Analysis: Time running out on outdated age discrimination legislation

An ageing population and reduced pensions mean that many people will be forced to delay their long-awaited retirement

British bosses will be comforting themselves today that the latest age discrimination case to hit the headlines has broken in America, the litigious capital of the world.

They will no doubt be reassured that although 56-year-old Sharon Haugh is suing a UK company she is using US laws, which for many years have recognised the rights of an ageing workforce.

In Britain, to discriminate on the basis of age alone has never been illegal. But this is all about to change.

By 2006, cases such as the multimillion-dollar one brought by Mrs Haugh against the UK fund manager Schroders will become commonplace in British courts. In four years' time, ministers must meet their obligations to comply with European Union equality laws, which include tough rules on age discrimination.

British employment lawyers are already warning their City clients that when age discrimination becomes illegal, damages will start to mirror the kind of record payouts recently witnessed in sex and race discrimination cases.

This comes at a time when there is more incentive than ever for UK employees to keep working. The ageing population, and the widespread abolition of final-salary pension schemes, has forced many people to delay their retirement plans.

Unfortunately, this appetite to keep working is not reciprocated by any desire for their employers to retain them.

The case of Mrs Haugh, who was estimated to be earning up to $1m (£650,000) a year, is not untypical. She was dismissed as chairman of Schroders' north American subsidiary 10 days after receiving an award for outstanding contributions to the industry. Her New York-based lawyers say that the London-based chief executive sacked her because of her age and gave her one day to clear her office, although she had been with the company for 20 years. Legal papers filed in New York allege that she was told simply that the company "wanted someone younger".

James Davies, chairman of the Employment Lawyers Association working group on age discrimination, says that sooner or later this sort of claim will be taking centre-stage in a British tribunal. He says employers should start immediately drawing up workplace policies to "avoid any inference of discrimination which can be based on age". Although the Government has until 2006 to comply with the directive it can act sooner if it wishes.

Under UK law an older worker has very little protection from discrimination. Anyone dismissed will have to prove that he or she qualifies for compensation under the rules of unfair dismissal.

Mr Davies, an employment law expert with the London law firm Lewis Silkin, says that an employee who can show the sacking was for reason of age alone will be able to win an unfair dismissal claim. But such claims are capped at a little over £50,000. Under the proposed change in the law an older employee will not only be able to claim unlimited damages but will not have to wait to be sacked before starting a legal action.

Many charities and lawyers argue that there is a compelling case for Britain to be seen to want to eliminate age discrimination by acting now rather than being pushed into it by Brussels in 2006.

Debbie Smith, campaigns manager for Help the Aged, said yesterday: "The case of Sharon Haugh demonstrates that age discrimination is rife in society today. This case, and many others like it, shows the need for action to be taken to outlaw age discrimination, in all its forms, now.

"Unless the Government legislates against age discrimination now rather than the proposed 2006, the UK will continue to deny itself a huge wealth of talent, skills and experience from a large and growing section of the community."

But all indications are that the Government would much rather stall on this issue until it has solved the greater problem of how to support an increasingly ageing population against the uncertain future of the pensions market.

This month Patricia Hewitt, Secretary of State for Trade and Industry, announced that ministers would be appealing against a tribunal ruling that gives thousands of workers aged over 65 the right to claim for unfair dismissal. The decision to appeal has mystified lawyers and age campaigners alike.

The tribunal decision, made in August, gives workers aged over 65 the right to claim for unfair dismissal and redundancy payments. John Rutherford, 71, and Samuel Bentley, 74, won a claim for indirect sexual harassment when they were dismissed from their jobs in the clothing industry for being over 65. They argued that there were far more men than women working over the age of 65, and therefore the cut-off point at 65 years discriminated against men.

The Employers Forum on Age (EFA) is unhappy that the Government is to appeal against the employment tribunal, whose landmark decision was widely seen as a step towards stopping age discrimination. "Whether the Government appeal is successful or not, when someone is unfairly dismissed they should be able to make a claim whatever their age, as a matter of principle," said an EFA spokesman.

In a seemingly contradictory move, which highlights the Government's growing uncertainty in this area, ministers are planning to change Inland Revenue rules to make it much simpler for employers to retain older workers.

Under reforms outlined this month by Andrew Smith, the Work and Pensions Secretary, employees will be able to stay on at work after retirement age while drawing their company pension. Current Inland Revenue rules prevent anyone from taking a pension and salary from the same employer. This makes it virtually impossible for staff to wind down to part-time work or take a less senior position with the same company while supplementing their income with a company pension.

The Government knows that time is running out on its plans to provide for the economic security of an ageing population. No worker wants to feel that the only way of supporting them-selves into their retirement is by suing their boss for age discrimination.

The alternative might be to find an employer, such as Tesco, which embraces mature employees. One in six of the supermarket's 200,000 employees is over the age of 50.

Janakumar Vyas started his job at Tesco's branch in Canary Wharf, east London, three years ago at the age of 44, after selling his Indian sweetshop.

He said he had not encountered ageism at work and added that he did not find age a hindrance to his tasks, which include restocking and shelf stacking in the wine and spirits section. "I feel I'm able to do my job properly, as well as anyone one else at the store. I will keep on working until I feel otherwise," Mr Vyas said.