The Employment Tribunals have considered for the first time the factors that may enable employers to justify compulsory retirement.
In Seldon v Clarkson Wright and Jakes, the claimant claimed that his compulsory retirement at age 65 was an act of direct age discrimination. The Claimant was a partner in a firm of solicitors who wished to continue a consultant beyond his retirement date. The partnership deed contained a provision for the retirement of all partners upon reaching the age of 65. The Claimant had never previously objected to such a provision.
Regulation 3(1)(a) of the Employment Equality (Age) Regulations provides that a person directly discriminates another if, on the grounds of that person’s age, he treats them less favourably than he treats or would treat others, unless it is a “proportionate means of achieving a legitimate aim” (commonly known as “objective justification”). The burden is on the employer to prove that the discrimination was objectively justified and cogent evidence will be required to discharge this burden.
Regulation 30 of the Age Regulations currently provides for the lawful dismissal of employees at age 65 where the reason for their dismissal is retirement. However, Regulation 30 is currently subject to a challenge to the ECJ by the action group, Heyday, which is currently expected to be heard in 2009. Regulation 30 also applies only to “employees” and not to broader categories of worker.
The retirement dismissal of other types of workers, such as partners, must therefore be objectively justified in order for employers successfully to defend a claim for age discrimination, even if the dismissal takes place where the employee is 65 or over and the employee’s contractual retirement age is 65.
The decision in the Seldon case is relevant to the retirement dismissal of employees under 65 and will be important to all employers if the Heyday challenge to the ECJ of the setting of national retirement age of 65 is successful.
Proportionate and legitimate aims
The Respondent claimed that compulsory retirement had the following proportionate and legitimate aims:
i) that it enabled the firm to meet the expectations of younger employees for advancement and career progression into partnership;
ii) that it enabled the firm to properly plan the partnership by having realistic expectations as to when vacancies in the partnership would arise;
iii) that it enabled and encouraged partners to make proper financial provision for their retirement;
iv) that it ensured a turnover of partners so that any partner could expect to become senior partner in due course;
v) that it limited the need to expel partners due to poor performance thus contributing to the congenial and supportive culture within the firm; and
vi) that it protected the partnership model of the firm.
The Tribunal confirmed that in this case, the term providing for compulsory retirement at 65 was unlawful age discrimination unless it was objectively justified. There was no direct authority to guide the Tribunal on what amounted to objective justification of age discrimination.
The Tribunal agreed that enabling employers to meet the expectation of younger employees for advancement was a legitimate policy objective, particularly as the firm had a strategy for growth and the retention of able solicitors. Similarly it agreed that the aim of facilitating the planning of the partnership by having realistic long-term expectations as to when vacancies will arise was legitimate. The Tribunal also found that it was an aim for the firm to create a congenial and supportive culture among the partners and the lack of power to expel partners for poor performance was capable of contributing to that aim.
However, the Tribunal found no evidence that the firm had the aim of encouraging or enabling staff to make financial provision for retirement; had there been such evidence, the outcome may well have been different. It also found that the aim of ensuring a turnover of partners to allow for any partner to become a senior partner was unsupported by the evidence and also that it was not legitimate as the aim appeared to be age related.
The Tribunal went on to consider whether compulsory retirement at 65 was a proportionate method of achieving the accepted legitimate aims. The Tribunal considered alternatives proposed by the Claimant, including reducing partnership share and the introduction of performance management, but found there was in fact no alterative to compulsory retirement where performance management would affect the culture of the partnership. It also found that having certainty in retirement age enabled solicitors to see when future vacancies for partnership would occur.
This decision will give some comfort to employers concerned about the ramifications of an adverse decision in the Heyday ECJ challenge. However, each case will turn on its own facts and employers should consider carefully their reasons for enforcing a compulsory retirement age should the Heyday challenge be successful.