Too old to work? The consequences of age discrimination in the workplace

Can an employer request an employee to retire at a particular age? Gutierrez v MUR Shipping Australia Pty Limited [2023] FCA 399 is an appeal from a decision of the Federal Circuit and Family Court (Initial Decision) which found the employer had discriminated against the employee on the grounds of age. The appeal focuses on the award of damages.

Section 18(2) of the Age Discrimination Act 2004 (Cth) (AD Act) makes it unlawful for an employer to discriminate against an employee on the ground of the employee’s age:

(a) in the terms or conditions of employment that the employer affords the employee; or

…

(d) by subjecting the employee to any other detriment.

Facts

Mr Gutierrez was born on 5 September 1949. He first commenced employment with the predecessor business of MUR Shipping Australia Pty Limited (MUR) in 2003 and then with MUR in 2004 in the role of Chief Accountant (the Role).

In February 2018, the Managing Director of MUR informed Mr Gutierrez that MUR had a retirement age of 65, and Mr Gutierrez was asked when he would retire. At this time, Mr Gutierrez was around 69 years of age. Mr Gutierrez did not intend to retire at that time but indicated he would provide MUR with three months’ notice when he decided to retire.

In early March 2018, Mr Gutierrez was informed by MUR that Ms Dorin Fernandes would take over the Role. At this time, Mr Gutierrez had not specified a retirement date but felt pressured to do so and selected July 2019 (this was later moved to 5 September 2019).

In July 2018, MUR informed Mr Gutierrez that his existing contract would end on 31 December 2018, but he would be placed on a fixed term contract from 1 January 2019 and be required to train Ms Fernandes. Subsequently, Mr Gutierrez told MUR he would end his employment on 31 December 2018 as MUR had repudiated his employment agreement.

On 1 November 2019, Mr Gutierrez filed a statement of claim in the Federal Circuit and Family Court of Australia alleging that he had been discriminated against on the basis of his age in contravention of the AD Act.

Initial Decision

The primary judge found that MUR Shipping Australia Pty Limited (MUR) committed unlawful discrimination against Mr Gutierrez contrary to section 18(2)(a) of the AD Act by replacing his ongoing contract with a fixed term contract, as the basis for changing the terms and conditions of his employment (thus shortening his employment) was based on his age. The primary judge also found that Mr Gutierrez faced a detriment in contravention of section 18(2)(d) of the AD Act because MUR disregarded his intention to retire at the specified date and instead imposed a fixed term contract, and because he was asked to train Ms Fernandes to take over his role.

The primary judge did not award Mr Gutierrez damages for economic loss seeing as he chose to terminate his employment himself but awarded him $20,000 in damages to compensate for his hurt feelings and ordered MUR to issue an apology. The primary judge also found that Mr Gutierrez’ adjustment disorder was ‘mild’ and did not preclude him from working.

Decision on appeal

Mr Gutierrez did not challenge the primary judge’s finding of age discrimination but challenged the Initial Decision on the grounds that:

• the $20,000 awarded for general damages in the Initial Decision was manifestly inadequate and was infected by errors of fact and law including that:
  • the appellant could continue working despite the impact of the discrimination;
  • the adjustment disorder was ‘mild’; and
• the primary judge failed to order MUR to pay damages for economic loss.

Mr Gutierrez sought $300,000 in general damages to compensate for significant psychiatric injury resulting from the discriminatory treatment and $142, 215.56 for economic loss.

MUR submitted that the damages awarded in the Initial Decision fell within an appropriate range and Mr Gutierrez’ claim was excessive. It argued the primary judge’s findings of a ‘mild’ the adjustment disorder and the ability for Mr Gutierrez to continue working were not erroneous. It also submitted that Mr Gutierrez failed to mitigate his economic loss by not finding paid work from the end of his employment to his intended retirement date (i.e 1 August 2018 to 5 September 2019).

The Full Court allowed the appeal and awarded $90,000 in general damages and took the initial view that Mr Gutierrez should be awarded $142,215.56 plus interest for economic loss.

The Full Court found that the primary judge wrongly determined that the adjustment disorder did not prevent Mr Gutierrez from working and that the condition was ‘mild’. The Full Court reviewed the medical evidence provided and found that the adjustment disorder arose entirely from Mr Gutierrez’s termination from MUR. Regardless of who terminated the employment, the age discrimination resulted in Mr Gutierrez’s psychiatric illness and inability to work.

The Full Court took a different view from the primary judge who found that no damages for economic loss were available. Instead, the Full Court found that the primary judge should have considered that Mr Gutierrez was unable to work because of the age discrimination and accordingly was entitled to damages from economic loss flowing from that.

Take Home Messages

Legally there is no mandatory retirement age in Australia. Employers should take caution in discussing an employee’s future or imminent retirement. Employers should refrain about explicitly or implicitly referring to an employee’s capacity or ability to work as the employee gets older to ensure it is not discriminatory as it may expose them to a breach of the AD Act (and/or the Equal Opportunity Act 1984 (SA) for employers located in South Australia).

This case also demonstrates the significant financial consequences employers may face if they are found to have discriminated against an employee on the grounds of their age.

For more specific information or advice on any of the material contained in this article please contact Lincoln Smith on +61 8 8210 1203 or lsmith@normans.com.au, Anastasia Gravas on +61 8 8217 1331 or agravas@normans.com.au or Divya Narayan on +61 8 8210 1279 or dnarayan@normans.com.au.