In this First Tuesday Q&A, Jason McMenamin, Solicitor in A&L Goodbody's Employment Group, considers the law in relation to mandatory retirement ages in light of a recent decision of the Labour Court, in McLoughlin & Sons Hardware Ltd / McLoughlins Trading Co. and Mrs. Pauline Butler (EDA232).

What does the legislation say about mandatory retirement?

In Ireland there is no statutory mandatory retirement age for private sector employees. The Employment Equality Acts 1998-2021 (the Employment Equality Acts) prohibit discrimination in employment on a number of grounds, including age. However, there is an exception that allows employers to impose a mandatory retirement age on employees provided they can show that the retirement age is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary. Any such retirement age must also be consistently applied, otherwise it could be discriminatory.

What happened in the decision of McLoughlin & Sons Hardware Ltd/McLoughlins Trading Co. and Mrs. Pauline Butler?

The complainant, Mrs. Butler, claimed that she had been discriminated against by her employer, a hardware wholesaler, on both the gender ground and the age ground. Mrs. Butler claimed her former employer sought to mandatorily retire her on reaching her 65th birthday having previously permitted a number of male employees to continue working past this age. Mrs. Butler claimed that the company's policy of mandatory retirement at age 65 was in breach of the Employment Equality Acts, particularly in circumstances where there was no reference to a mandatory retirement age in either her contract of employment or the company's employee handbook.

Mrs. Butler was employed as a receptionist from 24 August 1998 until 29 September 2020. For a large part of that period, Mrs. Butler worked on a part-time basis and job-shared with another employee. From 2008 onwards, she worked 20 hours per week. Mrs. Butler was placed on temporary lay-off with effect from 27 March 2020 following the onset of the Covid-19 pandemic and did not return to the workplace after that date. On 13 May 2020, having become aware that the company had offered redundancy to a number of her colleagues who had also been laid off, Mrs. Butler emailed the company's Managing Director, to advise that she wished to put her named forward for redundancy.

The Managing Director replied that the company would not be making her redundant as she was due to retire on reaching her 65th birthday on 29 September 2020 and that this was in line with the established custom and practice in the business. She was also told that the company was willing to pay her until her retirement date but that she would not be required to attend work. However, Mrs. Butler indicated that she intended to continue working after her 65th birthday, until April 2021. The company initially indicated that it was not possible to extend her employment due to the detrimental effect of Covid-19 on the business and its established practice on mandatory retirement at aged 65. However, Mrs. Butler was later given two options, (i) a six-month fixed-term contract (commencing on 1 October 2020, but she would be required to return to the office on 6 July 2020) or (ii) to take up the company's original offer i.e. to retire on her 65th birthday, but she would be not be required to return to work and would be paid up until this date. Mrs. Butler was subsequently invited by the company to a number of meetings to discuss the options presented to her but Mrs. Butler did not attend any meetings or inform the company which option she wished to avail of. Her employment was terminated on 29 September 2020. She was subsequently paid her outstanding annual leave and public holiday payments.

What happened Mrs. Butler's age discrimination claim?

Mrs. Butler claimed that the policy of mandatory retirement at age 65 was manifestly in breach of the Employment Equality Acts in circumstances where there was no reference to a mandatory retirement age in either her contract of employment or the company's employee handbook. She also submitted that the company's alleged policy was not supported by an objective justification.

Under S.34 (4) of the Employment Equality Acts an employer may impose a mandatory retirement age on employees provided they can show that the retirement age is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.

The Managing Director when asked by the Labour Court to explain the objective justification relied on by the company to support its retirement policy was unable to do so. His only explanation for the policy was that it was ‘the norm in the company’.

As the company had not advanced any objective and reasonable justification for its policy of mandatory retirement at age 65, the Labour Court found in favour of Mrs. Butler and awarded her €3,000 in compensation, having regard to the totality of the circumstances that give rise to the appeal.

What happened Mrs. Butler's gender discrimination claim?

In relation to the claim in respect of gender discrimination, the Managing Director gave evidence that the company operated a policy of mandatory retirement for all employees, regardless of gender, on reaching age 65. The Managing Director accepted that two of three male comparators named by Mrs. Butler worked beyond the mandatory retirement age. However, he gave a clear and cogent explanation as to why this came about in both cases. The Labour Court also noted that the company indicated it would accede to Mrs. Butler's request for an extension of her employment, six months beyond her 65th birthday and as such found that the claim of less favourable treatment on grounds of gender was not well-founded.

What are the key takeaways for employers?

Employers who wish to operate a mandatory retirement age for employees should be able to demonstrate that the retirement age is objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary. Employers should also ensure that any mandatory retirement age is widely available, well known to staff and is applied consistently.

The Workplace Relations Commission Code of Practice on Longer Working sets out a number of potential legitimate aims for setting a mandatory retirement age including:

• intergenerational fairness;
• motivation and dynamism through the increased prospect of promotion;
• health and safety concerns;
• the preservation of personal and professional dignity by avoiding capability issues with older employees;
• succession planning; and
• the creation of a balanced age structure in the workforce.

Employers can offer a fixed-term contract to an employee to enable them to work past the mandatory retirement age. However, the offering of the fixed-term contract must be objectively and reasonably justified by a legitimate aim and the means of achieving that aim must be appropriate and necessary. As such these requests must be carefully handled as they can weaken the enforceability of the mandatory retirement age.