LONDON, England / The Wall Street Journal / Retirement Planning / September 22, 2011
Companies say people must retire to make way for younger workers. But why should someone good at a job they love have to leave because of a birthday?
By Jabeen Bhatti
OSLO—Karin Johansen, a 68-year-old insurance adviser, didn't want to retire. Her employer, Norwegian insurance company Gjensidige, said she must, and the Norwegian Supreme Court agreed. Her case is one of a growing number across Europe involving older workers challenging forced retirement even as governments slowly realize they may need them after all.
"The European situation is so complex" regarding forced retirement, says Anne Lyne, an employment attorney at Hayes Solicitors in Dublin. "This issue is contentious in almost every country and is bubbling up everywhere."
Labor attorneys say national legal regimes and employment practices across Europe are increasingly clashing with a working population that is remaining fitter longer. Some older employees see no reason to retire and are keen to keep working past the age limits set by laws, collective bargaining agreements, employee contracts and custom. At the same time, European countries are grappling with labor shortages, low birthrates and expensive pension programs as retirees live longer.
Nine months before Ms. Johansen's 67th birthday on Oct. 7, 2009, she informed Gjensidige's management in writing that she wanted to stay on at the company she has worked at for three decades. A month before her birthday, she received a reply telling her she would have to retire the day before she turned 67. She recalls her shock and anger. "I like to go to work, be with my colleagues, talk to clients, feel useful," she said, sitting in her lawyer's office in Oslo just before the court hearings in mid-June. "I couldn't understand it, why I had to leave—I was depressed by the thought." Gjensidige officials say their decision to fight Ms. Johansen centered on their ability to do business and make plans for their workforce of 4,000.
Norway's Supreme Court ruled in favor of insurance company Gjensidige over the retirement of Karin Johansen. Jabeen Bhatti/The Wall Street Journal
"This isn't a case between the company and this particular employee, it's about principles," said Øystein Thoresen, a company spokesman. "We have nothing against [her], she's doing very well at work. This is about predictability and workforce planning: If everyone stayed as long as they wanted, it wouldn't be very predictable, would it?"
The Norwegian business community says it has been watching this case closely. "We need some clear rules because everything [has been] up in the air," says labor attorney Kurt Weltzien of the Confederation of Norwegian Enterprise, or NHO, an employers' association. "And we should avoid a situation where companies will have to dismiss individuals of an older age based on how they are performing at work. That would be a very sad way, in our opinion, to end one's work life."
Across Europe, countries vary in their legal approach to older employees. A few, like Finland and Luxembourg, have mandatory, across-the-board retirement ages. More often, individual sectors set their own retirement ages: In Belgium, for example, civil servants must retire at 65; in the Czech Republic, judges and states attorneys at 70. In Belgium and the Netherlands, there is no set retirement age but employees lose their strong legal protection against dismissal at 65. In Germany and Spain, retirement ages are included in employees' contracts and are often part of collective-bargaining agreements, and in the U.K., the mandatory retirement age was revoked in April this year.
Despite national variations, the status quo across Europe is founded on the perceived importance of age-diversity in the workforce. So far, this has been backed by many national courts and the European Court of Justice, which has ruled that discrimination against older workers may be permitted, if it is "objectively and reasonably justified by a legitimate aim."
"The big question in the EU is whether these laws are pursuing a legitimate aim, for example, wanting to create jobs for younger people so people at retirement age have to be moved on," says Declan O'Dempsey, a labor attorney with the Cloisters firm in London. "And this is where the logic gets creaky because essentially you're saying that it's okay to discriminate against the elderly for the sake of youth."
In Germany, a pending case filed at the Labor Court of Elmshorn near Hamburg, Golke v. Autoflug, is challenging mandatory retirement ages in employee contracts on discrimination grounds.
"These cases are important because many employment contracts have these clauses and we believe this is obvious age discrimination," says Klaus Bertelsmann, the attorney for Sigmund Golke, the plaintiff. "And if employees don't sign these contracts, they don't get the job."
But German employment attorneys say they advise firms to have set ages in the contracts.
"Without it, it is hard to get rid of people under the very strict German anti-dismissal act," says Martin Nebeling, of Bird & Bird in Düsseldorf, the attorney representing Autoflug, an aerospace and defense company, in the upcoming case. "This is a fair stipulation because at this point in time, an employee can receive a pension and there is no need to employ them any longer. There are a lot of younger employees who would like to have that job."
As some workers fight for their rights to retire later, governments are trying to find ways to keep them at work longer in spite of their own laws and business practices.
That is because Europe's aging population and low fertility rates are straining public finances, say analysts. Life expectancy in the OECD countries, which include Europe, rose 10.6 years from 1960 to 2007. As a result, the average number of years that OECD men spend in retirement rose from 13.4 years in 1958 to 18.5 in 2010. Simultaneously, fertility rates averaged 1.69 children per OECD women from 2005 to 2010, below population replacement levels (2.1 in the developed world).
"When you look in detail at governments' own forecasts, the entire financial arrangement is predicated on very large increases in the age at which people stop working," said OECD pensions expert Edward Whitehouse. "So in Italy, for example, only about one-third of people between the ages of 55 and 65 are working currently. And their projections assume that this amount will rise to 65 percent. That looks pretty ambitious to me."
Some countries, including Germany and France, have already raised the retirement age in the past two years, others are considering doing so. But what they need to do, analysts say, is close the gap between legal retirement age (when pensions start) and actual retirement age (when people actually retire) with pension reform.
For example, the legal retirement age in Germany is 65 (rising to 67 by 2029). But the average German man retired at 62.1 years of age in the years 2002-2007, according to the OECD. It is the same situation in countries with lower retirement ages such as France, whose government set off a national uproar last year when it raised the legal age to 60 from 62. The actual retirement age in that five-year period for men was 58.7.
"The problem in Europe is that people don't even work to the normal pension age now," says Mr. Whitehouse. "It's persuading people to work on until 65 rather than people being forced out at 65 that is the problem in most of the OECD countries."
Meanwhile, Ms. Johansen's case in Norway "has made people aware of how stupid [these rules] actually are," said her attorney, Pål Behrens. "There is a need for these people and they want to work."
Mr. Behrens says there is no appealing the Norwegian Supreme Court's decision –the ECJ has no jurisdiction over Norway. Now it is up to lawmakers, who have signaled that they might review the law after the summer break. In the meantime, Ms. Johansen has cleared her desk, said goodbye to colleagues and officially, if unwillingly, retired.
Copyright ©2011 Dow Jones & Company, Inc.
Credit: Reports and photographs are property of owners of intellectual rights.
Seniors World Chronicle, a not-for-profit, serves to chronicle and widen their reach.