted that, in this case, the age only applied if the individual had already qualified for a full pension and there was flexibility to alter the age under collective agreements.
Implications for the UK
This case is clearly relevant to Age Concern’s challenge to the retirement provisions in the UK Age Regulations, which is currently awaiting a hearing before the ECJ. The Age Concern challenge also relates to a retirement age of 65, at which it is lawful to terminate employment. The Advocate General has just issued an opinion in this case, which states that in principle the UK’s retirement age can fall within the permitted exception in the Directive, meaning that it will be lawful if justified.
In light of the ECJ’s latest ruling, it appears that the UK cannot now argue in the Age Concern case that the Directive does not apply at all. This is supported by the Advocate General’s opinion, which confirms that the issue of retirement ages is covered by the Directive.
However, the result in the Age Concern case is not guaranteed. The ECJ is not bound to follow the Advocate General’s opinion. In addition, the court is not being asked to consider whether the UK government’s policy is actually justified, but only whether the policy is capable of falling within the exemption to direct discrimination. Whichever way the ruling goes, it will not resolve the entire issue, and the UK government’s justification for the retirement age will remain open to challenge. If the Age Concern challenge continues after the ECJ’s decision, this issue will be considered by the High Court.
As and when such a future challenge arises, this Spanish case will be helpful to the UK government, but it will not be decisive. In particular, the Spanish provisions allowed for flexibility in retirement ages to be negotiated in collective agreements whereas the UK provisions set out a basic statutory rule. The UK government will still need to explain what legitimate aim is served by the retirement age and show that this is a proportionate way of meeting that aim. The Spanish decision is relevant to the UK position but falls short of conclusively resolving the issue.
Palacios de la Villa v Cortefiel Servicios SA, Case C‑411/05, IDS Brief 840, November 2007 (ECJ)