Last week’s Supreme Court ruling will be the last word for a while on the vexed question of compulsory retirement. Without ruling it out entirely, the decision will prompt businesses which still retain a compulsory retirement age to think carefully about whether keeping it remains legally defensible.

The case involves the compulsory retirement of Lesley Seldon, a partner in a legal firm in Kent. Contrary to some reports in the press, the decision did not reach a final ruling on whether the actions of the firm did in fact breach the Age Equality Regulations. It merely confirmed that its aims were legitimate in having a compulsory retirement age; in other words it was defensible in principle. The case will now go back to the employment tribunal to decide whether the means it chose to implement it – ie the choice of 65 as the age at which partners had to leave – were proportionate.

When Mr Seldon was made to retire, employers enjoyed an exemption which allowed them to impose compulsory retirement at 65 without facing age discrimination claims. There was no corresponding exemption for retirement from partnerships. That meant partnerships had to fall back on the justification defence, which sanctions what would otherwise be discrimination if the action taken was a “proportionate means of achieving a legitimate aim”. This defence applies to all cases of indirect discrimination, and, uniquely, to direct discrimination on grounds of age. Since the removal of the default retirement age in April last year, all employers are in the same position as Mr Seldon’s firm, or will be once the transitional provisions unwind fully in October 2012. Although Seldon was decided under the old law, the replacement provisions in the Equality Act 2010 are exactly the same.

So what are the lessons of this case? Most significantly, the courts are likely to accept that imposing a compulsory retirement age for workforce planning reasons is legitimate in principle. However they will require employers to produce evidence that a retirement age will promote these aims in reality. Employers will also need to defend their chosen retirement age. In Mr Seldon’s case, the partners could point to the existence of the default retirement age of 65 as a reason for choosing the same age for the partnership. Since its abolition no such point of reference is available, and the Supreme Court offers no explicit guidance about how to go about selecting an appropriate age.

The other main point to emerge is that aims linked to the assumption that performance will deteriorate with age are likely to be difficult to defend. In Seldon a so-called “congeniality” aim was held to be legitimate, but that was in a relatively small firm, where it was accepted that it was legitimate to seek to avoid hurtful disputes about partners’ performance. The Supreme Court said that if there is a worry about performance declining with age it will be easier to defend compulsory retirement as an occupational requirement, as has happened in a number of cases from elsewhere in Europe which have been referred to the European Court of Justice. Even then it is not straightforward, because evidence will be needed to support the choice of age. In addition, employers will not be able to defend compulsory retirement if a less discriminatory way of achieving their objectives is feasible – for example regular testing of the necessary physical or mental capabilities.