Early retirement incentives (ERIs) have been used both overseas and in New Zealand for some time. These schemes provide cash incentives for employees to retire, and are often conditional upon an employee's age and years of service, or a combination of these factors. For example, staff who retire between 55 and 65 years of age may receive a bigger payments than those who retire over 65 years receive (if those over 65 years receive a financial benefit at all).

The purpose is obvious - to 'move on' older staff who may be more expensive, and some say, less productive, than younger staff.

The Human Rights Act 1993 outlaws age-based discrimination. It also makes compulsory retirement at any age unlawful. So employers who wish to implement these ERIs need to consider whether their proposed policies breach the Human Rights Act.

There are two main issues which need to be considered:
1. Is it discriminatory to exclude employees from participating in the ERI scheme because they are too young or too old?

If employees are excluded because they are too young, it is unlikely to be seen as discriminatory because those employees are not being offered less favourable terms of employment. They will ultimately be offered and able to accept the ERI if they remain with the organisation. Also, they are not 'employed in the same ... circumstances' - they have not reached the age at which they might reasonably be expected to cease gainful employment by reason of age. In other words, there will be no discrimination where the younger employees do not possess the same right to the ERI as the older employees.

At the other end of the continuum, there are good arguments that employees who are over the age at which they have the opportunity to accept the ERI but chose not to do so have not suffered any detriment. It is difficult to see how employees could be disadvantaged or suffer detriment if they had the opportunity to accept the ERI but chose not to do so.

2. If employees accept the ERI but really wanted to keep working, have they been 'caused to retire' by a discriminatory practice?
Staff who accept the ERI and retire, conceivably could argue that they were 'caused' to retire by reason of age, even though they wanted to keep working.

Such a person could retire, accept the ERI and then say that as a result of age discrimination, he or she has been prevented from continuing work, because he or she has been caused to retire.

The mere presence of the policy will not amount to 'causing' staff to retire. But if other pressures are brought to bear, such as constant suggestions that the person should seriously think about taking up the ERI, there could be an argument that he or she has been forced out.
However to minimise the risk of this sort of argument, it will be important to ensure that no overt or subliminal pressure is put on staff to retire. If the policy is well-established and well set out, there is unlikely to be any coercion sufficient to 'cause' retirement.

Conclusion
ERIs are unlikely to be seen as discriminatory provided that employers are careful about how they are implemented: they should ensure that appropriate instructions are issued to managers and instructions placed in the HR manual or policies to ensure that no employee is put under any pressure to retire. Employers should just make staff aware that there is a retirement policy, which provides for an ERI. Employees should be advised that the policy exists and what it provides for. Employers should be careful not to steer people towards moving on.

This article is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this article.

Copyright Phillips Fox, December 2001

For further information please contact:Georgia Young, solicitor
Email georgia.young@phillipsfox.com

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