Older workers in the EU used to have a tough time staying employed.

Because most EU member states had no age discrimination laws, employers could force older workers out by setting mandatory retirement ages and offering early retirement incentives that were too good to pass up. Older workers who were looking for a new job had an even harder time. Employers could explicitly advertise the need for a “young, dynamic workforce” and select applicants based on age.

Yet barring the old from the labor force had its consequences. Like in the U.S., EU officials realized that as the workforce shrunk and the number of retirees grew, the social security system would buckle under its own weight. Something had to be done to force employers to hold on to and protect their aging workforce.

So in 2000 the European Council passed Directive 2000/78/EC, a wide-sweeping law that creates protections for workers on a number of grounds including age. Each EU member has until Dec. 1 to implement the directive. However, the directive only sets the baseline. Each member state can impose stricter legislation, which is creating a patchwork of age discrimination laws throughout the EU. In addition, the member states are taking different approaches to enforcing the new laws. All of which is leaving companies vulnerable to discrimination claims.

“This is probably the most important piece of labor and employment legislation in the EU in a generation,” says Erika Collins, a partner at Paul, Hastings, Janofsky & Walker in New York. “It will be critical for multinationals to look at member state legislation in each jurisdiction.”

Directive Perspective

Although laws will vary from country to country, the directive does establish some uniform policies member states must follow.

First, the directive protects workers of all ages. That is much different from U.S. age discrimination law, which only applies to people older than 40.

“A lot of what some member states construe as discrimination against young candidates falls under the EU's concept of indirect discrimination, which is similar to the U.S.'s disparate impact theory,” Collins says. “Having this protection applied to younger workers will impact every single aspect of the employment relationship, including recruiting and advertising, pay and benefits, hiring and harassment.”

For example, the U.K. has revised its laws to protect younger workers in the employee benefits arena. According to the U.K.'s legislation, which took effect Oct. 1, awarding additional benefits for years of service after the fifth year is illegal because it indirectly discriminates against younger workers who haven't been with the company as long. This means that if an employee reaches the 10-year mark at a company, it is unlawful for an employer to give him or her additional vacation time or a raise based on the decade of service.

In addition, the EU directive establishes new rules governing employee retirement plans.

Prior to the directive, retirement ages throughout Europe were relatively young, due in part to mandatory retirement programs. In fact, the average age of retirement across the EU was 60.4 in 2001, according to the EU's office of statistics. But now with its social security programs in peril, the EU has upped the age at which employers can force workers out to 65.

“Employers in the EU are going to have to decide what to designate as a retirement age for employees or if they are going to set retirement ages at all,” says Camille Olson, a partner in Seyfarth Shaw's Chicago office.

Although the directive sets the threshold for minimum mandatory retirement ages, each member state can implement its own version of the law. That inconsistency is one of the biggest problems the directive creates.

Legal Patchwork

For example, forced retirement at age 65 is not a legal in Belgium, which prohibits employers from setting any mandatory retirement age under its version of the directive. Then there are countries–including Spain and Austria–that only allow mandatory retirement policies for certain professions such as judges.

“If I'm serving as corporate counsel, and I'm seeing the member states all implementing this directive in their own way, I have to start thinking about how I'm going to operate in two dozen countries with slightly different laws,” says Wendy Tice-Wallner, a shareholder in Littler Mendelson's San Francisco office. “Do I have goals for establishing standards globally or do I have somebody on the ground in each country to help draft country-specific policies?”

Creating one global policy to tackle the directive might be a shortsighted solution since differences between each member state's anti-discrimination legislation touch every part of labor and employment law.

For instance, the directive allows employers to discriminate based on age as long as there is a justified reason for doing so. Yet, what is considered a reasonable justification is completely left up to the interpretation of each member state.

“Some countries have implemented narrower legislation, limiting the scope of what a justified exception is,” says Anne-Sophie Parent, director of AGE, the European equivalent of the AARP. “But other member states have left it so open that nothing has changed.”

France would fit in the latter category. Critics have chastised France, accusing government officials of merely copying and pasting the directive into its own laws, leaving room for sweeping exceptions. Currently, it is the only country in the EU that considers it justifiable to discriminate against older applicants for positions at hip wine bars that want a youthful clientele.

Because of these vast differences, experts agree that the country-by-country approach to compliance has the best chance of succeeding.

“You have to make a determination as to what sort of differences in policy you will have by country, which will depend on how different each country's laws are,” Olson says.

Increased Litigation

But redrafting corporate policies might not do much good. That's because no one is really sure exactly how the governments of each country are going to enforce their new age discrimination laws.

“These laws are untested,” Collins says. “We are going into a period of time where there will be many challenges in the courts. We don't have any case law telling us what is and isn't justified.”

Meanwhile, at press time, some member states had yet to fully implement the directive. Luxembourg has draft laws that aren't yet in force; Sweden hasn't published its legislation; and the U.K. is still finalizing changes to its pension laws. Germany, Belgium and the Czech Republic plan to finalize additional age-related legislation in 2007.

Perhaps the only thing companies can count on is a spike in age discrimination lawsuits.

“Companies must begin the compliance process now and not wait,” Collins says. “It's far easier to fix these types of things at the front end rather than wait for the claim to be filed. After all, we are on the doorstep of this legislation, and it is likely to present a lot of activity in terms of litigation in the future.”