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Employers cannot force employees to retire in New Zealand. They also cannot put undue pressure on an employee to resign. This is called ‘forced retirement’ and may be grounds for a personal grievance alleging constructive dismissal. However, there are some exceptions in some select industries. In addition, there are other ways of managing an employee at retirement age. These other options may be better for both your business and the employee in question. This article explains: 

  • what forced resignation is; 
  • what the exceptions are; and
  • some other ways to manage employees at retirement age if there are concerns.

What Is a Forced Retirement

It is a common misconception in New Zealand that the age 65 represents a ‘retirement age’ where most employees retire. It is also a misconception that employees can make them retire if they do not want to do so voluntarily. This is not correct. The age of 65 is most relevant as the age that New Zealanders qualify for superannuation. Therefore, some New Zealanders choose to retire at that age. However, they do not have any legal or other obligation to retire and many employees choose to keep working. 

No matter the age of an employee, you or your business cannot force them to retire or put pressure on them to resign. This is a common example of a constructive dismissal, which opens your business up to the risk of litigation from the dismissed employee. This should be avoided, and so you must be careful when discussing retirement with an employee.

Legally, you may be found to have forced an employee to resign if one or more of the following occurs:

  • you follow a course of conduct deliberately aimed at getting the employee to resign;
  • the employee is told to choose between resigning or being dismissed; or
  • you breach your obligations as an employer or the employee’s employment agreement to such a degree that the employee feels they cannot remain in the job.

Exceptions to the Rule Against Forced Retirement

It is generally not allowed to encourage or instruct an employee to retire. However, there are some narrow exceptions under employment law.

As an example, prior to 1 April 1992, some employment agreements created were allowed to specify a retirement age. The employee and employer must have agreed in writing to confirm this retirement age on or after 1 April 1992. Other exceptions include where the retirement is set out in legislation, such as coroners and judges.

Sometimes, an exception can be made where being in a particular age group is an occupational qualification for the role itself. For example, some foreign countries prohibit pilots-in-command aged above 60 years from operating certain aircraft. In this circumstance, it may be justifiable for a New Zealand airline to establish a policy that prohibits employees over 60 from holding that position. An employer who wishes to rely on this exception should establish a policy to this effect. They should also include it in the employment agreement. 

If your business thinks that a possible retirement fits one of the above categories, it is a good idea to get specific advice from an employment lawyer beforehand. 

Other Ways of Managing Retirement

Employers clearly have to be careful about people perceiving them as putting pressure on older employees to retire. However, it is still sensible to do advance planning for employees around retirement age. It is very normal for employees to want to retire at some point and preparing for this will ensure that your business can continue undisrupted when retirements do come.

One smart option for manage retirement is a phased retirement arrangement. Phased retirement is where an employer, with the agreement of the employee, reduces the retiring employee’s workload over a period of time. This has the dual benefit of allowing the employee to ease into retirement and transfer their knowledge across the business at the same time. The employee must be willing to undertake this kind of flexible arrangement. 

Key Takeaways

Employers cannot force employees to retire in New Zealand and also cannot put undue pressure on an employee to do so. This is likely to constitute constructive dismissal in most situations, meaning that the retiring employee could sue your business. There are some rare exceptions for a particularly old employment agreement with a retirement age clause or when legislation provides for an official retirement age. In most cases, it will be better to manage an older employee’s workflow by working with them. For instance, you can set up to phase their retirement if they want to do so. If you want to know more about forced retirement or management of flexible work arrangements, contact LegalVision’s employment lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is forced retirement?

Forced retirement is when an employee is put under pressure by their employer to retire when they do not wish to, or when the employee feels that they have to retire because they do not feel like they can remain in their job. It is generally illegal under employment law to force someone to retire. 

Do employees have to retire at age 65?

No, they do not. While 65 is the age that most New Zealanders qualify for superannuation, they do not necessarily have to retire at that age and will qualify for superannuation either way. Many New Zealanders choose to work past the age of 65. 

Is discussing phased retirement allowed under employment law?

Yes, it is fine for an employer to discuss possible flexible arrangements with an employee. However, as an employer, you should be careful to not give the employee the idea that they must accept a phased retirement or another kind of flexible arrangement. You as the employer and the employee must agree upon it.

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