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In this issue, the Company Law Memo Newsletter looks at how the new age discrimination legislation will affect company directors. |
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The Employment Equality (Age) Regulations 2006, “the Regulations”, came into force on 1 October 2006 (SI 2006/1031). They received a great deal of media attention, which focused mainly on retirement ages and the difficulties that older persons face when looking for work. In fact, the Regulations impact on numerous other aspects of employment as well, because they aim to protect all employees from discrimination on the basis of their age, from advertising job vacancies, through training and promotion to ending the employment relationship. Significantly for directors, the Regulations apply to office holders as well as employees (reg 12). Therefore, all companies must consider the impact of the Regulations on their employees and officers, and alter their policies and practices accordingly. This article focuses on how the Regulations affect directors in particular. Appointment See CLM: ¶2246+, 2253 Under company law, private companies are at liberty to stipulate minimum and maximum ages for their directors in their articles. Although it is not common for companies to set minimum age limits, upper limits are sometimes set. It is now unlawful under the Regulations to set any limits other than retirement ages (see below), whether in the articles or as part of another policy, as it amounts to direct discrimination. By contrast, public company directors must retire at the age of 70, and can only be reappointed if the articles permit or the shareholders approve his appointment. Despite appearing to be discriminatory, the Regulations specifically exempt compliance with statute from being unlawful (reg 27), so public companies will have to maintain their existing procedures. The Companies Bill proposes to repeal this age restriction, and so this clash between company law and the Regulations will only be temporary (Sch 16 Companies Bill). Whereas it is easy to see how setting certain age limits on holding office is discriminatory, it is not so easy to draw the line when stipulating the qualifications and experience required of prospective directors. Although statute does not set out any qualification requirements to hold the office, companies will usually require a certain level of experience from their directors. The Regulations prohibit any provision, criterion or practice which is applied generally but has the effect of putting persons of a particular age or age group at a disadvantage. Therefore, companies must review how they phrase their recruitment material and policies to avoid indirectly discriminating against any applicants on the basis of their age. As well as taking good practice/cautionary steps such as removing questions from application forms about a candidate’s age, date of birth, when they attended school/university etc, companies should also consider taking steps such as avoiding setting minimum levels of experience because this may indirectly discriminate against younger applicants. Companies should ensure that any experience requirements are truly based on the demands of the office/employment as a director. In their advertising material, companies should also avoid stereotypical language, such as requiring a “mature” or an “enthusiastic” candidate. Similarly, interview techniques will need to be reassessed to avoid unnecessary questions relating to age or experience. During office See CLM: ¶2717, ¶2720 During office or employment, the Regulations protect employees from harassment and victimisation because of their age. Companies must also ensure that promotion and training opportunities are known to all employees and officers and are available to all on a fair and equal basis. Companies should review the uptake of these opportunities to see if certain age groups are favoured or missing out, and adjust their availability to redress any imbalance. Companies will also have to review their remuneration policies in light of the Regulations. In particular, any bonus schemes based on length of service over 5 years must now be objectively justified on business needs. Therefore, companies will have to show that length of service bonuses are a real incentive that keeps the directors at the company, thereby benefiting the business. The Regulations also deal with the criteria companies can set regarding joining pension schemes, but these provisions will not come into force until 1 December 2006, to coincide with other new pensions legislation. Termination See CLM: ¶2912+ Clearly, the Regulations prohibit companies from terminating their directors’ employment or office because of their age. The “normal retirement age” remains 65, although companies are free to set a higher retirement age if they wish. The Regulations introduce a new procedure whereby companies are obliged to consider a request by an employee to work beyond whatever retirement age is set and to follow the correct procedure for doing so. Companies may also have to review other termination policies that discriminate on the basis of age, such as redundancy criteria based on age or “last in first out”. What now? Companies which breach the new Regulations could face claims at employment tribunal for unfair dismissal and age discrimination, which can amount to a large sum since discrimination damages are unlimited. Therefore, it is well worth reviewing all employment policies and procedures and ensuring that officers and employees receive up-to-date training on the new Regulations.
Discrimination includes direct and indirect discrimination, instructions to discriminate, victimisation and harassment (regs 3-6). Direct discrimination arises where a person is treated less favourably on the ground of his age or apparent age. Indirect discrimination occurs where a provision, criterion or practice is applied generally to the workforce, but has the effect of putting people of a particular age or group at a disadvantage. A person is victimised if they are treated detrimentally, and harassed if they are subjected to offensive, frightening or distressing behaviour (e.g. being made the butt of jokes, comments etc). |
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AGE DISCRIMINATION |