Under the Equality Act 2010, direct age discrimination is unlawful unless the discrimination can be objectively justified. The test for objective justification is whether the discriminatory act is a proportionate means of achieving a legitimate aim. In Seldon v Clarkson Wright and Jakes (“CWJ”), the Supreme Court considered the issue of mandatory retirement ages. These are directly discriminatory on the grounds of age and therefore, the lawfulness of a mandatory retirement age depends on whether or not it can be objectively justified. This decision provides important guidance as to the relevant factors for determining whether a mandatory retirement age is justified.

The case was decided under the now repealed Age Regulations. However, in the decision, Lady Hale (who delivered the leading judgment) expressly acknowledged that the principles she identified would apply equally to age discrimination under the Equality Act. The provisions of the Equality Act apply to partners as well as employees and, therefore, although the case relates to a partner, the reasoning in the decision applies just as much to employees.

The facts:

Mr. Seldon was a partner in CWJ. A clause in CWJ's partnership deed (agreed by Mr. Seldon) provided for the compulsory retirement of partners at the end of the calendar year that they reach the age of 65. When Mr. Seldon approached 65, he asked not to retire. However, he was required to do so by CWJ, who relied upon the compulsory retirement provision in the partnership deed. Mr. Seldon argued that notwithstanding the partnership deed, forcing him to retire constituted unjustified direct age discrimination. CWJ accepted that the retirement clause was directly discriminatory but asserted that both the mandatory retirement provision and requiring Mr. Seldon to retire could be objectively justified as a proportionate means of achieving a number of legitimate aims, including the following three aims:

  • ensuring senior solicitors are given the opportunity of partnership;
  • facilitating partnership and workforce planning; and
  • creating a congenial and supportive firm culture by limiting the need to expel partners by way of performance management.

The claim:

The Employment Tribunal held that a retirement age of 65 was a proportionate means of achieving these aims and rejected Mr. Seldon's claim of direct discrimination. After various appeals before the Employment Appeal Tribunal and the Court of Appeal, three questions came before the Supreme Court:

  • whether the three aims of the retirement clause were capable of being legitimate aims for the purpose of justifying direct age discrimination;
  • whether CWJ had to justify both the retirement clause generally and its application to Mr. Seldon; and
  • whether the Employment Tribunal was correct to conclude that the clause was a proportionate means of achieving any of the three aims.

The decision:

The Supreme Court dismissed Mr. Seldon's appeal and the three questions before it were decided as follows:

Legitimate aims for direct age discrimination

The three aims of the retirement clause were capable of being legitimate aims for the purpose of justifying direct age discrimination. On this issue, and following recent decisions of the European Court of Justice (the "ECJ"), the Supreme Court affirmed that the justification test for direct discrimination is narrower than for indirect discrimination because "If it is sought to justify direct age discrimination…the aims of the measure must be social policy objectives, such as those related to employment policy, the labour market or vocational training. These are of a public interest nature, which is…distinguishable from purely individual reasons particular to the employer's situation, such as cost reduction or improving competitiveness…". In contrast, indirect discrimination can be justified by purely individual reasons particular to an employer's situation.

However, even applying this narrower test, the Supreme Court held that the mandatory retirement age clause was justified by reference to two broad categories of legitimate social policy objective identified by the ECJ, "inter-generational fairness" and "dignity". Lady Hale held that two of the three aims, staff retention and workforce planning, fell within the category of "inter-generational fairness" and were not, as Mr. Seldon contended, merely individual aims of the business. In addition, the third aim – limiting the need to use performance management to expel partners – was deemed to fall within the "dignity" category of legitimate aim. As a result, all three aims were of a public interest nature and were therefore legitimate.

Justification needed both generally and in relation to a particular individual

On this issue, Lady Hale held that "where it is justified to have a general rule, then the existence of that rule will usually justify the treatment which results from it." In other words, if the rule is justified, its purpose would be negated if a business had to justify the rule every time it is applied. However, Lady Hale also distinguished between not having to justify a rule when it is applied and the need to justify a general rule in the particular circumstances of the business. Indeed, in relation to general rules, she made clear that

"all businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified".

In relation to justification, Lady Hale also noted that the fact that the retirement age provision had been relatively recently re-negotiated could not "be entirely irrelevant" to the issue of whether the rule is justified. Lord Hope expressed similar views. This is important given the indication that consent to a rule (especially after consultation) can be a factor that assists in showing an otherwise discriminatory provision is justified.

Proportionality

On the question of proportionality, Lady Hale stressed that this requires a business to demonstrate that that the means adopted to achieve a legitimate aim are both appropriate and reasonably necessary. Noting that the case (as a result of other appeals) was already being remitted to the Employment Tribunal on whether or not a particular retirement age of 65 (rather than a different age) was a proportionate means of the performance management aim, Lady Hale stated she would not rule out the same Employment Tribunal considering whether a mandatory retirement age of 65 was a proportionate means of achieving the other two aims (i.e., ensuring senior solicitors are given the opportunity of partnership and facilitating partnership and workforce planning), noting "there is a difference between justifying a retirement age and justifying this retirement age".

Comment

This is an extremely important decision in relation to the difficult issue of mandatory retirement ages. In practical terms, it illustrates that any business wishing to maintain an existing mandatory retirement age (or implement a new one):

  • must have objectives for a mandatory retirement age that both fit within public policy as well as apply to a particular business;
  • must be able to demonstrate why a specific retirement age has been selected in order to comply with the stated objectives;
  • where possible, consult about and obtain consent to the implementation of a mandatory retirement age.

Having documentary evidence showing the rational and procedure for implementing a mandatory retirement age that is in keeping with the above guidelines will be very valuable in defending any challenges to a mandatory retirement age.