How paternity rights and abolition of retirement age will hit construction

The Coalition Government promised that it would work hard to reduce the amount of red tape employers have to go through when managing their employees. However the removal of the default retirement age and increase in paternity rights appear to fly in the face of this stated intention.

The impact of the abolition of the retirement age

On 13 January 2011, the Government confirmed from 1 October 2011 no employee can be compulsorily retired by an employer because they have reached the age of 65 unless that retirement can be objectively justified.

This is likely to be of concern to members of the construction industry who, until now, have simply had to give the requisite notice of retirement to dismiss those who reach 65 without any legal risk.

Practical implications for employers

Employers have two options

• Abandon their normal retirement age (“NRA”) altogether but then look at other ways to end the employment relationship; or
• Seek to retain a NRA by showing that it is “objectively justified”.

Normal retirement age - can it be objectively justified?

• To act lawfully, employers who retain a NRA must show that:
• There is a real business need to have NRA i.e. a legitimate aim is being met.
• Having the particular NRA meets that aim.
• That it is proportionate to use that NRA as a means of meeting that aim, i.e. that the measures taken were reasonably necessary.

If the employer cannot do this, he faces claims for age discrimination. While such matters as the need for workplace planning and to provide promotion opportunities for younger employees have been held to be legitimate aims capable of justifying having a NRA, it will not be easy for employers to make this case. The ACAS guidance confirms that the bar is set high.

Practical issues if employers abandon NRA

Many employers will determine that a NRA cannot be objectively justified. Some points that will need to be considered are:

• As employers will not be able to retire workers, greater emphasis must be placed on performance management
• As there will be an inherent danger of Age Discrimination claims when managing the exit of older workers, the employer’s procedures will need to perfected
• As poor performance may relate to the employee becoming incapable due to ill, employers will need to consider obtaining medical report so as to ensure they make reasonable adjustments to avoid Disability Discrimination claims
• The potential compensatory awards for employers getting such dismissal wrong are likely to be higher as older employees are likely to find it hard to obtain new employment.

Additional paternity leave offers fathers new rights

The Government have brought in a further measure that gives very significant rights to fathers that never before existed, which again potentially will have a substantial impact on employers.

From April 2011, fathers will have the right to take between two and 26 weeks additional paternity leave (APL) to care for a child under one.

The rationale behind APL is that if the mother wishes to return to work, the father may take a period of leave himself. This is in addition to the two weeks ordinary paternity leave (OPL) that a father can take around the time of birth. APL is available to a father of a child due on or after 3 April 2011.

Fathers are also entitled to receive additional statutory paternity pay (ASPP). ASPP is currently paid at a rate of £124.88 a week, or 90 per cent of the father’s average earnings. It is only payable during the time the mother would have been entitled to statutory maternity pay (SMP). All APL taken after the end of the SMP period will be unpaid, unless the employer decides to pay enhanced paternity pay.

While some commentators have speculated that the take up of this new paternity right will be low, this has to be doubted. Many mothers are paid more than the fathers so economically often it will be better to get the mother back to work. The prospect of male employees leaving site for up to 26 weeks needs managing. Flexibility in the work place will be increasingly important, which may be easier said than done when faced with a time critical phase of a project.

In relation to these two changes, employers can well argue that more red tape, not less, has been created.

Edward Goodwyn is a partner at Pinsent Masons