In this landmark ruling, the Supreme Court confirmed that it is possible for an employer to justify its own rules where those rules result in direct age discrimination. This includes the imposition of a compulsory retirement age set by the employer. However, the decision leaves partly unanswered the question of when a particular retirement age will be justifiable.
The Supreme Court held that, in order to justify direct age discrimination (including that arising from a compulsory retirement age), the employer must show that it had a legitimate objective that relates to a wider social policy aim.
The court identified objectives with a social policy element falling within two broad categories: inter-generational fairness (including staff retention and workforce planning); and ensuring dignity for older workers in relation to the termination of their employment.
The objective with a social policy element must be the real objective of the employer. For example, if the real objective of retiring employees at a particular age was simply to cut costs, it will not be possible to justify the discriminatory effect of the rule even if it has the incidental effect of promoting inter-generational fairness.
Even if there is an objective with a social policy element, the steps taken in pursuit of that objective must be proportionate to achieve the objective. In the context of compulsory retirement, this means that the age chosen must be no lower than what is proportionate to achieve the stated objective.
The Supreme Court confirmed that it will be for the Employment Tribunals to assess on a case by case basis whether the employer’s discrimination (including compulsory retirement at a set age) can be justified as proportionate.
It is precisely this proportionality test that will be most difficult and unpredictable element for tribunals to determine. It will entail a difficult balancing act between the true benefit of a discriminatory rule (e.g. the degree of intergenerational fairness it provides) and the rule’s detrimental impact on persons of a particular age group (e.g. the true impact of the forced retirement on those whom it affects).
The Supreme Court did provide some suggestions on how the tribunals might address the issue. It sanctioned the notion of tribunals unpicking the issue of the age chosen and examining it by reference to each of the stated objectives of the employer. This suggests an expectation that tribunals will take a rigorous approach to weed out cases where the employer is seeking to justify a retirement age by reference to spurious objectives.
At the same time, there was also a suggestion from the Supreme Court that tribunals will not need to be unduly exact when considering whether the particular retirement age chosen was proportionate. The Court noted that in this case the Employment Tribunal might well decide that a compulsory retirement age of 65 was justifiable by reference to only two of the three objectives relied upon by the employer (namely workforce planning and staff retention).
It also gave a warning to employers that “all businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified”.
The decision broadly supports the notion of a compulsory retirement age and allows employers to rely on genuine social policy aims that are applied within the context of their own organisation. However, it will always be open to an Employment Tribunal to find that there was a mismatch between the policy aims and the retirement age chosen and therefore to find that the age was not justified.