In a landmark ruling in Seldon v Clarkson Wright and Jakes, the Supreme Court has provided important guidance on the components needed to justify a compulsory retirement age (and in particular a mandatory retirement age contained within a partnership agreement.)
Lesley Seldon was a partner at a law firm that had a policy of retiring partners at 65. When Mr Seldon reached the age of 65, he was duly retired under the partnership deed.
However, Mr Seldon brought an unlawful age discrimination claim under regulation 17 of the Employment Equality (Age) Regulations 2006, which prohibits discrimination on the ground of age against partners.
At the subsequent hearing, the Employment Tribunal found that the law firm’s retirement policy was justified, stating that it was a proportionate means of pursuing the firm’s legitimate aims of:
1. Giving the firm’s younger associates an opportunity of reaching partnership within a reasonable timescale, thus giving them an incentive to remain with the firm;
2. Facilitating workforce planning, by giving reasonable expectations on when partnership vacancies would arise; and
3. Limiting the need to expel underperforming partners.
Subsequent appeals by Mr Seldon to the Employment Appeals Tribunal and the Court of Appeal failed.
Mr Seldon appealed to the Supreme Court on the basis that it was wrong to use the same test for justification for both direct and indirect age discrimination (and the aims pursued by the firm did not justify direct age discrimination), and that the treatment had to be justified in relation to his case and not just the retirement policy in general.
The Supreme Court unanimously dismissed the appeal, but remitted the case to the Employment Tribunal on an outstanding issue to consider whether the choice of a mandatory age of 65 was a proportionate means of achieving the legitimate aims of the partnership.
The ruling means that an employer can set its own default retirement age; however, it must have a legitimate aim and be able to provide evidence to justify its means of achieving it.
Although the case provides some clarity for employers over the issue compulsory retirement, some uncertainty remains. The fact that the Supreme Court has remitted the issue of proportionality back to the Employment Tribunal means that, currently, the issue of when particular retirement ages are justified is still a grey area. The issue of what age (60, 65?) is a justifiable retirement age remains unresolved.
Points to note
1. The ruling applies to compulsory retirement ages for all employees (and not just partners);
2. The employer will have to prove that there are problems with recruiting younger workers in the firm’s industry/sector (and that this is a direct result of retaining older workers);
3. The employer will have to show that its chosen mandatory retirement age has been set at a level that is appropriate and necessary to achieve the firm’s particular aim in question; and
4. The employer (or partnership) will have to carefully draft retirement policies that explain the need for a retirement age.
If you would like to discuss the implications of this ruling for your business, or anything else employment-related, please contact me at michael.delaney@mablaw.com.