In response to the Pensions Commission Recommendations and Implementation Plan, the Government committed to a range of pension reforms which included a commitment relating to contractual mandatory retirement age. The policy objective is to introduce measures which allow, but do not compel, an employee to stay in employment until they can access the State Pension. The General Scheme of the Employment (Restriction of Certain Mandatory Retirement Ages) Bill 2024 has now been published. While the drafting of the Bill is awaited, a summary of the anticipated features of the Bill based on the wording of the General Scheme is set out below, and employers may wish to consider if their own succession planning arrangements will be impacted by the Bill.
Entitlement but no compulsion to stay in employment under the pensionable age
The Bill, once drafted, will apply to clauses in contracts of employment, whether express or implied, which oblige an employee to retire at an age which is below the age at which the employee can first access the State Pension (referred to as 'the pensionable age'). The pensionable age is currently 66 years.
The General Scheme sets out a consent based approach in this regard. It states that where an employee does not consent to the enforcement of a mandatory retirement age (the 'MRA') in a contract of employment earlier than the pensionable age, that clause will be deemed to prescribe the mandatory retirement age as:
- the pensionable age; or
- where the employee consents to retire at an age which is later than the mandatory retirement age but before the pensionable age, as that age.
Therefore, the General Scheme gives the option to the employee:
- to retire at the MRA contained in his/her contract of employment, whatever age that may be;
- to continue working to the pensionable age; or
- where applicable, to retire at any age between the MRA and the pensionable age.
Notice in writing to employer
Where an employee does not consent to retire at the MRA, they must notify the employer in writing of that fact not less than 3 months prior to the date on which he or she would have been required to retire. The employer can specify a different notice period, not exceeding 6 months in their employee handbook, circular or the employee's contract of employment.
Once the employer has been so notified, they must not retire the employee before a date to which the employee consents or before the employee reaches the pensionable age, whichever first occurs. It is important to note that if the employee does not make this notification to the employer, the employer can assume the employee consents to retire at the MRA. The General Scheme also states that the employee can withdraw a notification at any point and retire but they must give the employer the notice required either by their contract of employment or the Minimum Terms of Notice and Terms of Employment Act 1973.
Redress
The General Scheme confirms that, where an employee is dismissed prior to the pensionable age by reason of attaining a contractual retirement age which is lower than the pensionable age, having made a valid notification to their employer, the employee may take a case to the Workplace Relations Commission under the Unfair Dismissals Acts 1977-2015 or the Employment Equality Acts 1998-2021 but cannot take a case under both Acts.
The Bill will amend the Unfair Dismissals Acts, to provide that they will not apply to employees who are dismissed and who on or before that dismissal date they had reached the mandatory retirement age set out in their employment contract and that age is greater than the State Pension Age. Accordingly, the effect of the provision is to ensure that the Unfair Dismissals Acts will apply to employees who are forced to retire at an age which is below the State Pension age without their consent.
The General Scheme also confirms that the operation of the Employment Equality Acts will not be restricted by the changes to be contained in the Bill. Where the employee has made a valid notification to the employer and, notwithstanding the notification, the employer dismisses the employee, the employee may make a complaint under section 77 of the Employment Equality Acts 1977-2021. As is currently the case, in order to rely on the exemption contained in section 34(4), the employer will have to establish that the dismissal was justified by the existence of a legitimate aim, and that the means of achieving that aim are appropriate and necessary in relation to the individual employee concerned.
Exemptions/Impact on Pension Schemes
This Bill will not impact on any retirement age which is set out in law, e.g. public servants, Gardaí, Defence Forces etc and the General Scheme confirms that the Bill will not affect any pension scheme.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
