The Supreme Court has recently handed down its judgment in Seldon v Clarkson Wright and Jakes. Whilst the matter has been remitted to the employment tribunal for further consideration, the decision represents a significant narrowing of the circumstances in which an employer can justify its own compulsory retirement age and will therefore be of particular interest to in-house legal and HR professionals.
Leslie Seldon, an equity partner at Clarkson Wright and Jakes, was compulsorily retired on 31 December 2006, the year in which he reached age 65, in accordance with the partnership deed. Mr Seldon began proceedings against the firm, alleging that his expulsion was an act of direct age discrimination as it was directly due to his age. The firm claimed that his treatment was justified.
Unlike other forms of direct discrimination, direct age discrimination can be objectively justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives if the means of achieving that legitimate aim are appropriate and necessary.
The Supreme Court held that whilst the compulsory retirement age in the partnership deed was a directly discriminatory measure, it was capable of justification because it was based on various legitimate aims – the retention of associates, facilitating the succession planning of the partnership and workforce 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 to contribute to a congenial and supportive culture in the firm.
The case was remitted back to the employment tribunal who will now need to decide whether the specific age of 65 was an appropriate and necessary means of achieving the firm’s aims in the particular circumstances of the firm.
Whilst the Supreme Court was fairly pragmatic in its reasoning – business is competitive and employers ‘are not a social service’ – employers who still have a policy of compulsory retirement would be well advised to review this in light of the decision in Seldon. In so doing, employers should have regard to the three-stage test for justifying direct age discrimination which was clarified by the Court.
- Do the measures seek to achieve a legitimate aim? ‘Inter-generational fairness’ (eg the interchange of ideas between younger and older workers) and ‘dignity’ (eg avoiding the need for costly and divisive disputes about capacity or underperformance) are legitimate aims; reasons particular to the employer such as cost reduction and improving competitiveness are not.
- Is the aim legitimate in the particular circumstances of their business? For example, whilst a policy of improving the recruitment of young people in order to achieve a balanced and diverse workforce is in principle a legitimate aim, if the business in question is easily able to recruit young people but has a problem with retaining older workers, it is unlikely to be a legitimate aim for that business. The Court made clear that it is the particular circumstances of the business rather than the individual that should be considered.
- Are the means of achieving the aim proportionate i.e. both appropriate to the aim and necessary to achieve it, or are other, less discriminatory, measures possible? For example is a mandatory retirement age of 65 a proportionate means of achieving a balanced and diverse workforce?
Employers should also be aware of the possible impact of the decision on any other policies or practices which distinguish between employees on age-related grounds (eg employee share schemes that favour those retiring on or after a specified age in circumstances where none of the statutory exceptions are applicable).
It is also important to note that although the Tribunal, the EAT, the Court of Appeal and the Supreme Court accepted that a legitimate aim within Clarkson, Wright and Jakes included reducing the need to expel partners for performance management reasons, the EAT held that fixing a particular age of 65 on the basis that performance would drop off that at age was not justified because there was no evidential basis for that assumption. It will be interesting to see how the Tribunal addresses this question.