Supreme court judgment on enforced retirement

The Supreme Court has handed down its long awaited judgment in Seldon v Clarkson Wright and Jakes. This has been a long-running case and considered whether the compulsory retirement of a partner (Mr Seldon) at a firm of solicitors (the Firm) was justified under the Employment Equality (Age) Regulations 2006. Although these Regulations were repealed with effect from 1 October 2010, the Supreme Court recognised that the principles identified would apply equally to the justification of direct age discrimination under S.13(2) of the Equality Act 2010.
 

Facts

There was a clause in the partnership deed of the Firm which provided for the compulsory retirement of partners at 65. When Mr Seldon was retired at 65, he argued that this was unjustified direct age discrimination. The Firm's defence was that the age discrimination could be objectively justified.

To be objectively justified, the discrimination must be a proportionate means of achieving a legitimate aim.
 

Employment Tribunal (ET)

It was accepted that the retirement clause was directly discriminatory and the ET examined the Firm's defence of objective justification and found that the Firm had the legitimate aims of:

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

The ET also found that a retirement age of 65 was a proportionate means of achieving these aims and rejected Mr Seldon's claim of direct discrimination.
 

Employment Appeal Tribunal (EAT)

On appeal, the EAT held that the ET had correctly approved the Firm's legitimate aims. However, the third aim was based on a discriminatory stereotype that partners' performance may diminish at 65. Therefore, this particular aim could not justify a retirement age of 65 without evidence that performance tends to diminish at this age. As  result of this, the EAT remitted the case to the same ET to reconsider the question of justification. Mr Seldon then appealed unsuccessfully to the Court of Appeal before appealing three questions to the Supreme Court:

  1. whether the above three aims of the retirement clause were capable of being legitimate aims for the purpose of justifying direct age discrimination;
  2. whether the Firm has to justify both the retirement clause generally as well as its application to Mr Seldon; and
  3. whether the ET was correct to conclude that the discriminatory clause was a proportionate means of achieving any of the three aims.


Supreme Court

In dismissing the claimant’s appeal, the Supreme Court held that the justification tests for direct and indirect age discrimination are not one and the same and the justification test for direct discrimination is narrower than for the indirect form.

Direct discrimination can only be justified by reference to legitimate objectives of a public interest nature, rather than purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness. The Supreme Court held that the staff retention and workforce planning aims were not (as was Mr Seldon's case) individual aims of the business. Instead, they fell within the category of ‘inter-generational fairness’. Further, the aim of limiting the need to use performance management to expel partners clearly fell within the ‘dignity’ category of the legitimate aim. As a result, all three aims had the requisite ‘social policy/public interest dimension' and were legitimate.

In relation to proportionality, the Supreme Court noted the following:

  1. that this requires an employer (or partnership) to show that the means adopted to achieve the aim were appropriate and necessary;
  2. the case was already being remitted to the ET as a result of the EAT’s ruling on the performance management aim and therefore the Supreme Court would not rule out the ET considering whether the choice of age 65 was a proportionate means of achieving the first two aims;
  3. there is a difference between justifying a retirement age and justifying this retirement age; and
  4. it would be proper for the ET to take into account the fact that, when the clause was agreed and when Mr Seldon was retired under the clause, there existed a designated retirement age of 65 for employees.


Summary

As a spokesman for the Department for Business said, ' this decision confirms that businesses can justify a compulsory retirement age based on legitimate aims such as workforce planning, provided that this is proportionate.'

This long awaited decision has given employers some more certainty as to certain circumstances in which they may be able to justify the retirement of their employees, but it is unlikely to change most businesses current retirement polices. 


For advice or more information, contact Natasha Twaits.

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