Summary

The EAT has issued a decision in the well-known and long-running retirement case of Seldon v Clarkson Wright and Jakes, which dealt with the question:

Was the retirement age of 65 PROPORTIONATE to achieve the firm’s stated aims of retention of staff and workforce planning?

Following the removal of the default retirement age, employers need to justify any retirement policy in place by showing that it is a proportionate means of achieving a legitimate aim.  In Seldon, the EAT has found that it was proportionate for the firm to select a retirement age of 65, even though using a higher age could have a less discriminatory effect.  The reasoning in this case may be useful to employers setting a retirement age, or considering other policies which may be potentially age-discriminatory (e.g. benefits policies).  

We discuss this in more detail and also consider essential points when deciding on a retirement age.

Background

More than seven years ago, Mr Seldon raised a claim of age discrimination because he had to retire from the solicitors’ practice that he worked for at age 65.  The firm’s defence was that having a retirement age of 65 in place was a “proportionate means of achieving a legitimate aim” and therefore allowable under the legislation in place at that time.  Protracted litigation ensued, and the Supreme Court eventually decided that the firm had legitimate aims in place, namely:

  • Retention of Staff – i.e. ensuring that associates were given the opportunity to become partners rather than leave the firm
  • Workforce Planning – having a sense of when vacancies would become available by having a retirement age in place
  • Congeniality – avoiding the awkwardness of having to dismiss a long-standing and senior figure for performance reasons (NB: this aim was not ultimately relied on by the firm as justification for the age chosen)

Having reached a decision on one prong of the test for justification, the Employment Tribunal had to decide whether the age of 65 itself was proportionate.  The Tribunal found against Mr Seldon.  It stressed that in this case a balance needed to be achieved between the interests of the practice, the partners, and the associates who aspire to partnership.  It found that there was a narrow range of ages that would be proportionate to achieve the two aims of retention of staff and workforce planning, but that 65 was within this range.  Mr Seldon appealed again to the EAT.

The EAT found that the age of 65 was proportionate.

It noted that determining whether a particular age is proportionate is fact-sensitive to the particular business, but in this case the Tribunal had considered this appropriately. 

One of the arguments raised by Mr Seldon was that the given age of 65 could not be proportionate because it was possible for another age to have been used (e.g. 68 or 70), which would have met the legitimate aims just as well.

The EAT confirmed, however, that the fact that it would be less discriminatory for the firm to have chosen another age did not prevent the age of 65 from being appropriate in this case.  If this were the case, it would be impossible for a given age to be proportionate as there would always be a less discriminatory choice.

How does this decision help employers?

While it may be challenging to decide on a specific retirement age for a given business, it is helpful to note that the precise age is not completely critical. It was remarked throughout the case that a retirement age needs to be decided on the basis of the needs of the particular organisation.  If, for example, the firm had no trouble retaining associates regardless of partners being retired or not, this may well have undermined the legitimate aim of workforce retention. 

The EAT repeated the list of factors used by the ET when weighing up whether a retirement age of 65 was appropriate in this case, which may be useful when thinking about justifying a retirement age:

  • The partners had consented to the retirement age of 65 in the partnership deed where it was set out
  • The retirement age for partners was the same as for other staff
  • The State Pension Age
  • At the time, the default retirement age was 65
  • There had been a number of European cases where a retirement age of 65 was upheld

The Tribunal also considered that the congeniality aim, while not contested, might be a factor to consider when looking at proportionality for the other two aims.

It is possible that the ET and EAT may have reached a different decision if Mr Seldon had been retired following the removal of the default retirement age (of 65), which provided a useful benchmark.  However, this was not the only factor looked at and the case suggests that an age of 65 may well be justifiable if this appears to be appropriate for the given organisation. 

Key points when thinking about setting a retirement age

  • Think about what legitimate aims are relevant to your organisation: e.g. is there a need to incentivise junior staff to stay with the employer?
  • Give careful consideration to which age you will set by reference to the particular legitimate aim: e.g. for succession planning, the higher the retirement age the higher the detriment for junior staff, the lower the age the higher the determent for potential retirees.  The respective needs must be balanced as far as possible.
  • Document any deliberations about possible legitimate aims and the rationale for selecting a certain age, but bear in mind that these will be discloseable in the event of litigation.
  • Make sure that you act consistently whether or not you decide to put a policy in place.