Pitfalls

The employment market is feeling the effects of the ageing population. We expect that there will be a shortage of workers in the near future. That’s why the government wants us to keep on working later in life. So where exactly does the legislation say that we have to stop working when we reach 65? Why is an employer allowed to dismiss an employee because he’s turned 65? Is an employer allowed to dismiss an employee due to age at an earlier stage too? Can legislation place limits on the maximum age we’re permitted to work until? And when can age discrimination be said to be taking place? These questions arise as we anticipate future developments.

Most people eagerly look forward to the time when they can retire and try to bring it forward if they can. Despite this, it should not be forgotten that increasing numbers of people want to keep working after reaching the age of 65. The fact that people are remaining active for longer is not the only reason for this. Many older people will need to remain in paid employment because they have not made adequate pension provision. So there are plenty of reasons why termination of employment due to age can be expected to meet with some resistance in future.

No legislative provision exists stating that employment contracts must be terminated when an employee reaches 65. In other words, the parties have complete freedom to agree this between themselves. However, most social security legislation states that after the age of 65 there is no longer any entitlement to benefits, such as unemployment benefit, sickness benefit or occupational disability benefit. This is set off by the fact that the right to state pension arises at 65 and the tax laws are designed on the assumption that people stop working at the age of 65.

Demographic developments

Dismissal on grounds of age is restricted by recent legislation prohibiting age discrimination except where objective justification exists. Up to now, the courts have assumed the existence of such objective justification where employees are dismissed because they have reached the age of 65. The Dutch Supreme Court approved this reasoning in 1995 and confirmed the position again in 2002. The Supreme Court supported this with three arguments: “In the first place, one must consider the advantage of applying an objective criterion, the age of the employee, without any personal element over a system in which the employer and employee would have to debate on a case by case basis whether the employee was still able to carry out his appointed task properly as the years progressed. In the second place, the system of dismissing employees on attaining the age of 65 means the release of employment places for younger employees occurs more smoothly and regularly than if it were dependent on the readiness of older employees to give up the positions they occupy. In the third place, the objections that indisputably attach to compulsory dismissal due to reaching the age of 65 are to some extent compensated by the fact that on reaching that age employees are entitled to an income that is not dependent on performing work.” This reasoning is therefore entirely founded on the current population demographic.

In 2004 an unusual case arose on the issue of whether KLM was permitted to include a provision in the Collective Labour Agreement with its commercial pilots that they were required to retire early at the age of 56. The commercial pilots contested this dismissal. They believed that they were being discriminated against on grounds of their age. The District Court held that creating a movement of staff through the organisation constituted objective justification for compulsory retirement at the age of 56. According to the District Court, this movement means that all parties have a better idea of what to expect. The Supreme Court held that this argument was legitimate.

Termination

At present the case law appears to approve termination due to attainment of pensionable age. The precedents show that in reaching this conclusion the courts have accorded considerable significance to the views generally held by society. If these views change, for example because of more frequent protests against the habit of terminating the employment relationship at 65, it is possible that the courts’ judgments will change too.

If employees insist on wishing to keep working after they reach 65, the legislation and courts are currently prepared to assist the employer in achieving dismissal. In the first place, the Dutch Administrative Office for Employed Persons’ Insurance Schemes (Uitvoeringsinstelling werknemersverzekeringen or UWV) will grant a dismissal permit without any difficulty. It should be noted that to terminate an employment contract with a 65-year-old it is necessary to obtain a dismissal permit from UWV Work Company. Sub-district courts also tend to approve any application by an employer to rescind the employment contract without any settlement payment when an employee reaches 65. The situation changes if the employer neglects to dismiss the employee on reaching 65. Any dismissal after that is subject to the usual dismissal protection.

Prevention

An employer can avoid having to take action to dismiss an employee who has turned 65 by providing for this situation in advance. On entering into the employment contract, a provision can be included stating that the employment contract terminates by operation of law when the employee reaches the age of 65. However, consideration should be given to the fact that as a result the employment contract has the status of a fixed term employment contract. It is not possible to terminate such a contract early unless the contract provides that early termination is permitted at any time. Many Collective Labour Agreements already include this age limitation, so if one of these Collective Labour Agreements applies to your employees no action is required on this issue.

Age discrimination

The ability to dismiss employees without much difficulty because they have reached the age of 65 does not detract from the fact that employers need to be more careful in other areas when differentiating due to age. Recently, the Dutch Equal Treatment Commission held that an employer’s rules were unnecessarily discriminating because they awarded older employees more holiday days than younger employees. The Equal Treatment Commission held that diminishing physical condition could not justify this as in that case older employees could be required to carry out other suitable duties. This decision appears to be an indication that courts are going to take a different view of the changing demographics of our society, particularly with regard to differences in treatment between older and younger employees.