Beware impact on personal injury and employment claims with proposed scrapping of retirement age
Article Type: Corporate law outlook From: Strategic Direction, Volume 26, Issue 11
Marie ColleranDefendant Personal Injury Legal Executive at Yorkshire law firm Gordons.
A recent judgment handed down by the Court of Appeal in Seldon v. Clarkson Wright and James stated that a solicitors’ partnership clause forcing retirement at a certain age was lawful under the Employment Equality (Age) Act Regulations 2006. However, this was only if it was consistent with the social and employment objectives of those Regulations and a proportionate means to achieving those legitimate aims.
Ironically, within days the Government published proposals to phase out the Default Retirement Age of 65 years. The present provisions will remain until April 6, 2011 but by October 2011 the default retirement age will be scrapped.
The concept of a Default Retirement Age (DRA) was implemented by the Employment Equality (Age) Regulations 2006, giving statutory effect to the long established retirement age. The Regulations allow employers to compulsorily retire employees once they reach the age of 65.
They can do this without having to justify their actions or pay any form of compensation provided that they follow the set procedure and issue retirement notices to employees six months before retirement. Requests to work beyond retirement age must also be considered, but can be declined, and there is no legal obligation to provide any reasoning.
The new proposals include:
Phasing out the DRA from April 2011, with a total abolition from October 2011.
Removal of all statutory procedures, including retirement notices.
Permitting retirement dismissals after October 2011, but only where “objectively justified”.
Transitional arrangements will apply to retirements that have been notified before April 6, 2011 to take effect before October 1, 2011.
The Government strategy is clearly driven by a desire to cut spending however the reverse is true of the effect this may have on insurers and employers.
Personal injury and fatal accident claims
Historically, it has not been difficult to calculate actual loss of earnings that run from the date of injury to date of assessment. The calculation of future loss, however, has always been problematic because it involves estimation of whether the loss will continue, for how long and at what rate. Life is subject to so many uncertainties, no one can say for sure what future earnings would have been had there been no injury.
Once the Government proposals are achieved damages will increase to reflect a longer working life and consequently, the actual amount insurers and defendants have to pay out will be considerably higher. Not only that, defendants and insurers will now have to determine when the end of a working life would have been in addition to considering other life contingencies other than mortality.
The Ogden tables are published by the Government’s Actuary Department to assist courts in the calculation of future losses in personal injury cases. These tables already allow for retirement ages other than 65 and have tables for 70 and 75 suggesting that working well beyond retirement age already exists. For the majority of claims however future loss relating to employment is calculated up to the age of 65.
From October 2011 that will no longer be the case and whilst each claim will vary it is obvious that higher sums will be sought to reflect the extended working life. It will be necessary to consider and assess the level of any pay increases, promotion prospects and other benefits (e.g. pension) that may have enjoyed if the accident had not happened.
Defendants will of course be able to argue that the injured person would not have continued working. However, that could require substantial investigation and evidence as to when retirement is relevant having regard to the employer’s policy, procedures and practice.
This legislation will have an enormous impact upon personal injury and fatal accident claims. Insurers have to reserve against liabilities in order that sufficient monies are set aside to pay claims as they occur and the removal of a default retirement age is likely to have a considerable effect upon that process. It will almost certainly increase the risk and value of claims and will continue to be a significant issue for the insurance market.
Employment
Premiums will increase due to the provision of insured benefits and the threat of employment litigation (possibly on a large scale). There is no doubt that employers will have a tougher time in trying to objectively justify their own company-specific retirement age and it is also more likely that employees will be prepared to argue that a company retirement age is age discriminatory.
Cover for older employees will need to be considered; at present, it becomes progressively more expensive – and sometimes impossible – to provide insured benefits such as medical insurance and group income protection to employees over the age of 65.
Other provisions will also need to be looked at such as company pension arrangements where it may become standard to work beyond 65; “good leaver”retirement provisions and the definition of “retirement” in share incentive arrangements.
On a positive note, they will be able to avoid losing long-serving,experienced staff and thereby also escape recruitment and training costs. That said, succession planning arrangements will need to be reviewed as employees may expect to stay in their jobs for potentially much longer.
Employers also face having to adopt an entirely new approach to workforce management, with curbs on the degree of certainty and planning they presently enjoy. Policies and procedures, such as those relating to flexible working, will need to be rethought. Care will need to be taken to ensure that dismissal of employees aged 65 or over is for valid non-age-related reasons, such as poor performance, as is the case currently for employees under the age of 65.
Employers and insurers are left with an array of implications to consider,not least the relatively short period of time before the changes are proposed to come into effect.
If you wish to discuss this article, or any issues around personal injury law, then please contact Marie Colleran on 01274 202 182 or e-mail: marie.colleran@gordonsllp.com
Acknowledgements
Issued on behalf of Gordons by Brand8 PR. For further information please contact Rob Smith. Tel: 0113 394 4580; Mobile: 07840 677534; E-mail: rob.smith@brand8pr.com
