Some employers mistakenly assume that an employee reaching retirement age automatically brings the employment relationship to an end or, at the very least, provides grounds for terminating the employment contract. However, this is not the case under Estonian employment law. Reaching the statutory retirement age neither terminates an employment contract nor entitles an employer to dismiss an employee solely on the basis of age. The Estonian Employment Contracts Act does not recognise retirement age as a ground for terminating an employment contract, and an employee may continue working after reaching retirement age on the same terms and conditions as before.
Equal treatment and age discrimination
Employers are required to protect employees against discrimination and to comply with the principle of equal treatment. The Equal Treatment Act prohibits discrimination on the grounds of age, including in relation to the conclusion of an employment contract, the determination of employment conditions and the termination of employment. Accordingly, an employer must not make employment-related decisions solely on the basis of an employee’s age or eligibility for an old-age pension.
What employers should not rely on as justification
In practice, this means that an employer cannot terminate an employment relationship on the grounds that the employee has reached retirement age or has become entitled to receive a pension. Statements suggesting that the company wishes to rejuvenate its workforce, create opportunities for younger employees or that it is time for the employee to enjoy retirement may also be problematic. Such statements may indicate age discrimination and could subsequently be relied upon in a dispute as evidence that the employee’s age was the real reason for terminating the employment relationship.
Employees of retirement age and lawful grounds for termination
It is important to understand that an employee who has reached retirement age does not have any special status under employment law. The same rules apply to that employee as to all other employees. If the employer has lawful grounds for terminating the employment contract, it may do so irrespective of the employee’s age. For example, an employee may be made redundant due to organisational restructuring, a reduction in workload or the elimination of the employee’s position. An employer may also terminate an employment contract extraordinarily for a compelling reason arising from the employee, provided that the statutory requirements for such termination are met. Retirement age itself, however, cannot serve as justification for the decision.
Burden of proof in age-related disputes
If an employee presents facts suggesting that they may have been treated less favourably because of their age, the employer must demonstrate that its decision was based on objective and lawful reasons unrelated to age. Employers should therefore exercise particular caution both when providing reasons for terminating an employment relationship and when discussing the matter with the employee.
Termination by mutual agreement
If the employer and the employee mutually agree that the working relationship should come to an end, they may conclude an agreement to terminate the employment contract. In practice, such arrangements often include additional compensation and/or other terms intended to support the employee. It is essential, however, that the employee’s consent is entirely voluntary and that the agreement is not used as a means of exerting indirect pressure on the employee to retire.
What employers need to keep in mind
In summary, an employee reaching retirement age does not, in itself, change anything in the employment relationship. If the employee wishes to continue working and performs their duties properly, the employer cannot rely on the employee’s age or eligibility for a pension as grounds for terminating the employment relationship. The employer must base its decisions on the employee’s actual work performance and the grounds prescribed by law, rather than on the employee’s year of birth. This helps prevent discrimination disputes and ensures that all employees are treated equally, regardless of age. Reaching retirement age may provide an appropriate opportunity to discuss the employee’s future plans, but it does not constitute grounds for terminating the employment relationship. Whether the employment relationship should continue or end must be assessed according to the same criteria that apply to any other employee.
Questions About Employees of Retirement Age?
If you would like advice on the employment contract of an employee of retirement age, the termination of employment or equal treatment requirements, please do not hesitate to contact Leinonen Estonia legal team.
