Is your compulsory retirement age policy for partners Seldon compliant?

Earlier this year the Supreme Court ruled in Seldon v Clarkson Wright & Jakes [2012 UKSC 16] that Leslie Seldon had not been discriminated against on the grounds of age when he was forced to retire when he reached 65, as per the partnership deeds.

Lawyers had been watching the case develop with particular interest but has the ruling given us clear guidance on the circumstances in which law firms can impose retirement?

Leslie Seldon was an equity partner in a firm of solicitors, having joined the firm in 1971. The partnership deed imposed retirement at the age of 65 unless agreed otherwise. In 2006, Mr Seldon reached the age of 65. He asked to stay on because he could not afford to retire. His request was refused and he brought a claim for, among other things, direct age discrimination.

Before 1 October 2006, retirement was a matter of contract. The only relevant statutory provision was that the employee could not bring an unfair dismissal claim once he had reached normal retirement age or, if none, the age of 65.

From 1 October, a series of legislative changes significantly altered the position. These changes were the Employment Equality (Age) Regulations 2006, the Equality Act 2010 and the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011.

The cumulative effect of these changes was that every retirement at any age, whether direct or indirect and whether in relation to an employee, worker or partner, had to be justified.

On the face of it, Mr Seldon’s case was straightforward: the act of compulsory retirement was direct age discrimination and so the question was whether that was a proportionate means of achieving a legitimate aim. There was, however, a twist. The provisions governing direct and indirect discrimination in the 2006 regulations (and subsequently those in the Equality Act 2010) were introduced to give effect to the Framework Directive for Equal Treatment in Employment and Occupation (2000/78).

Article 6(1) of the directive appeared to permit direct discrimination where it was justified by national social policy aims. Unsurprisingly, Mr Seldon argued that his retirement could only be justified if it satisfied such aims.

Clarkson Wright & Jakes (“CWJ”) argued that, even if that was the case, Mr Seldon’s forced retirement was justified because: (i) it enabled associates to move up the ranks to partnership status and enabled them to see when vacancies would arise, (ii) it facilitated the planning of the partnership, and (iii) it reduced the need for partners to be expelled for poor performance as age advanced and thus improved the working atmosphere of the firm (the “collegiality” argument).

Social policy aims

The Supreme Court decided that the directive did intend that direct discrimination could be justified only if it satisfied national social policy aims. The court reviewed the European case law on age discrimination and concluded that legitimate aims in relation to direct discrimination could include:

• Promoting access to work for youngsters
• Planning the efficient departure and recruitment of staff
• Sharing employment opportunities between the generations
• Ensuring a mix of a generations to establish experience and new ideas
• Rewarding experience
• Cushioning the blow of dismissal for long serving employees
• Avoiding the need to dismiss employees for deteriorating performance
• Avoiding disputes about fitness for work as age advances

The court recognised that social policy aims could change over the years in response to economic and other pressures and that the United Kingdom had justifiably chosen to give employers flexibility to choose their objectives as long as they were (i) legitimate objectives of a public interest nature, (ii) consistent with the social policy aims of the state, and (iii) proportionate.

The court decided that these aims need not have been articulated or even realised by the employer at the time that the compulsory retirement policy was ?drawn up.

The court also decided that, where introducing a general retirement rule was justifiable, any treatment of employees which resulted from that rule would also be justified – i.e. there was no need to take account of the specific, individual circumstances of the employee.

The court decided that CWJ’s arguments were indeed social policy aims and were legitimate. Mr Seldon’s argument that these three reasons were the employer’s own selfish reasons was rejected. Consequently, Mr Seldon’s claim failed.

Lawyers’ performance

So, what should law firms do to establish a retirement age for partners (and other staff) likely to survive legal challenge? As far as partners are concerned, a good starting point would be to ensure that the retirement age in the partnership deed is one which the partners have agreed on. It would also be a good idea for the partners to reconsider the retirement age on a regular basis, for example, every five years.

For the age to be justifiable, it should be based around some at least of the legitimate aims approved in Seldon. The policy also needs to be evidence based. This point was illustrated neatly in Seldon: CWJ argued that the retirement age they had chosen (65) avoided the need for partners to be dismissed for deteriorating performance – but they did not produce any real evidence to justify that performance did start to deteriorate at that age. Consequently, the case was remitted back to the Tribunal.

Clearly, if evidence could be produced to show that performance deteriorated at 65 (or any other age) then that would go a considerable way to justifying retirement at that age. This may, of course, be difficult to achieve: while it may not be difficult to produce evidence that performance in manual work deteriorates notably by the age of 65, it is likely to be much harder to produce that sort of evidence in relation to the work of a solicitor.

Firm-specific policy

If so, then it may be more sensible to rely on some of the other approved legitimate aims, such as ensuring a mix of generations in the firm with a combination of experience and new ideas and ensuring that younger workers can see a clear career path for them within the firm.

Again, a policy which is evidence based and specific to the circumstances of the firm is much more likely to survive challenge than a policy which looks like a paper exercise only. The policy should, as far as possible at least, reflect “national social policy aims”. These will change over time and so, as part of routine (five yearly, for example) reviews of the retirement policy, firms should consider whether their policies comply with, or at least do not conflict with, the needs of the market place generally.

From a claimant’s point of view, any retirement policy which is arbitrary and not evidence based is clearly going to be susceptible to challenge. If no thought has apparently been given as to why a particular retirement age has been selected, and no evidence has been put together to justify that particular retirement age, clearly it will be open to challenge.

One thing for certain is that the Supreme Court’s decision in the Seldon case is not the last we will hear on age discrimination. While the position may become clearer after the employment tribunal has decided whether the choice of 65 for the enforced retirement of Mr Seldon did constitute a proportionate means of achieving a legitimate aim, imposing retirement on staff will continue to be a difficult process.

 

Devising a compliant forced retirement policy

As a rule, any forced retirement age must be based on the aims identified in Seldon and should be evidence based. If your partnership deeds include a compulsory retirement age for partners, you may want to consider the following: Regular review: Partners should agree on a retirement age and regularly review it (say, every five years) Declining performance: justifying an age limit should be based around the aims mentioned in Seldon. While possible in theory it will be difficult in practice to prove that a solicitor’s performance declines once they reach 65. Mix of generations: more realistic is to rely on some of the other objectives set out in Seldon  such as the need to ensure a mix of generations, highlighting the need to combine experience with new ideas, and to provide clear career path for younger lawyers Firm specific: it will help if your policy reflects the wider social policy aims in Seldon. But in any event, ask yourself whether your policy is specific to your firm. If too general, it is more likely to be vulnerable to challenge. Evidence based: make sure that your decision is based on evidence and that you can show you have given proper thought to it. If it is regarded as arbitrary it will be open to challenge.

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