Businesses face flood of legal claims after forced retirement scrapped

BUSINESSES will face a surge of legal claims after the default retirement age (DRA) is abolished next month, solicitors are predicting.

The change is expected to trigger claims for age and disability discrimination, and unfair dismissal, with businesses likely to see costs rise sharply as they adjust to the new rules.

As it stands, employers can force workers to retire at 65 provided they meet with them six months in advance to discuss their plans. That will no longer be the case when the DRA is phased out from 6 April.

The DRA isn't being scrapped entirely until October, but after 6 April employers will no longer be able to give six months' notice of forced retirement.

From 1 October, any compulsory retirement that was notified after 5 April will have to be justified in a way that doesn't fall foul of age discrimination legislation.

With the end of the DRA approaching, firms are growing increasingly worried that they will be vulnerable to legal action, according to Chris Leitch, an employment lawyer at Scottish law firm Tods Murray.

"Older workers will still have the protection of disability discrimination legislation under the Equality Act 2010 and I can see claims being made for unfair dismissal, disability discrimination and age discrimination from disgruntled senior employees who are forced out on performance grounds," he said.

The removal of the DRA will have far-reaching and costly implications for some firms, he added.

"The impact on contractual, pension and performance matters is creating a huge additional burden for employers as they seek to avoid claims for unfair dismissal.

"The carrot of a directorship or a senior management position is a means of rewarding ambition and talent, and many companies could plan with certainty when they could expect holders to go. They could now face an expensive fight if the person in the senior chair is not agreeable to walking away."

Under the new rules, many employers are likely to use performance grounds to dismiss older workers.

But unless the employer has the right processes in place, such dismissals could lead to tribunal challenges and potentially unlimited fines as disgruntled employees turn to the disability discrimination legislation under the Equality Act 2010.

"The new law therefore has huge implications for employment contracts, management of senior staff and succession planning. We may see bigger inducements to retire being negotiated, changes to performance appraisals or increased use of occupational health practitioners to monitor workers," said Leitch.

The end of the DRA will also affect company pensions, according to Scott Moore, a senior manager at accountant Grant Thornton.

He said: "Pensions will not be exempt from the new legislation, and so employers should review their arrangements and consider continuing to pay staff pension contributions for those who work beyond the traditional retirement age."