After Seldon

By Tina Williams, Senior Partner, Fox Williams

Most UK law firms, through their partnership or members’ agreements, require partners to retire when they reach a certain age. Such provisions constitute discrimination on the grounds of age and must be justifiable as a proportionate means of achieving a legitimate aim if the firm is to successfully defend a discrimination claim.

Following the Seldon v Clarkson Wright & Jakes judgments, firms which choose to have (or retain) a compulsory retirement age must abandon any complacency and be very clear on their answers to the following questions:

• What are the firm’s aims in retiring partners at a particular age?

• Are those aims legitimate?

• What is the compulsory retirement age that is proportionate to achieving those objectives?

Legitimate aims

The Court of Appeal held in Seldon that it was permissible to justify having a compulsory retirement age by reference to a legitimate aim other than that which was specified at the time the measure was introduced. However, a responsible firm will ensure that, when the measure is introduced, the firm is clear about its aims.

This question should be considered when the partnership or members’ agreement is being prepared or amended, and not when a claim is brought. Agreement by all partners to the provision is a relevant consideration but not conclusive as to the legitimacy of the aims or the proportionality of the provision.

Seldon, Clarkson Wright & Jakes cited numerous objectives which the retirement provision was designed to achieve, only three of which were considered to be legitimate aims which might justify discrimination on the grounds of age. These were:

1.      providing promotion opportunities for associates within a reasonable period;

2.      workforce planning; and

3.      collegiality (avoiding the risk of destroying a collegiate culture on expelling older partners when their performance deteriorated due to age).

Firms which have performance management procedures in place to effectively retire partners whose performance has declined to unacceptable levels will be unable to use the collegiality argument.

Law firms without performance management procedures but which wish to rely on this argument will need to undertake some analysis of the age at which partner performance usually deteriorates. Any unlucky firm which faces a claim will want to have ready the evidence on which it has relied to support the choice of a particular age.

In Seldon, the Court of Appeal held that a compulsory retirement age of 65 was justified (but only with reference to the first two aims, which the court found to be legitimate, and not with reference to the aim of collegiality).

In this context, there were two significant findings. The first was that, where a partnership’s aim is consistent with the social objective that has justified the legislative provision, that aim is lawful, provided a proportionate means of achieving the aim is adopted.

The second, which was the Court of Appeal’s sole answer to the question of whether 65 was an age which could be justified, was that “the choice of 65 when Regulation 30 actually renders lawful 65 in the employer/employee context must support the choice of 65 as a fair and proportionate cut-off point”.

Given these two findings, it is highly questionable whether Seldon would have been decided the same way if heard after the 1 October 2011 abolition of the default retirement age for employees.

Rethink policies

Law firms would be well advised to review their compulsory retirement policy every five years or so and to carry out the first review in advance of 1 October 2011. After that date, it appears that the choice of age 65 will no longer be supported by government social policy.

The abolition of the default retirement age of 65 will inevitably impact the promotion prospects of the younger employees and require workforce planning to be undertaken differently. The social policy may retain as its objective to produce a happy workforce, but the avoidance of tensions from having to performance-manage partners may not take precedence over the unhappiness caused by forcing partners to retire when they feel that they still have much to contribute.

Firms will have to give much more careful thought to what retirement age is appropriate for the particular aims which they are seeking to achieve.

Given the fact that there is no limit on the damages that can be awarded for age discrimination, law firms cannot afford to get this wrong. The disappearance of compulsory retirement ages and the rise of strong performance management are confidently predicted.

The author gratefully acknowledges the assistance of Emma Roake with this article.