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The Actuary The magazine of the Institute & Faculty of Actuaries

Age discrimination in Europe

A stranger to European directives
could be forgiven for supposing
that age discrimination, like its
race and sex counterparts, is
clearly wrong, easy to spot, and simple to legislate
against. However, the EU Employment
Equality Directive (2000/78/EC) established a
framework that obliged EU countries to enact
their own version of anti-age discrimination. As
a result, multinational companies face a mosaic
of regulation, uncertainty, and a likelihood of
potential claims.
The European approach differs fundamentally
from that of the US. In Europe the aim is not to
protect older workers from discrimination but to
ensure equality for employees of all ages. A consequence
is that employers are likely to get at
least as many claims from younger employees as
older. The European model protects all employees
at all stages of employment against direct or
indirect discrimination, harassment and victimisation.
Employers can, however, rebut a claim
of age discrimination if they can show objective
justification. That means an employer’s action or
policy can discriminate directly or indirectly
where it represents a proportionate means of
achieving a legitimate aim. (The test only applies
to direct or indirect discrimination harassment
or victimisation cannot be justified.) But variation from country to country is
marked: in Germany, for example, length of
service is an objective justification; the UK views
qualifying periods up to five years as acceptable
longer if the employer can justify that it
satisfies a business need; in France and Spain,
however, there are no automatic exceptions.
Because each European country has developed
its own interpretation of the anti-age discrimination
directive, there is no pan-European onesize-
fits-all answer. An approach mandated in
one country may be disallowed in another.
Take something as fundamental as retirement
age: Germany, Portugal and the UK have
adopted a default retirement age of 65; Spain
and Belgium have no default age; and in France
employers can set a default retirement age if
their collective agreement allows it.
The potential threat is the development of
case law on a European level that may contradict
local regulatory or case law interpretation,
when a practice or policy in one country is
judged to be discriminatory and this renders the
activity open to challenge in other European
countries. Current case law experience varies
from country to country. Ireland’s long experience
has seen age discrimination as the cause
of 20% of all employment claims. The UK
expects it will make up 10% of all claims, but
elsewhere they are rare so far.
So multinational employers face a conundrum.
Do they adapt their practices to conform
to the law in each country, or do they establish
a consistent position to be followed throughout
the company? Because legislative interpretation
of the directive varies across Europe, that
means, to be consistent, employers may have
to conform to a stricter interpretation in some
countries even though those practices are not
viewed as discriminatory in the local country.
In trying to formulate a Europe-wide view
employers are faced with a fundamental question
about what equality means. Should they
ensure equality of contribution towards human
resources programmes or of benefits received
from them? Is it discriminatory if a company
offers a scheme that provides the same benefit
for all, even if value increases with age?
Of course the principal benefit that varies in
value with age is a pension benefit. In a number
of countries (eg the Netherlands) the
interpretation of equality is in ensuring that the
benefit earned is the same for each individual
over a period of time, leading to defined
contribution plans that must have age-related
scales. The UK is unusual in seeking to define
equality in both value and benefit terms, a
position that may appear fundamentally
But it is not just pension schemes that may be
age discriminatory. Holiday entitlement linked
to length of service is widespread, culturally
accepted and expected. Long-service awards are
common. Medical check-ups or examinations
are often given to staff over a certain age, or provided
more often. Notice periods can increase in
line with service as does sick pay in many organisations.
Stock plans may provide better benefits
to retirees compared with other leavers. All such
benefits are potentially risky to employers.
A deep-seated problem with the directive is
that it does not recognise that inherent aspects
of human resources programmes are designed
to reward length of service, accrue value over
time, and provide benefits in retirement. By
now all employers should have reviewed all
their benefits plans in all of the EU (not just
pension benefits in the UK) to pinpoint any
potentially age-discriminatory elements and
decide upon an appropriate action plan. Some
employers have taken a Europe-wide view,
using a risk-based approach, with the size of the
risk and likelihood of a negative outcome the
two main factors considered. Finally, it should
be remembered that litigation claims may
emerge after some years, and that the basis of
successful claims in one country could become
popular grounds in others.