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Termination of redundancy pay at age 65 is age discrimination

Publication date: 18 December 2017
Employers make a forbidden distinction on the basis of age if they terminate redundancy pay due to reaching the age of 65.

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Age discrimination

Article 1 of the Dutch Constitution provides protection against all forms of discrimination. Prohibition of discrimination based on age has been laid down in a separate Act that combats and prevents age discrimination at work.

Redundancy pay scheme

In this case the employment of a group of employees was terminated because of restructuring. Due to this termination, they were awarded redundancy pay based on the collective agreement at the time. Redundancy pay is meant to bridge the financial gap until employees can make use of state pension benefits (AOW). The Implementing Regulations contained, among other things, the term and amount of the redundancy pay. In addition, they contained that the entitlement shall lapse in any case when the former employees reach the age of 65.

State pension age (AOW age)

When the employees were dismissed the state pension age was 65. Thereafter, the state pension age was gradually increased and will rise to 67 years and 3 months in 2022 and is likely to rise even further. Pursuant to this regulation the redundancy pay shall be terminated when the employee reaches the age of 65. This means, a number of former employees will not be able to make use of the maximum redundancy pay and will face a financial gap as they won’t receive redundancy pay from the day they turn 65 until they receive state pension.

The court held that there was no justification for the distinction made on the basis of age. It was not established why the age limit of 65 years is necessary. The age of 65 in the scheme was based on the former retirement age. Now that the retirement age will be gradually increased, the termination of the redundancy pay at age 65 can no longer be justified.

Conclusion

As there is age discrimination, the former employer will have to continue to pay redundancy pay until the former employees will have reached retirement age. It is advisable to set money aside for this purpose.

A pension clause in an employment contract may also contain that the employment contract will end when the employee reaches the age of 65. As an employer, make sure this will be adjusted in new and existing contracts. This clause is void, unless you have a good reason for including a specific age. It is possible, however, to determine that an employment contract will end when an employee reaches retirement age.

More information

Would you like to include or modify a pension clause, or do you have any other questions regarding personnel? Our employment law specialists will gladly help you! Please contact us:

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