Seldon decided: Supreme Court gives guidance on compulsory retirement

As education institutions know, in some situations it may be possible to justify a retirement age. Unfortunately, there is very little practical guidance on what constitutes a lawful justification in this context. As a result, education institutions and other employers were hoping that the judgment in Seldon would provide much-needed clarification.

The Supreme Court has upheld much of the original tribunal’s judgment. It has clarified the type of aims that are legitimate for an employer to pursue under a mandatory retirement policy, but we are no further forward with understanding whether a cut-off age of 65 is appropriate - the Court remitted that issue back to the tribunal to decide.

Also this week, the Court handed down its judgment in Homer v Chief Constable of West Yorkshire Police. A summary of Homer is given towards the end of this briefing.

Seldon - Background

Leslie Seldon brought a claim of age discrimination after he was forced to retire as a partner of law firm Clarkson Wright and Jakes (CWJ) at the age of 65. Because Mr Seldon was a partner rather than an employee, the default retirement age which, at that time, permitted forced retirement of employees, was inapplicable. Instead, the firm was required – as now applies to employees too - to satisfy the tribunal that the treatment was justified as 'a proportionate means of achieving a legitimate aim' under Regulation 3 of the Employment Equality (Age) Regulations 2006 (since replaced by s 13 Equality Act 2010). This the firm managed to do, the tribunal accepting that the retirement was a proportionate means of:

  • ensuring associates were given the opportunity of partnership after a reasonable period;
  • facilitating the planning of the partnership and workforce across individual departments by having a realistic long term expectation as to when vacancies will arise;
  • limiting the need to expel partners by way of performance management, thus contributing to the congenial and supportive culture in the firm. The Employment Appeal Tribunal upheld the tribunal's decision on the first two points. It rejected the third deciding that it had been based on an assumption, unsupported by any evidence, that the performance of partners would tail off at around 65. The Court of Appeal upheld all three aims and Mr Seldon appealed to the Supreme Court.

Seldon - Supreme Court decision

The Supreme Court held as follows:

  • It confirmed that a degree of flexibility is available to employers in relation to their legitimate aims for justifying direct age discrimination providing the aims are of a public interest nature (ie not individual, such as cost cutting) and consistent with the state’s social policy aims. In practice, the Court noted that two broad aims have been accepted by the European Court of Justice (CJEU): inter-generational fairness and preserving the dignity of older workers. Applying them to the case in question, it endorsed the three aims accepted by the tribunal. The first two related to inter-generational fairness and the third to preserving dignity.
  • It is worth noting that the Court said that the efficient planning of recruitment and departure fell within “inter-generational fairness” and that “dignity” could, at least in some situations, justify having a compulsory retirement age in order to avoid disputes with employees about whether their performance had fallen off because of mental or physical decline with advancing years.
  • However, the Court emphasised that such aims must stand up to scrutiny in that each employer must show that they are legitimate in their case. For example, if the aim is to improve recruitment of young people, has the employer got a problem in recruiting the young? As the Court says, “all businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified in their particular business”.
  • Unfortunately, the Supreme Court declined to decide whether a 65 cut off was proportionate in the circumstances. Instead it has sent it back to the tribunal to decide. This is a crucial issue since it will often be difficult for an employer to establish that any particular age is the right one. For example, if the concern is employees’ declining ability, employers may have to show at what age such a decline normally occurs in that industry and job role. In addition, the tribunal’s ultimate decision may not be helpful either, because the tribunal may take into account that Mr Seldon’s retirement occurred at a time when retirement of employees at that age was permissible under the law. This would not be the case in relation to any compulsory retirements now. 
  • The Court confirmed that the approach to justifying direct age discrimination is not identical to the approach to justifying indirect discrimination and that regulation 3 (and its equivalent in section 13(2) of the Equality Act 2010) must be read accordingly.

For anyone who has struggled to translate, legally, some of the recent CJEU decisions on age discrimination across to UK law, the judgment sets out a helpful review.

Seldon - Comment

The Supreme Court has sought to give a clear statement of the law and many will welcome its views on the applicability of EU case law, which often deals with national or regional collective agreements, to our different UK legal context. It is now clear that direct age discrimination is permitted by employers where the aim is inter-generational fairness and/or retirement with dignity (although Lady Hale sympathises with those viewing the latter as a form of stereotyping). Other grounds are also not excluded if they are in the public interest on employment policy, labour market or vocational grounds.

But, such aims must be legitimate in the particular circumstances of the employer’s case and not merely invoked as a general defence. And, the means chosen to achieve the aims must be proportionate; in other words, an institution must be able to show that 65, or their particular retirement age, is the right age and the judgment implies that an institution has to be able to show this and that other less discriminatory measures would not suffice.

Finally, a word of warning. The case concerns a retirement in the context of a professional services partnership deed and therefore the aims upheld by the Court should be viewed in that context. There are differences between the way partnerships are run and a traditional employment relationship and therefore the aims justified in this case may not always read across to employment.

Seldon v Clarkson Wright and Jakes, Supreme Court

Homer v Chief Constable of West Yorkshire Police

The Supreme Court also handed down its decision in Homer v Chief Constable of West Yorkshire Police, where Homer, an in-house legal adviser to the police force, claimed that a requirement for him to hold a law degree in order to reach the top salary level was discriminatory on account of his age. This was because it was not worth his studying for a degree since he would shortly be compulsorily retired. The Supreme Court has overturned the decisions of both the EAT and the Court of Appeal which held that the requirement was not discriminatory, and that what put Mr Homer at a disadvantage was not his age but his impending retirement.

The case was brought on the basis of a relatively narrow issue; the perceived age disadvantage resulting from the employee’s inability to undertake a degree before retirement age. Presented in these terms, the case did not invite nor provide opportunity for the courts to consider promotional criteria more widely in the context of age discrimination. The sole issue to be considered was whether the employee had suffered a disadvantage based on age and, if so, this could be justified. The Supreme Court’s decision confirms that Mr Homer’s disadvantage, which the EAT and the Court of Appeal put down to his impending retirement, was in fact directly related to his age. The case will now be remitted to an employment tribunal to determine whether or not the discrimination can be justified.

Comment

Inevitably, institutions insisting upon degree level qualification for recruitment or promotion will in future come under increased pressure to justify such a requirement, and they must now carefully consider and record their aims in insisting upon a degree rather than, for example, degree level practical experience.

Homer v Chief Constable of West Yorkshire Police