UK News

Can employers justify the compulsory retirement of employees?

May 2012

The Supreme Court finds a potentially legitimate aim in maintaining a compulsory retirement age for partners.

Background

A partner at a law firm was compulsorily retired by the firm, in accordance with the partnership deed, at the end of the year in which he reached 65 years of age. The partner wanted to keep working for the firm but was not permitted to do so. He then brought proceedings against the firm on the grounds that he had been directly discriminated against on the grounds of his age.

The Employment Tribunal had originally held that compulsory retirement was a means of achieving the firm’s legitimate aims which were to:

  • retain younger associates by providing partnership opportunities, after a reasonable period;
  • facilitate partnership and workforce planning by having realistic long term expectations as to when vacancies will arise; and
  • to contribute to a congenial and supportive culture in the firm by limiting the need to expel partners by way of performance management.

The Tribunal held that the claimant’s retirement was objectively justified. On appeal to the Employment Appeal Tribunal (the “EAT”) the EAT upheld one ground of the claimant’s appeal, that is, that while the Tribunal was entitled to find that compulsory retirement at a certain age achieved legitimate objectives, there was no evidence to support the firm’s claim that a compulsory retirement age of 65 was justified on the grounds that the claimant’s performance would decline at age 65.

Following an unsuccessful appeal to the Court of Appeal the claimant then appealed to the Supreme Court. His appeal was again rejected, the case being remitted to the Tribunal for it to decide if a compulsory retirement age of 65 was a proportionate means of achieving these aims.

Justifying direct age discrimination

The Supreme Court held that to justify direct age discrimination employers must show they have a social policy/public interest aim, and that, in the particular circumstances, the means chosen to achieve that aim are both appropriate and necessary. The Tribunal will now have to consider whether the law firm could have used a different, less discriminatory method of achieving their aim.

The Supreme Court referred to two kinds of legitimate objectives of a public interest nature which the European Court of Justice has in the past identified as meeting the criteria of appropriate and necessary:

  • intergenerational fairness (which includes facilitating access to employment by young people, enabling older people to remain in the workforce, sharing limited opportunities to work in a particular profession fairly between the generations promoting diversity and the interchange of ideas between younger and older workers); and
  • dignity (this includes avoiding the need to dismiss older workers due to underperformance, thus preserving their dignity and avoiding costly and divisive disputes).

The Supreme Court made it clear, however, that other employers cannot simply rely upon the aims which were held to be legitimate in this case; the aims must be legitimate for the business which seeks to rely on them.

Commentary

Following the abolition of the default retirement age on 6 April, 2011, this decision will apply to employers generally in relation to employees and not just to the partnership scenario. While the Supreme Court was willing in principle to accept that the law firm’s aims in having a compulsory age of 65 were legitimate, any organisation that seeks to impose a compulsory retirement age will have to be prepared to justify why that particular age is necessary for its particular business.

Resources

Seldon v Clarkson Wright and Jakes

For further information or to discuss the issues raised, please contact David Widdowson or Emma Clark on +44 (0)20 3051 5711.

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