Enforcing a compulsory retirement age against a partner that wishes to stay is a high risk option.
Prior to the Employment Equality (Age) Regulations 2006, it was common to see compulsory retirement ages for partners in practices’ partnership agreements. The Regulations prohibited discrimination on the grounds of age and compulsory retirement ages for partners fell outside the exemption to the Regulations for compulsory retirement ages for employees. Therefore compulsory retirement ages for partners have fallen out of favour.
A recent case involving a partner in a law firm (a partnership) has clarified in what circumstances a partner can be forced to retire at a certain age.
The Court of Appeal has ruled that a clause within a partnership agreement requiring partners to retire at 65 may be a proportionate means of achieving legitimate aims and so can be enforceable. The case was brought by Leslie Seldon, a partner in the law firm Clarkson, Wright & Jakes. Mr Seldon claimed direct age discrimination after being compulsorily retired as required by the partnership agreement at the end of the year following his 65th birthday.
The Court confirmed the previous decisions of the Employment Appeal Tribunal and the Employment Tribunal and dismissed Mr Seldon’s claim. The judges were of the opinion that requiring Mr Seldon to retire because of his age was justified by two legitimate aims:
- workforce planning and providing associates with promotion opportunities (the “dead men’s shoes” aims); and
- limiting expulsion of partners through performance management and so contributing to a congenial and supportive workplace (the “collegiality”).
In deciding that 65 was an appropriate age for retirement, the Court gave weight to the current compulsory retirement age for employees of 65. However, whether this will remain a valid argument will depend on the Coalition Government’s current plans to remove the compulsory relevant ages for employees.
From the Court’s judgement it is clear that quite specific issues arise whilst considering the legitimacy of an aim within a partnership arrangement. The financial dynamic of the arrangement is a key feature. Partnership profits are finite and unless the number of equity partners is limited, the profits of the partnership will be reduced. This factor has to be balanced with the need to retain talented high level employees that aspire to attain partner status. Although not a decisive factor, the fact that a Partner with considerable legal experienced entered into a Partnership agreement that expressly included a compulsory retirement age should be borne in mind.
In summary, a compulsory retirement age for partners must be a proportionate means of achieving a legitimate aim. That, of course, requires consideration of all of the circumstances of individual cases. Even though Mr Seldon failed in his claim, enforcing a compulsory retirement age against a partner that wishes to stay is a high risk option, there is no statutory limit on the damages that can be awarded for age discrimination claims. Legal advice should be taken before starting down this route.