Think twice before you pressure an employee to retire because of their age. You could be breaching the discrimination rules.

Consider this scenario: An employee's level of work performance has deteriorated to the point that his employer is seriously considering dismissal. The employee is in his late sixties, has been employed for five years and would be eligible to receive the age pension if no longer employed. The employee is adamant he can continue in his employment. 

Can the company ask the employee to retire because he has reached the eligible age to receive a government pension? Or, if we think he can no longer perform the work at the required pace, can we demand proof of fitness for work if an employee? Can we terminate employment if performance has declined?

 

The legal position 

The employee has several statutory protections in this circumstance if the grounds for dismissal are based solely or primarily on age. This includes the Age Discrimination Act 2004 (Cth), state and territory anti-discrimination laws, and general protection against adverse action by the employer under the Fair Work Act 2009.

These statutes also protect an employee whose dismissal is based on physical disability or, in the case of the Fair Work Act, protection where the employee is temporarily absent from work (three months) due to illness or injury. Even if the grounds for dismissal were not based on the employee’s age, he could argue the dismissal was due to physical disability and health issues. 

 

Inherent requirements of the position

In this circumstance, dismissal could only be justified if the employee was deemed incapable of performing the inherent requirements of the job.

A practical method of determining an “inherent requirement” is to ask whether the position would essentially be the same if that requirement were removed. A position relates to rank and status. What is required of a person’s position will usually require examining the tasks performed from that position. 

For example, an employee who is not attending work for long periods due to a physical or mental disability cannot fulfil the inherent requirements of the position – that is, the inherent requirement being attendance at work.

See K v Department of Disability, Housing and Community Services [2011] FCA 1424.

 

Performance management is still permitted

Age protection does not prevent employers from addressing genuine performance concerns. An employer may stil manage underperformance, and take disciplinary action (including termination) at any age, provided that decisions are based on objective performance criteria, applied consistently, and are not influenced by age or stereotypes associated with ageing. Performance concerns must be managed through fair and lawful processes, such as performance improvement plans, feedback and review.

 

What employers should do

When dealing with older employees or retirement‑related issues, employers should:

  • avoid raising age or pension eligibility as a basis for decision‑making

  • manage performance using objective, documented processes

  • separate age from performance and health considerations

  • request medical or fitness‑for‑work information only where reasonably necessary

  • assess inherent requirements carefully and fairly

  • consider reasonable adjustments where applicable

  • seek HR or legal advice before termination decisions involving age, health or capacity.

 

Key takeaways

Employers cannot force an employee to retire because of age. However, employers can lawfully manage performance, request fitness‑for‑work information where appropriate, and terminate employment where an employee is unable to perform the inherent requirements of the role. This is provided that decisions are evidence‑based, procedurally fair and free from age‑based assumptions.

Handled correctly, employers can balance performance and operational needs while complying with discrimination and workplace laws.