This month’s article from the Labour Court Case Law Review Panel was written by Barry Walsh, Partner, McDowell Purcell.  It concerns an age discrimination claim brought by an employee (“the Claimant”) engaged as a bar tender against his employer, Connaught Airport Development Limited t/a Ireland West Airport Knock (“the Company”) and his compulsory retirement by reason of age.

Compulsory Retirement Claims

Litigation by employees over compulsory retirement has become a reasonably significant issue for Irish employers over the last 10 years or so.

While not initially viewed by employers as an obvious source of litigation when the Employment Equality Act was introduced, over time a significant and solid body of case law has developed regarding compulsory retirement as a result of reaching contractual retirement age.

On a positive note for employers, this case law is reasonably consistent. The rules of engagement seem to be relatively clear for employers who wish to set and successfully enforce contractual retirement ages. The recently reported Labour Court decision of John Glavey v Connaught Airport Development Limited is a useful reminder of the issues that the Workplace Relations Commission (“WRC”) and Labour Court will examine and the case that an employer will have to meet to successfully defend a challenge to a compulsory retirement.

Background to this case

The Claimant had worked as a Senior Bar Tender at Knock Airport for some twenty-five years. During that time had originally been employed by an outsourced catering company and was subject to a transfer of undertaking (TUPE) from it to the Company in 2003 when the catering operations were taken in-house.

His employment was terminated by the Company when he reached his sixty-fifth birthday on the basis that this was a contractual requirement.  The Claimant was apparently surprised by this. While he knew there had been some retirements over the years he alleged that he was not necessarily aware of a set Company retirement age.  He also maintained that he was fit and well capable of carrying out his duties. The Company accepted that there was no express mandatory retirement clause in the Claimant’s contract of employment.

The Claimant took a claim for age discrimination under the Employment Equality Acts 1998 to 2011 at the WRC and was successful, resulting in an order for reinstatement and a compensation award of €6,500. The employer appealed to the Labour Court which took the opportunity to set out its views on the matter.

The two-stage test in compulsory retirement cases

The Labour Court decision reminds employers in Ireland that it is still possible to successfully retire employees under Irish law in accordance with the Employment Equality Acts but that a two-stage test will be applied, as follows:

1. Does a contractual retirement age actually exist?; and
2. If so, is that contractual retirement age objectively justified?

The majority of the case law from the Labour Court and the Court of Justice of the European Union (CJEU) relates to the second limb of the test. Much of that case law focuses on examples of objective justification such as succession planning and “intergenerational fairness” and, occasionally, health and safety. That body of case law is, in itself, extensive and interesting.

A separate body of case law also exists on the first limb of the test and the Labour Court decision in this case focused on that and, particularly, on the existence of a contractual retirement age in the first place.

Does a contractual retirement age actually exist?

The non-existence of an express mandatory retirement clause in a contract of employment is obviously far from ideal from the perspective of an employer trying to retire an employee. However, is not necessarily fatal in establishing the existence of a contractual retirement age for that employer.  The Labour Court accepted such and referred to the High Court case of McCarthy v HSE [2010] ELR 165. That involved a HSE employee forced to retire at 65.  In that case, the High Court considered whether, in the absence of an express clause, the employer could rely on an implied retirement clause and particularly whether it had been implied into the employee’s contract through custom and practice.

In McCarthy, the knowledge of 65 as the standard retirement age in the HSE was, in the High Court’s view, so well-known that the employee should have known or could easily have become aware of it.  She was as such deemed to be on notice of the organisation’s retirement age, particularly by reference to the superannuation (pension) scheme which was well established across the organisation.  That “custom and practice” test is sometimes also called the “officious bystander” test and refers to something that is so well known that it is “so obvious that it goes without saying”[1] or alternatively “something so notorious, well-known or acquiesced in” that anyone concerned should have known about it[2]

As such, as a general principle, it is accepted by the Labour Court that a retirement clause can be implied into the contract of employment but naturally will require a higher level of proof from the employer trying to rely on such a clause.

The Labour Court decision

In ultimately deciding that there was no sufficient evidence to suggest an implied contractual requirement through custom and practice, the Labour Court noted the following:

1. The Claimant had two contracts of employment during his period of employment – one with his original employer, the catering company, and another one which was negotiated on over a considerable period of time and eventually agreed following the TUPE. However, neither the initial contract nor the new contract signed between him and the Company contained a compulsory retirement clause. The latter particularly can be seen as surprising bearing in mind the clear opportunity to renegotiate and re-document all applicable terms, including retirement terms.

2. There was a defined contribution pension scheme at the Company which did indeed refer to a normal retirement age of 65. However, the Claimant was not a member of that scheme and the entitlement to join the scheme was not incorporated into the terms of his contract of employment.

3. Finally, the Labour Court also noted that in the 10 years between 2006 and the date of the hearing, approximately 10 years later, there had been 10 retirements at the employer and, in 2 cases (20%), employees had worked beyond their 65th birthday.  While those were referred to as being due to “exceptional circumstances”, nevertheless a significant minority situation existed where employees did not, as a matter of custom and practice, necessarily resign at that age.

Taking all the above into account, the Labour Court concluded that there was insufficient evidence to suggest the existence of an implied contractual retirement age through custom and practice or otherwise. The Company’s appeal failed. As the Claimant was not actually seeking reinstatement, the WRC compensation award was upheld. The Company effectively fell at the first hurdle and could not, in the first instance, identify the existence of a contractual retirement age.

Accordingly, the sometimes more complex question as to whether such retirement could be objectively justified did not arise. The Company did try and rely on the usual justification of succession planning and preserving the dignity of older employers but those points were moot.

Full Case Decision:
https://www.workplacerelations.ie/en/Cases/2017/April/EDA1710.html

What can be learned from this case?

A significant take away for employers is the importance of drafting effective contracts of employment in the first instance.  The existence of an express contractual retirement clause is a starting point for any employer intending to require employees to retire at a stated age.  While a further backdrop exists, to justify that retirement age as a condition precedent employers will need to show the existence of the requirement in the first place.

Best practice advice is careful drafting and review of contracts of employment. Furthermore, if some employees are permitted to work beyond what is stated to be a contractual retirement age, employers should record the reasons for those exceptions and promulgate same so as to reinforce the stated retirement age as the norm.