Ageing directive

Palacios de la Villa v Cortefiel Servicios SA

Although the European Equal Treatment Directive says that employers are not allowed to discriminate against workers on the basis of age, it also says that it can be justified if it is to fulfil a legitimate social policy.

In Palacios de la Villa v Cortefiel Servicios SA (IDS 840), the European Court of Justice (ECJ) held that a Spanish law requiring compulsory retirement at 65 was not discriminatory because it could be justified.

Basic facts

Mr Palacios de la Villa, who was born on 3 February 1940, was told by his employers on 18 July 2005 that he was being dismissed because he was 65.

They said he satisfied all the conditions in article 19 of the collective agreement that governed his employment. This stated that, in order to promote employment, all workers had to retire at 65 unless they had not worked long enough to qualify for their pension.

Mr Palacios de la Villa argued that this amounted to age discrimination. The Spanish court was not sure whether national law allowed compulsory retirement ages in collective agreements and asked the ECJ to decide.

Relevant law

The 2000 Equal Treatment Directive (ETD) required member states to introduce legislation outlawing discrimination at work on a number of grounds, including age.

It also said, however, that employers could discriminate on the ground of age if “within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.”

The directive made clear that it applied to dismissals and pay, although the preamble stated that it was “without prejudice” to national provisions stipulating retirement ages.

In 2005 the Spanish Government decided to introduce a statute allowing for compulsory retirement clauses in collective agreements as long as they were linked to legitimate employment policy objectives to promote the “quality of employment.” This law was also retrospective, so applied to agreements already in force except that they did not have to show they were linked to an employment policy objective.

ECJ decision

The ECJ first had to decide whether the directive applied to this case. This was in some doubt as the Advocate General in his preliminary opinion (LELR 7) said that retirement provisions were excluded from the scope of the directive.

However, the ECJ disagreed. It said that the directive did not undermine the power of member states to determine retirement ages, but it did apply to national measures governing situations where someone’s employment contract was terminated because they had reached retirement age.

But was the law introduced by the Spanish Government compatible with the directive? Clearly, it directly imposed less favourable treatment on workers who had reached 65, compared with everyone else in the workforce. However, as the compulsory retirement age was part of a policy to promote full employment (a legitimate social policy) it could be justified.

The Court noted that member states (and in some cases social partners) enjoyed broad discretion about which aims to pursue in terms of social and employment policy, as well as deciding how those could be achieved.

It did not seem unreasonable, therefore, for a member state to take the view that a compulsory retirement age was an “appropriate and necessary” measure to achieve the legitimate aim of promoting full employment, once workers qualified for a pension.

As the social partners (trade unions and employers’ organisations) had a degree of flexibility in deciding how the compulsory retirement provisions could be applied, it was satisfied that the law ensured a balance between the different interests.

On that basis, it said that the national legislation was not incompatible with the ETD.