In Seldon v Clarkson Wright and Jakes, the Supreme Court today (25 April 2012) dismissed Mr Seldon's appeal that a compulsory retirement age in a partnership deed was unlawful direct age discrimination. The Supreme Court held that the partnership had legitimate aims which justified compulsory retirement and submitted to the Employment Tribunal the question of whether the age of 65 was a proportionate means of achieving those aims.
As well as being an important decision for partnerships and LLPs, the decision will be of great interest to employers as the default retirement age for employees has been abolished.
Mr Seldon, a former partner in Clarkson Wright and Jakes (the "Firm"), was forced to retire following his 65th birthday in accordance with the Firm's partnership deed. He claimed direct age discrimination.
The Employment Tribunal ("ET") found that although there was direct age discrimination, the Firm had established that the compulsory retirement age clause was a proportionate means of achieving legitimate aims. The Employment Appeal Tribunal upheld the ET's decision (apart from 'collegiality' not being a legitimate aim). The Court of Appeal dismissed Mr Seldon's appeal (as reported in our previous e-bulletin).
Supreme Court decision
The unanimous decision of the Supreme Court was that partnerships have the flexibility to choose which objectives to pursue provided that (i) those objectives can count as legitimate objectives of a public interest nature within the meaning of the European Directive; and (ii) are consistent with the social policy aims of the state; and (iii) the means are appropriate and reasonably necessary to achieve the aim (i.e. proportionate).
The Supreme Court found that all businesses should give careful consideration as to what, if any, compulsory retirement rules can be justified.
The key points which arise from the Supreme Court's consideration of compulsory retirement ages are:
- the three aims identified by the Firm were legitimate (i) ensuring associates were given the opportunity of partnership after a reasonable period; (ii) facilitating the planning of the partnership and workforce by having a realistic long term expectation as to when vacancies would arise; and (iii) limiting the need to expel partners by performance management, thus contributing to the congenial and supportive culture in the Firm.
- these aims were consistent with social policy objectives, such as those related to employment policy, the labour market and vocational training;
- the aims need not have been articulated or even realised at the time the compulsory retirement age was implemented; and
- whether the compulsory retirement age of 65 was a proportionate means of achieving these aims should be decided by the Employment Tribunal (and the fact that there was a default retirement age of 65 for employees at that time was relevant).
In addition, the Supreme Court explained that there is a difference between justifying direct and indirect discrimination. The Supreme Court also drew the distinction between rules which are the product of bargaining between parties (such as partnerships and LLPs) and those which are unilaterally imposed.
The decision gives partnerships and LLPs comfort that compulsory retirement ages can be justified on the basis of legitimate aims. However, each aim of the partnership/LLP must also equate to wider social policy objectives. It remains to be seen whether a particular retirement age, in this case 65, is considered a proportionate means to achieve those legitimate aims.