The Employment Appeal Tribunal has upheld an employment tribunal's decision that a compulsory retirement age of 65 in a partnership deed was a proportionate means of achieving legitimate aims.

Background & previous litigation history

Mr Seldon, a partner in the law firm Clarkson Wright & Jakes (the "Firm") was compulsorily retired on 31 December 2006, at the end of the year following his 65th birthday, in accordance with the Firm's partnership deed.

Following his compulsory retirement, Mr Seldon issued proceedings in the employment tribunal claiming that his compulsory retirement was direct age discrimination and unlawful.

At the relevant time, the Employment Equality (Age) Regulations 2006 (the "Age Regulations 2006"), which were designed to implement the Equal Treatment Framework Directive (2000/78/EC), provided (at Regulation 3) that an act would not amount to direct or indirect age discrimination if it could be shown to be a "proportionate means of achieving a legitimate aim" (this wording is replicated in the Equality Act 2010 which superseded most of the Age Regulations 2006).

At the time of Mr Seldon's compulsory retirement, the Default Retirement Age (DRA) of 65 applied to employees under the Age Regulations 2006, but not to partners. Instead the Firm was required to show under Regulation 3 of the Age Regulations 2006 that compulsorily retiring partners at a certain age was objectively justified as a "proportionate means of achieving a legitimate aim". It is worth noting that the DRA was abolished on 6 April 2011, and the same considerations would also now apply in the case of an employee being compulsorily retired, albeit now governed by s13 of the Equality Act 2010.

In the Employment Tribunal, the Firm successfully argued that the compulsory retirement age was justified as a proportionate means of achieving three legitimate business aims, namely:

  • The "retention aim" i.e. ensuring that associates were given the opportunity of partnership after a reasonable period as an associate thereby ensuring that associates do not leave the firm.  
  • The "facilitating aim" – i.e. facilitating the planning of the partnership and workforce across individual departments by having a realistic long-term expectation as to when vacancies will arise.  
  • The "congeniality aim" – i.e. limiting the need to expel partners by way of performance management thus contributing to the congenial and supportive culture of the partnership.

The case was then appealed to the Employment Appeal Tribunal which accepted the retention aim and the facilitating aim as legitimate aims, but did not consider that the compulsory retirement was justified as a proportionate means of achieving the congeniality aim given that there was no evidence to support the assumption that partners should be retired at 65 because performance would drop off at around that age.

The case was eventually appealed to the Supreme Court in 2012, which rejected Mr Seldon's arguments and concluded that the Firm had legitimate aims for forcing his compulsory retirement. The case was remitted back to the Employment Tribunal to decide whether the Firm's retirement age of 65 was a proportionate means of achieving those legitimate aims.

The Employment Tribunal determined that the Firm's compulsory retirement age of 65 was in fact proportionate, i.e. appropriate and reasonably necessary to achieve the two legitimate aims i.e. the retention aim and the facilitating aim.

In coming to this conclusion, the Employment Tribunal noted that whilst the Firm might have selected another compulsory retirement age other than 65, the fact that a higher or lower age could have been agreed did not mean that the age selected was not appropriate and reasonably necessary, following the judgment of the Court of Appeal in Seldon. The Employment Tribunal noted however, that it would not be the case that any retirement age would achieve the two legitimate aims. Instead the retirement age had not to be so high that it would discourage associates who may otherwise leave and join a firm where the opportunities for partnership were more immediate. Nor must it be so low that the associates become concerned (a) about partners being required to retire before the end of their careers and continuing to practise elsewhere with the consequential loss to the partnership of their goodwill and connection and/or (b) that the duration would not meet their expectation and/or (c) that there might be insufficient time as partners to make proper provision for retirement. The Employment Tribunal noted there had to be a balance between the needs of the Firm and of the partners and the associates, and there would only be a narrow range of ages that would provide the necessary balance, for example the ages of 64 to 66.

The Employment Tribunal also took into account a number of other factors in judging that the retirement age of 65 was proportionate. For example, the Employment Tribunal noted that the consent of all the partners and the signing of the partnership deed were not determinative, but strong factors to be taken into account in the determination of proportionality. In addition the default retirement age of of 65 which applied to employees at the relevant time was a relevant factor to consider, as was the fact that the state pension age was 65 for men at the relevant time (however this was not a significant factor). The Employment Tribunal, following comments made by Lady Hale in the Supreme Court, also considered that the ruling that mandatory retirement age achieved the congeniality aim was also a factor to take into account.

The Employment Tribunal therefore concluded the Firm's compulsory retirement age of 65 was proportionate and objectively justified, and Mr Seldon appealed again to the Employment Appeal Tribunal.

Current Decision of the EAT

In the Employment Appeal Tribunal, Mr Seldon made a number of arguments against the decision of the Employment Tribunal.

In particular, Mr Seldon argued that there was a principle that where there is a provision which would achieve the legitimate aim with less discriminatory impact than the measure relied upon, then the measure relied upon cannot be justified. On this basis, Mr Seldon argued that either an age of 68 or 70 would have met the Firm's legitimate aims just as well as the Firm's chosen compulsory retirement age of 65.

Mr Seldon also argued that by envisaging a range of possible retirement ages which might have been justified, the Employment Tribunal fell foul of the principle established in the Court of Appeal's judgment in Hardy and Hansons Plc v Lax [2005] ICR 1565. There it had been argued, in relation to a refusal of part-time working, that the range of reasonable responses was to be applied when determining objective justification, an argument which was rejected by Pill LJ.

The EAT rejected Mr Seldon's arguments and noted that the Employment Tribunal's statement of the law was impeccable. In coming to its decision that the Employment Tribunal had been entitled to conclude that 65 was an appropriate retirement age, the Employment Appeal Tribunal noted that the fact the Tribunal might have identified a different date within very much the same range but which was slightly later did not mean there was an error of law. The EAT noted that for a potentially discriminatory measure to be objectively justified, it must be "reasonably justified", and the qualification by the word "reasonably" is essential when looking for a particular retirement age.

Furthermore, the EAT noted that if it was to be said that a day later than a given retirement age would discriminate less and if Mr Seldon's argument were accepted as a matter of principle, it would seem no date could be lawfully chosen because any date would be capable of being rendered unlawful by the argument that a slightly later date would serve just as well. The EAT also noted that the judgments of the superior courts in the litigation demonstrated it was entirely appropriate for an employer to choose a particular retirement age, necessarily expressed as one point in time, in order to meet its legitimate aims. The Employment Appeal Tribunal noted the issue for the Employment Tribunal was to determine where the balance lies between the discriminatory effect of choosing a particular age and its success in achieving the aim held to be legitimate, and that balance will not necessarily show that a particular point can be identified as any more or less appropriate than another particular point.

Conclusion

The Seldon litigation is of more relevance to employment practitioners than to occupational pension schemes, particularly as many elements of the operation of an occupational pension scheme, such as setting the minimum age at which a member becomes entitled to benefits, which could potentially be age discriminatory, are in fact permitted by the Equality Act 2010 and related regulations.

Nevertheless, where there may be situations where members are treated differently on grounds of age which are not expressly given exemption by the relevant legislation, the Seldon litigation gives some indication about the circumstances in which such practices may be objectively justified.