Ireland: Mind The Gap! Employees To Be Allowed Work Until State Pension Age

The government recently published the General Scheme of the Employment (Restriction of Certain Mandatory Retirement Ages) Bill 2024 (General Scheme).

The General Scheme seeks to allow, but not compel, an employee to remain in employment until reaching the "pensionable age" under social welfare legislation. "Pensionable age" is currently age 66 (State Pension Age). These reform proposals follow State Pension reforms which we discussed in a previous article. Both reforms were agreed by the Cabinet in 2022 after the Pension Commission's report, in tandem with the decision for the State Pension Age to remain at age 66.

Mandatory retirement ages (MRAs) remain a common feature in employment contracts in Ireland. Our previous article discussed the enforceability of MRAs. The General Scheme does not seek to abolish MRAs and it is important to remember that employers can still seek to enforce their MRAs if the following conditions are met: (1) the MRA is objectively and reasonably justified by a legitimate aim and (2) the means of achieving that aim are appropriate and necessary. Instead, the General Scheme seeks to enable employees to decide whether to consent to their employer's MRA. If an MRA is lower than the State Pension Age, an employee can choose not to consent to such an MRA. In this instance, the employee's employment contract shall be deemed to prescribe the MRA as (a) the State Pension Age or (b) the age at which the employee consents to retire (i.e. a date which is later than the employer's MRA but before the employee reaches State Pension Age).

Requirements

An employee who chooses not to consent to their employer's MRA must notify their employer in writing. An employee must provide at least three months' written notice (or another period of notice specified by their employer up to a maximum of 6 months) to their employer in advance of the date on which the employee would have been required to retire according to their employer's MRA.

Once such written notice has been provided an employer may not retire that employee before a date on which the employee consents to retire or before the employee reaches the State Pension Age, whichever is earlier. Otherwise, the employer risks the employee submitting a complaint to the Workplace Relations Commission (WRC) (see below). Employers will assume that an employee consents to their MRA if no such written notification is received. Employees have the right to withdraw their notification subject to complying with their contractual or statutory notice period.

Employee Redress

The General Scheme provides that an employee who has been dismissed before reaching State Pension Age, despite notifying their employer of their intention to continue working until State Pension Age, can seek redress in the WRC. An employee may seek redress under the pre-existing unfair dismissals legislation or the employment equality legislation, but not both.

The General Scheme provides that the proposed legislation will not restrict the employment equality legislation. As discussed in our previous article, under employment equality legislation, an exception to age-based discrimination exists whereby MRAs are permitted if an MRA (1) is objectively and reasonably justified by a legitimate aim and (2) the means of achieving that aim are appropriate and necessary. There will be no change to the operation of this exception if the proposed Bill comes into force. As such, employers will have a valid defence to a complaint submitted under employment equality legislation for a breach of the proposed employee entitlement to decide to work beyond the MRA if they can satisfy the WRC on items (1) and (2) above in the context of the application of the MRA to the individual complainant.

Impact on Pension/Risk Benefits

If employees invoke the restrictions on MRA (once implemented) to work to State Pension Age (Late Retirees), there will be important considerations for employers where they provide pension and risk benefits. As many of these benefits will have been designed with a retirement age of 65 in mind, key questions to consider include:

• will the pension scheme rules permit a Late Retiree to continue to make member contributions to the pension scheme and will employer contributions continue?
• what death in service benefit is payable for a Late Retiree and does insurance cover need to be extended to maintain cover for Late Retirees?
• will income protection cover cease for the Late Retiree?

It may prove difficult or costly for employers to extend cover for Late Retirees in individual cases (depending on the circumstances). Employers should plan, before implementation of the General Scheme, so that the implications of the reforms for pension and risk benefits are thought out in advance and any mitigating steps implemented.

What Happens Next?

The government's legislative programme for Spring 2024 confirms that heads of bill are being prepared for the Employment (Restriction of Certain Mandatory Retirement Ages) Bill 2024. We anticipate the publication of the Bill in the coming months but given the recent resignation of the Taoiseach Leo Varadkar, the publication of the Bill may be delayed. The Regulatory Impact Analysis (RIA) published alongside the General Scheme acknowledges the challenges for employers with how the reforms will interact with existing MRAs. Helpfully, to mitigate these challenges, the RIA indicates an intention to give a "lead in" time and guidance for employers.

Employee Redress

The General Scheme provides that an employee who has been dismissed before reaching State Pension Age, despite notifying their employer of their intention to continue working until State Pension Age, can seek redress in the WRC. An employee may seek redress under the pre-existing unfair dismissals legislation or the employment equality legislation, but not both.

The General Scheme provides that the proposed legislation will not restrict the employment equality legislation. As discussed in our previous article, under employment equality legislation, an exception to age-based discrimination exists whereby MRAs are permitted if an MRA (1) is objectively and reasonably justified by a legitimate aim and (2) the means of achieving that aim are appropriate and necessary. There will be no change to the operation of this exception if the proposed Bill comes into force. As such, employers will have a valid defence to a complaint submitted under employment equality legislation for a breach of the proposed employee entitlement to decide to work beyond the MRA if they can satisfy the WRC on items (1) and (2) above in the context of the application of the MRA to the individual complainant.

Impact on Pension/Risk Benefits

If employees invoke the restrictions on MRA (once implemented) to work to State Pension Age (Late Retirees), there will be important considerations for employers where they provide pension and risk benefits. As many of these benefits will have been designed with a retirement age of 65 in mind, key questions to consider include:

• will the pension scheme rules permit a Late Retiree to continue to make member contributions to the pension scheme and will employer contributions continue?
• what death in service benefit is payable for a Late Retiree and does insurance cover need to be extended to maintain cover for Late Retirees?
• will income protection cover cease for the Late Retiree?

It may prove difficult or costly for employers to extend cover for Late Retirees in individual cases (depending on the circumstances). Employers should plan, before implementation of the General Scheme, so that the implications of the reforms for pension and risk benefits are thought out in advance and any mitigating steps implemented.

What Happens Next?

The government's legislative programme for Spring 2024 confirms that heads of bill are being prepared for the Employment (Restriction of Certain Mandatory Retirement Ages) Bill 2024. We anticipate the publication of the Bill in the coming months but given the recent resignation of the Taoiseach Leo Varadkar, the publication of the Bill may be delayed. The Regulatory Impact Analysis (RIA) published alongside the General Scheme acknowledges the challenges for employers with how the reforms will interact with existing MRAs. Helpfully, to mitigate these challenges, the RIA indicates an intention to give a "lead in" time and guidance for employers.

Contributed by Ellen O'Duffy and Jane Barrett

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.