The 25 European Union member states have until 2 December 2006 to introduce legislation to implement the anti-age discrimination aspects of the European Union Directive 2000/78/EC, which established a general framework for equal treatment in employment and occupation (the "Directive").[fn1] Twenty-two EU member states have already introduced legislation. However, three member states have yet to do so. One such "straggler" is the UK.

Whilst the Directive gives member states some limited leeway in their implementation of local legislation to reflect social and cultural differences, it will be unlawful to directly or indirectly discriminate whatsoever on the grounds of age (described further below) across all of the EU countries.

To meet the deadline of 2 December 2006, the British Government will on 1 October 2006 implement the Employment Equality (Age) Regulations 2006 ("UK Age Regulations").[fn2] The UK Age Regulations will make it unlawful for organizations in Great Britain to discriminate against people of all ages with respect to employment and vocational training. This is being hailed by many as the most significant upheaval in UK employment law in 30 years. It has the potential to force radical change on long-established UK employment practices, and it will also impact the policies and benefits of both UK and US companies and multi-nationals operating in the UK with respect to every aspect of the employment relationship, from recruitment, pay, and benefits to retirement.

As anti-age discrimination legislation in the form of the Age Discrimination in Employment Act 1967 ("ADEA") has been a feature of US labor law for almost 40 years, this article will consider the following:

How do the UK Age Regulations compare to the ADEA?

What lessons can be learned by the UK from the US experience?

How will the new UK Age Regulations impact the policies and benefits of both UK and US companies and multi-nationals operating in the UK? and

What should you and your organisation be doing now to be ready for such a dramatic change?

How Do the UK Age Regulations Compare to ADEA legislation?

We set out in the attached pdf, a table comparing the UK and US anti-age discrimination legislation.

The key difference between the UK and the US approaches explained

The US anti-age discrimination seeks to protect persons aged 40 and older. There is no corresponding limitation under the UK Age Regulations. The UK Age Regulations are significantly wider in scope in that they make it unlawful to discriminate against persons of all ages, young and old.

For example, a job advert for a "mature candidate with gravitas" is likely to constitute direct discrimination in the UK, but it would not, on the face of it, be unlawful under the US legislation. Further, if a UK manager tells a young worker that he or she is "wet behind the ears," "straight out of diapers," or "only a youngster," it is as likely to constitute harassment in the UK as is telling jokes about "old fogies" or referring to an older worker as "granddad."  

Further, the UK Age Regulations protect "age groups" below 40 years of age. The term "age group" means a group of people defined by reference to age, whether that is a particular age (e.g., 20) or a range of ages (e.g., 30 to 35).

For example, Real Estates Inc requires its applicants for a UK real estate agents job to have held a clean driving license for a minimum of 10 years. This requirement does not mention age, but it is more likely to disadvantage those in the age group 18 to 28, than those in the age group 40 to 50, as someone who is 40 is far more likely to be able to meet this requirement than someone who is 25. This is likely to constitute unlawful indirect discrimination in the UK (unless the employer can show that the 10-year requirement is a proportionate means of achieving a legitimate aim) but it is unlikely to give rise to a disparate impact claim in the US.

It will also be unlawful under the UK Age Regulations to discriminate against a person based not only upon his or her actual age but also upon an assumption made about his or her age, whether that assumption is correct or not. There is no similar protection for those of a perceived age under the US legislation.

For example, Simons & Co, a retail bank, interviews Charles and David for a management position. Their skills and qualifications are very similar, and there is nothing to choose between them. The interviewer decides to offer the position to David as he is older and more likely to command the respect of the team. In fact, Charles is older. Charles could bring a claim of direct discrimination in the UK unless the bank can objectively justify its decision. (As there is no such similar protection for perceived age under the US legislation, Charles would need to be 40 or over and older than David to bring a disparate treatment claim.)

Cost alone no justification

In the US, cost may be a consideration in the application of certain employer defenses, particularly in the context of bona fide employee benefit plans. EEOC regulations issued pursuant to ADEA allow age-based reductions in benefit plans if they are justified by "significant cost considerations."[fn3]

The UK Government’s Department of Trade and Industry (the "DTI") has stated that "economic factors such as business needs and considerations of efficiency may be legitimate aims," but "discrimination cannot be justified merely because it may be more expensive not to discriminate."[fn4] UK case law[fn5] has held that costs can be considered as a factor in any decision, but they must not be the only factor to justify indirect discrimination.

What Lessons Can Be Learned By the UK from the US Experience?

As set out above, there is a key difference between the UK Age Regulations and ADEA. But are there any lessons that the UK can learn from the US experience?

No quick solutions

In fiscal year 2005, the EEOC received 16,585 charges of age discrimination, which represented 22% of all discrimination complaints.[fn6] The EEOC resolved 14,076 of those charges and recovered $77.7 million in monetary benefits for charging parties and other aggrieved individuals (not including monetary benefits obtained through litigation). Whilst the number of EEOC charges may be down in the 2005 fiscal year, monetary benefits are up just over 12%. However, whilst the cost of monetary benefits is obviously prohibitive, the cost of reputational damage for businesses remains unquantifiable. Therefore, even after 39 years, creating and maintaining an age discrimination-free workplace remains a live issue for the US employer. UK employers are likely to face the same protracted difficulties. Whilst UK employers are accustomed to anti-discrimination legislation on other grounds such as race and sex,[fn7] age-based discrimination is generally considered to be rife in the UK workplace. As both UK and US employees live longer and are required to work longer, it is likely that age-based discrimination claims will only increase over the next decade. As in the case of EEOCv.Protis Executive Innovations, Inc.,[fn8]where the EEOC found evidence that a recruitment and placement agency coded applications by age and denied referrals to applicants aged 40 and over, awards for the successful claimant will be significant, given that once an employee is dismissed, he or she faces increased difficulties in securing new and comparable employment.[fn9]

The rise of the class action?

Big US class actions are less common in the UK. However, it is evident from US case law that the impact of such high-value, headline-grabbing claims should not be underestimated. The US class actions in the age-discrimination context tend to arise from disparate impact claims. As set out above, this cause of action is remarkably similar to the indirect discrimination claim. As employers wrestle with the UK Age Regulations and the impact on their businesses, this US trend may well encourage greater numbers to challenge provisions, criteria, or practices collectively in the UK, particularly when such employees are unlikely to be at risk as to legal costs for unsuccessful claims, as the UK Tribunals are usually reticent to make awards of costs.

The "down-sizing" or "redundancy" trigger

The EEOC’s Office of General Counsel FY 2005 Annual Report states that "employers frequently cite a need to ‘down-size’ or ‘restructure’ in support of decisions to lay off or fire older workers." It cites clear-cut examples of cases such as EEOCv.Central Foodservices Co.,[fn10] in which a 64-year-old sales representative was told that he was selected for layoff because the company expected him to retire in eight months when he reached 65, and that it wanted to keep younger sales representatives who had a future. The employer later claimed unsuccessfully that the employee was selected because of his sales performance. However, the case of Meacham v. KAPL, Inc.[fn11] ("Meacham") presents a more challenging and expensive conundrum. In Meacham, on remand the US Court of Appeals dismissed a $6 million class action lawsuit award. In the first decision of the US Court of Appeals, the employer was criticized for: using criteria such as "flexibility" and "criticality of skills"; decision-makers having no training on age-discrimination issues; and failing to audit and validate its results. However, in the court’s majority verdict on August 14 dismissing the claim, it stated that certain employment criteria may be reasonable despite their adverse impact on older workers as a group. Therefore, whilst there are clear lessons to be learned for both US and UK employers when implementing a down-sizing or redundancy process, it may be likely that the UK courts will also take the "reasonable" approach to the criteria used in their interpretation of the objective justification defence.

Lesser benefits to older employees

Throughout the course of 2005, the EEOC brought a string of claims against school districts in Minnesota with respect to their early retirement benefit plans.[fn12] The EEOC alleged that the early retirement incentive plans provided lesser benefits to older workers based upon their ages. The cases resulted in an award for loss of benefits to those affected. Whilst it is easy to see how the use of criteria such as age or long-service requirements for benefits may give rise to the risk of similar claims in the UK, the position is somewhat more complex, given that the UK Age Regulations protect all ages. Therefore, even policies designed for the benefit of older employees, such as offering employees over 55 a variety of flexible working options, will now need to be reviewed to ensure that they are lawful.

How Will the New UK Age Regulations Impact the Policies and Benefits of Both UK and US Companies and Multi-nationals Operating in the UK?

As is evident from the above, the breadth in scope of the UK Age Regulations means that an employer’s actions, policies, and benefits which are compliant with the US anti-age discrimination legislation may still fall afoul of the UK Age Regulations. This impact will be felt at every stage of the employment relationship, from recruitment to termination, including:

• Recruitment and Selection – adverts, application forms, selection criteria, and interviews
• Employment – offer letters, contracts of employment, and service agreements
• Pay, Benefits, and Policies – criteria and requirements for eligibility for pay and benefits, including share option schemes
• Promotion, Training, and Development – skills and ability-based selection criteria and job-related interviews; ensuring open access to training for all
• Termination – reason for termination and process
• Retirement – set procedure and right to request and be considered to work beyond the normal retirement age
• Retention and reductions in force – consider selection criteria for redundancies and down-sizing

What law applies when US and UK employees are posted abroad?

In order to meet the demands of globalization, we see increasing numbers of corporations posting their employees to the UK or to the US. So how will the UK Age Regulations and ADEA apply to such employees?

At present, US citizens working abroad for US companies can already claim age discrimination under ADEA unless compliance with ADEA would violate the laws of the country in which the workplace is located. As of 1 October 2006 and the introduction of the UK Age Regulations, it will be easier for US citizens to make out such claims, as compliance with ADEA would not violate the laws of either Great Britain or any of the other EU member states which have implemented the Directive. In addition, if, as part of the posting, the US citizen: ordinarily works at a UK establishment; is employed by the UK subsidiary and works in the UK; or was ordinarily resident in the UK when he or she applied for or was offered employment before returning to the US to work for the UK company, the US citizen is also likely to have the benefit of the wider protection of the UK Age Regulations. Conversely, UK citizens working for UK or US companies and posted to the US will also now have the ability to potentially be covered by both the UK Age Regulations and ADEA.[fn13]

Therefore, we are likely to see an increase in age-based claims and ever-increasing costs of transatlantic litigation. However, the extent of the protection remains to be seen.[fn14]

We can assist you and your organization in identifying and avoiding the pitfalls by giving you tailored and practical advice on the practical steps to protect you and your business.

What Should You and Your Organization Be Doing?

Five practical steps to protect you and your business:

1. Know your UK and EU organization by conducting an audit to identify the age profile of your current workforce. (Remember that UK and EU legislation relates to employees and workers.)

2. Review all personnel application forms, contracts, service agreements, benefits, policies, practices, and procedures in place in the UK and the EU to identify if they are compliant, how and if they affect employees of all ages, and then eliminate risks. (N.B. In respect of EU operations, check whether any works council has co-determinative rights.)

3. Implement a UK and EU age policy as part of your organization’s approach to equality and diversity. (N.B. In respect of EU operations, check whether any works council has co-determinative rights.)

4. Put in place procedures and checklists in the UK and EU for handling age issues such as requests to work beyond the normal retirement age and for investigating complaints of age discrimination.

5. Communicate and, if necessary, train your organization’s UK and EU managers and staff on what sorts of behaviors are and are not acceptable, as an employer will have a defense to a claim of vicarious liability if it is able to show it took such steps as were reasonably practical to prevent the employee from doing such an act.

If you or your organisation has any questions on the UK Age Regulations, please contact Ann Bevitt or Suzanne Horne.

Marian A. Waldmann is based in our New York City office and can answer questions related to the ADEA. 

 

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Footnotes

¹    The European Directive 2000/78/EC establishes a general framework for equal treatment in employment and occupation in respect of race, sex, disability, sexual orientation, religion and beliefs, and age. Directives must be implemented by each of the 25 European Union member states within a set period of time and supersede the legislation of the member states.

²   The UK Age Regulations can be found online at: http://www.opsi.gov.uk/si/si2006/20061031.htm.

³   29 C.F.R. § 1625.10(a)(1) (2006).

⁴   Equality and Diversity: Coming of Age [July 2005].

⁵   Cross and Othersv British Airways plc [2005] IRLR 423 .

⁶   EEOC, Charge Statistics FY 1992 Through FY 2005 (2006), http://www.eeoc.gov/stats/charges.html.

⁷   Race Discrimination Act 1976; Sex Discrimination Act 1975.

⁸  No. 1:04-cv-1585-DFH-TAB (S.D. Ind. Mar. 18, 2005) .  

⁹  There are already UK case law examples of the UK Tribunals awarding compensation up to and even well beyond retirement age; see Kerleyv New Forest Bakeries Ltd, COIT 1459/59, where the claimant was 59 years old and near retirement age. He was a baker and had no experience of any other trade. The Tribunal said that his prospects of attaining work before retirement were "virtually nil" and proceeded to award the compensation up to the date of retirement. Also, Barrel Plating & Phosphating Company Ltdv Danks [1976] ICR 503, [1976] IRLR 262, where the EAT held that if there is evidence on which to conclude that the claimant would have worked beyond retirement age, his or her loss of earnings for that period may be taken into account.

¹⁰  EEOCv.Central Foodservices Co., No. 02 C 6984 (N.D. Ill. Mar. 28, 2005).

¹¹  Meachamv.KAPL, Inc., Nos. 02-7378-cv(L), 02-7474-cv(XAP) (2d Cir. Aug. 14, 2006), on remand Meachamv.Knolls Atomic Power Lab. Inc. , 381 F.3d 56 (2d Cir. 2004), vacated and remanded , 125 S. Ct. 1731 (2005).

¹²   EEOCv.Independent Sch. Dist. No. 2174 of Pine River, Minn. (D. Minn. July, 2005); EEOCv.Independent Sch. Dist. No. 2134 of Wells, Minn. (D. Minn. July 11, 2005); EEOCv.Independent Sch. Dist. No. 482 of Little Falls, Minn. (D. Minn. Mar. 7, 2005); EEOCv.Independent Sch. Dist. No. 2144 of Lindstrom, Minn. (D. Minn. Jan. 14, 2005).

¹³   US-incorporated subsidiaries of foreign corporations are covered by ADEA. Sumitomo Shoji Am., Inc.v.Avaliano , 457 U.S. 176 (1982).

¹⁴  Some federal courts have held that ADEA does not reach promotion decisions made by those foreign corporations that control a U.S. subsidiary, even though the employee challenging the decision is an employee of the US subsidiary. Dentyv.Smith Kline Beecham Corp.,1997 U.S. App. LEXIS 4936 (3d Cir. 1997).