The Supreme Court has today handed down an eagerly awaited judgment that considers when it is justified to require a person to retire. This new area of law is problematic and guidance on these issues from the UK's highest court is therefore particularly welcome.
The case confirms that employers (or partnerships) can, in principle, justify a retirement age. In order to do so however, they must be able to identify an aim or aims that are not only about business issues such as increased competitiveness or reduced cost, but also point to broader 'social policy' considerations such as inter-generational fairness or preserving the dignity of older workers.
The retirement age must, in practice, achieve what the business has identified as its aims – this means that the age of 65 may not be the right one for all businesses, or all parts of the same business.
The case was brought by Leslie Seldon, who objected to being retired as a partner from Clarkson Wright & Jakes despite there being a clause in the Partnership Deed which provided for retirement at 65. He argued that the clause was discriminatory on grounds of age.
Initially the case was primarily of interest to partnerships (partners were not covered by the default retirement age rules that were in force at the time), but since the abolition of the default retirement age, the case has become equally significant for employment situations.
The nub of the case is when and in what circumstances an employer or partnership can require a person to retire without risking a finding that it has unlawfully discriminated because of age. Age discrimination law, which is contained in the Equality Act 2010, permits discrimination because of age where this is 'a proportionate means of achieving a legitimate aim'.
Mr Seldon's partners argued that they had a number of legitimate aims in retiring him. The employment tribunal accepted three of them:
- ensuring that associates were given the opportunity of partnership after a reasonable period, thereby ensuring that they did not leave the firm;
- facilitating the planning of the partnership and workforce across individual departments by having a realistic long-term expectation as to when vacancies would arise; and
- limiting the need to expel partners by way of performance management, thus contributing to a congenial and supportive culture in the firm.
The tribunal decided that the use of a compulsory retirement clause was a proportionate means of achieving those aims. Mr Seldon appealed to the Employment Appeal Tribunal (EAT) and the Court of Appeal. He was largely unsuccessful in both Courts, although the EAT decided that the employment tribunal ought to consider further the issue of whether the age of 65 was the right age to choose in order to meet the legitimate aims in the most proportionate way.
Mr Seldon then appealed to the Supreme Court.
The parties had agreed the issues that they wanted the Court to decide as the following:
- whether any or all of the three aims of the retirement clause identified by the ET was capable of being legitimate aims;
- whether the firm has not only to justify the retirement clause generally but also their application of it to Mr Seldon; and
- whether the ET was right to conclude that relying on the clause in this case was a proportionate means of achieving any or all of the identified aims.
The Supreme Court held:
- In a case involving the justification of direct age discrimination, such as retirement, an aim will only be legitimate if there is something in it that has a broad social policy objective. It is not enough to point to the specific objectives of the business such as increasing competitiveness or reducing cost. (In contrast, 'indirect discrimination' may be justified by particular business considerations that do not include these broader objectives.)
- The first two aims put forward by Clarkson Wright & Jakes, staff retention and workforce planning, were related to the legitimate social policy aim of sharing out professional employment opportunities fairly between the generations. The third, limiting the need to expel partners by way of performance management, was related to 'dignity' aims accepted in some of the European cases.
- The aims also could be related to the particular needs of the business; in effect, they made commercial sense in the context of a law firm partnership.
- The question of whether the age of 65 was the right age to choose should be looked at again by the tribunal. Whether a retirement age is justified is one question, whether this age is justified is another.
Implications for employers and partnerships
- The case makes it clear that if at least part of the underlying purpose is 'broader', for example providing openings for younger workers, or maintaining work opportunities for older workers, a retirement age is, in principle, capable of being justified.
- A 'one size fits all' retirement age is unlikely to pass muster in most businesses – the aim of the decision to retire someone has to be considered first (and this has to have some broad social policy component). The employer (or partnership) must then decide whether this way of achieving that aim creates the right balance between the needs of the business and the impact on the employee (or partner).
- The case implies that an employer that makes sensible, rational business decisions when considering a retirement policy will be better off than one that is overly averse to the risk of litigation and devises its policies with that at the forefront of its mind.
- In the words of Lady Hale herself, 'All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified.
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