AXA UK - Loophole leaves UK plc at risk of £60m backdated unfair
dismissal claims in the next 12 months
Leading insurer AXA today warns that UK employers
could be sued to the tune of £60m in backdated
discrimination claims for forcing people to retire at
the age of 65. Employers who do so are acting within the
law as it currently stands, however a ruling awaited by
the European Court of Justice (ECJ) could leave them
facing expensive compensation claims in the future.
The background
The National Council on Aging (NCA) has persuaded the
High Court to ask the ECJ if the new UK Age
Discrimination Regulations, effective from 1 October
2006, have been implemented properly
The NCA’s concern is that these Regulations allow
employers to retire employees at the age of 65 even if
they wish to continue working. So, while the new law
permits employees to appeal against forced retirement,
it allows employers to retire them compulsorily without
having to justify the decision. This means that even
under the new Age Discrimination Regulations enforced
retirement at 65 is still legal - it just takes longer.
The worry is that if the European Court makes a ruling
in favour of the NCA, British Businesses could be at
risk from unfair dismissal claims dating back to 1
October 2006 – the date the Regulations came into force.
Disgruntled employees can ‘bank’ unfair dismissal
claim’s as long as they are filed within three months of
the date of their retirement. These claims will then be
frozen pending the ECJ’s decision which could take
between 12 and 24 months.
If the ECJ dismisses the NCA’s claim then the 'banked'
claims will eventually be dismissed too. However, if the
ECJ rules that the Regulations are unfair, it could
involve compensation awards for all claimants.
The cost
The cost to UK PLC would be hefty. International
retirement research to be released by AXA next week has
found that of those in retirement now, 28% said it was
imposed by their employer. The DTI predicts 8,000 unfair
dismissal claims per year and according to the
Employment Tribunal Service Annual Report 05/06 the
average compensation awarded to a successful claimant is
£8,679. This means that if British businesses continue
to force retirement and the ECJ rule that the
Regulations are unfair, they could face compensation
claims in the region of £60m. Discrimination claims cost
even more, as there is no cap on the potential awards.
The experts comment
Steve Folkard, Head of Pensions and Savings Policy at
AXA, says: “This will be worrying news to employers. The
real cost of a successful claim will be even higher when
legal costs and damage to reputation are taken into
account.
“Employers had hoped to avoid having to justify their
reasons for retiring employees at 65. However a ruling
by the ECJ could leave them under scrutiny. Employers
should review their retirement policies and decision
making processes now to protect against retrospective
claims.”
Sue Ashtiany, Employment Partner at Nabarro Nathanson,
concludes: “Although it is difficult to predict the
outcome of this case employers must be aware that
maintaining a compulsory, fixed retirement age could
lead to a long period of uncertainty and a large number
of potential discrimination claims. In an attempt to
avoid future claims, some employers are now considering
abandoning a compulsory retirement age altogether whilst
others have already done so.
“Employers are advised to review cases of compulsory
retirement dating back to last October to identify and
be aware of any potential claimants.”
Email:
JemmaP@lansons.com
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News Categories : Age discrimination in the
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Age
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