Employment Law Coffee Break | 'Building back better', mandatory retirement ages, and the importance of checking income protection provisions

'Building back better': Covid-19 recovery and jobs of the future

Recovering from Covid-19

Emphasising the government's commitment to "building back better" as businesses recover from Covid-19, this week the chancellor of the exchequer, Rishi Sunak, announced the next phase of the government's "Plan for Jobs", following the closure of the Coronavirus Job Retention Scheme on 30 September 2021. With further details due to be announced at the Budget on 27 October, the chancellor has committed to extending the Kickstart and Job Entry Targeted Support schemes to March 2022 and September 2022 respectively and continuing to provide a £3,000 payment for each apprentice an employer takes on until the end of January 2022.

Support for jobs of the future

The chancellor also announced this week a new £34m National Artificial Intelligence (AI) Fund that will support the creation of 2,000 "elite AI scholarships" for disadvantaged young people "to train up for the jobs of tomorrow in the new and exciting industries of the future such as AI".

With COP26 drawing near, focus is naturally turning to "green jobs" and the government's commitment to the creation of 2 million skilled jobs that contribute to the UK's net zero transition. A government Green Jobs Taskforce published recommendations in July to support it in meeting this target which will be considered ahead of the government setting out its Net Zero Strategy.

At our webinar on 13 October we will be looking at how the decarbonisation transition will impact employers, many of whom have made public net zero commitments, what employers need to do to adapt and develop their workforce so they have the right skills for the green economy and how they can take their workforce with them on the net zero transition. Please sign up here to join us.

EAT decision emphasises uncertainties of objectively justifying compulsory retirement age

Forcing an employee to retire at a set age constitutes direct age discrimination, unless it can be "objectively justified". This has been the case since 6 April 2011 when the retirement age provisions in the Equality Act 2010 were repealed. Since then many businesses have instead relied on natural staff attrition to manage opportunities within their workforce, with people tending to make different working choices in older age. However, with indications that employees are working longer (the government has announced an enhanced support package for workers aged over 50 to help them to stay in and return to work) and many employees enjoying greater levels of flexibility and home-working, employers will increasingly need to manage an older workforce while ensuring a pipeline for younger talent. An objectively justified compulsory retirement age may offer an attractive solution but a recent Employment Appeal Tribunal (EAT) decision emphasises the uncertainties employers can face when that retirement age is challenged.

In a co-joined appeal, the EAT considered two conflicting Employment Tribunal (ET) decisions relating to the application by the same employer (and in one case a separate joint employer) of a compulsory retirement age which facilitated measures to promote legitimate aims of inter-generational fairness, succession planning and equality and diversity. While one ET (P's claim) found that the retirement age was objectively justified (and P's claim of age discrimination and unfair dismissal therefore failed), a different ET (E's claim) found that it was not (and consequently E's claims of age discrimination and unfair dismissal succeeded).

Each ET had reached its decision on the evidence before it, with the EAT stating that "the fact that another ET reached a different decision will not give the EAT jurisdiction to interfere". The EAT appreciated that in case such as this, where the same workforce policy was under consideration, the outcome was "undesirable", but the role of the ET "was not to strive to find a single answer, but to consider whether a particular decision was wrong in law". That was not the case here.

Supporting objective justification through evidence

The decision highlights the potential uncertainties that exist for employers when seeking to objectively justify a retirement age noting that a "difference in result may be a consequence of differences in the evidence adduced or in the focus of the evidence". In E's claim, the ET had the benefit of statistical analysis that was not available in P's claim meaning that ET legitimately gave "greater weight" to other factors; and while both ET's were alive to the possibility those retiring would be able (if they chose) to have a continuing relationship with their former employers or apply for an extension under the retirement policy, "they received different evidence as to the extent to which that might mitigate the detriment arising from forced retirement" when considering it in general terms; in E's claim the evidence led them to the conclusion that "the discriminatory impact was severe, and not sufficiently mitigated by the extension provisions".

Is a compulsory retirement age appropriate for your organisation?

A compulsory retirement age will not be the solution for every business - this EAT decision which looks at retirement in the context of a university setting with its own peculiarities demonstrates clearly the legal difficulties that arise. Any policy must be underpinned by legitimate aims and kept under regular review, with the EAT highlighting the use of statistical evidence and case studies on usage to support an employer's position that a policy is objectively justified. Where this evidence is not available, for example where the retirement policy is in its infancy, employers should consider what reasoned projections and estimates of its impact can be made.

There has been a sharp increase in age discrimination claims in the ETs, in part in response to the Covid-19 pandemic and more broadly as a result of employees continuing to work to a later age. In an earlier edition of our Coffee Break, Danielle Kingdon, partner in our Employment team discusses the importance of promoting inclusivity and age diversity in businesses with an increasingly multi-generational workforce. Employers should be managing any age discrimination in their recruitment policies, promotions and at other stages of employment as an equal priority with other forms of discrimination.

Employer liable for income protection payments not met by insurance provider

A recent Employment Appeal Decision serves as a useful reminder that employers can be liable to pay income protection payments that are not covered by insurance where contractual documentation does not sufficiently limit the amount payable to the amount received under the scheme from the insurer.

The employee was transferred to the employer on a TUPE transfer. He had received an offer letter and summary of benefits from his former employer that had contractual force and bound the employer to pay an "escalator" payment of 5% per annum payable after the first 52 weeks. After the transfer, the new employer gave a presentation advising that income protection would not be affected and confirmed this in a subsequent letter. A pack was also provided that included details of the income protection scheme and the employee confirmed his wish to participate in the scheme with his signature.

The employee began a period of long-term sickness absence with his new employer and started to receive income protection payments that did not include the escalator payment as he was no longer part of the former scheme and was not entitled to it under the existing insurance scheme.

The employee brought a successful unlawful deduction from wages claim, which was upheld by the EAT - the new employer was bound to pay the additional escalator payment. The former employer's commitment had contractual force and while the new employer's summary of benefits included the words that "the operation of both schemes is governed by the terms of the group policies and nothing will override the terms of that document", if reliance was to be placed on this term to cut back on the employee's original entitlement, further steps were needed to bring these particular terms to the employee's attention above and beyond the inclusion of this sentence in the summary of benefits. The limitation on the benefit should have been unambiguously and expressly communicated to the employee, which had not happened. Also of note was the finding that there was no implied limitation of the new employer's obligation by reference to the extent of its insurance cover on the basis of an appeal to commercial common sense – the employer was bound by the commitment it had inherited.

Check contract terms reflect income protection cover

Transferee employers must carefully check the level of income protection provided by the transferor employer and confirm whether this will be fully covered by their existing insurance provision. Any limitation on an employer's exposure to pay income protection to employees must be unambiguously and expressly communicated, so there can be no doubt; commonly achieved through a specific clause in the employment contract making the receipt of income protection strictly subject to the employee meeting the insurer's eligibility criteria and any payments due to the employee being limited to those paid by the insurer.