Age discrimination: Supreme Court rules on partner's forced retirement

Age discrimination: Supreme Court rules on partner's forced retirement

Published:

Author: Kevin McCavish

The Supreme Court has handed down a decision on whether a partner in a law firm suffered direct age discrimination when he was forced to retire at age 65

Background

Unlike other types of discrimination, age discrimination is not unlawful if an employer can show that it was,

a proportionate means of achieving a legitimate aim

Under previous legislation it was possible for employers to force their employees to retire at the "default retirement age" of 65. This was repealed in April 2011. However, this relaxation of the general prohibition on age discrimination never applied to partners. Forcing a partner to retire at any age was therefore, potentially, direct age discrimination unless the firm could show that this practice was a proportionate means of achieving a legitimate aim.

Facts

In Seldon v Clarkson, Wright and Jakes (a Partnership), Mr Seldon was forced to retire from the partnership of his law firm at the end of the year in which he reached 65, on 31 December 2006. Mr Seldon tried to negotiate continuing to work for the firm on a self-employed basis but the parties failed to agree. He issued a claim for direct age discrimination but an Employment Tribunal dismissed his claim holding that compulsory retirement was a proportionate means of achieving a legitimate aim. It identified three legitimate aims in this case:

  • ensuring that associates were given the opportunity of partnership after a reasonable period, thereby ensuring they did not leave the firm;
  • facilitating workforce and partnership planning across individual departments by having a realistic and long-term expectation as to when vacancies would arise;
  • limiting the need to expel partners by means of performance management, thus contributing to a congenial and supportive culture within the firm.

The tribunal also held that those aims were proportionately implemented by the fixed retirement age for partners. The tribunal was not, however, asked to consider whether any of the accepted aims could be achieved by a different retirement age.

The Employment Appeal Tribunal remitted the case for a tribunal to consider whether there was any evidential basis for the assumption that performance would drop off around the age of 65 and thus any justification for choosing that age in order to avoid performance management and promote collegiality.

Mr Seldon appealed to the Court of Appeal but his appeal was dismissed and the case finally came before the Supreme Court where the issues were:

  • Whether any or all of the three aims of the retirement age identified by the Employment Tribunal were capable of being legitimate aims for the purposes of justifying direct age discrimination?
  • Whether the firm had to justify not only the retirement age generally but also its application to this individual case?
  • Whether the Employment Tribunal was right to conclude that relying on the retirement age in this case was a proportional means of achieving any or all of the identified aims?

Supreme Court decision

The Supreme Court accepted that the aims identified by the Employment Tribunal were legitimate and remitted the case back for consideration of whether the choice of age 65 for mandatory retirement was a proportionate means of achieving the first two aims. It noted that there was a difference between justifying a retirement age and the particular retirement age in this case.

Different approach to direct and indirect discrimination claims

The Supreme Court clarified that the approach to justifying direct age discrimination is not the same as the approach to justifying indirect age discrimination. In the case of direct discrimination claims, the focus is on the legitimate aim being pursued at a national level by the member state whereas in indirect discrimination cases, the focus is on whether the employer can justify their own employment practices.

In respect of legitimate aims for direct discrimination, the Supreme Court accepted that European law draws a distinction between legitimate aims which relate to employment policy and labour market or vocational training which are legitimate and those purely individual reasons which are particular to the employer's situation such as cost reduction or improving competitiveness which, in general, are not legitimate.

This means that the aims that might be relied upon to justify direct discrimination are fewer than those capable of justifying indirect discrimination, even though the proportionality test is essentially the same for both types of discrimination.

Legitimate aims for direct discrimination

It was noted that two different kinds of legitimate aim had been identified by the European Court in respect of direct discrimination. The first could be called "inter-generational fairness" meaning a variety of things such as:

  • facilitating access to employment by young people; or
  • enabling older people to remain in the workforce; or
  • sharing limited opportunities for work in a particular profession fairly between the generations; or
  • promoting diversity and the inter-change of ideas between younger and older workers.

The second kind might be called "dignity". That is avoiding the need to dismiss older workers on the grounds of incapacity or underperformance: this is more controversial as it looks suspiciously like stereotyping.

Aim must remain relevant

The Supreme Court reviewed the European law and held that there was no need for the aim to have been realised at the time the measure was first adopted. What is clear is that employers will need to demonstrate that the aim which they are pursuing is in fact still relevant.

For example, if the aim is to improve the recruitment of young people to achieve a balanced workforce, this will not help an employer's argument if there is in fact shown to be no problem in recruiting the young but the problem is in retaining older workers. While avoiding the need for performance management may be a legitimate aim, if a business already has sophisticated performance management measures in place then it may not be legitimate to avoid them for a single section of the workforce.

Proportionality

Identifying acceptable legitimate aim(s) is the first step. The second step is to demonstrate that the means employed to achieve that were "proportionate".

To do so, European law recognises that the seriousness of the impact on the employee who is discriminated against must be balanced against the importance of the legitimate aim(s) in assessing whether the particular method chosen was necessary. If the legitimate aim can be achieved by an alternative method which has a less detrimental effect on the individual then the employer's chosen method will not be proportionate and the treatment will be unlawful.

The Supreme Court said that tribunals will have to scrutinise each context carefully to see whether the particular business does meet the stated aims and there are not other less discriminatory measures which would do so.

The Supreme Court agreed that where it was justified to have a general rule, then the existence of the rule will usually justify the treatment which results from it. Therefore, it was not necessary to justify the application of the rule to a particular individual but only to show that it was justified in general in the context of that particular business.

Not a "green light" for mandatory retirement ages

In its judgment the Supreme Court gave a warning that all businesses will have to give careful consideration to what, if any, mandatory retirement rules can be justified.

Comment

This is not the end for Mr Seldon's litigation. As in many discrimination cases, whether or not his forced retirement at age 65 was a proportionate means of achieving the legitimate aims identified will be the real battle ground. The Judges in this case noted that at the time of Mr Seldon's retirement, it was lawful for employees to be retired at age 65 and that this may be highly relevant to any subsequent decision.

It is clear that the potential legitimate aims in direct age discrimination claims are now more limited than in indirect discrimination cases, being confined to larger social policy considerations rather than the individual employer's needs. However, identifying a potential legitimate aim still appears to be relatively straight forward given the options which have been identified by European law.

As these cases are fact specific, it is not always easy to apply the principles more widely but what is clear is that any employer who wishes to retain a retirement age of 65 (or any other age) will need to proceed with caution and produce compelling evidence of real need.

European law has recognised a number of overlapping legitimate aims in the context of direct age discrimination claims:

  • Promoting access to employment for younger people.
  • The efficient planning of the departure and recruitment of staff.
  • Sharing out employment opportunities fairly between the generations.
  • Ensuring a mix of generations of staff to promote the exchange of experience and new ideas.
  • Rewarding experience.
  • Cushioning the blow for long-serving employees who may find it hard to find new employment if dismissed.
  • Facilitating the participation of older workers in the workforce.
  • Avoiding the need to dismiss employees on the grounds that they are no longer capable of doing the job, which may be humiliating for the employee.
  • Avoiding disputes about the employee's fitness for work over a certain age.

The Supreme Court recognised that this is not an easy concept to understand but granting flexibility to employers can, in itself, be a legitimate aim. The United Kingdom has therefore chosen to give employers and others the flexibility to choose which objectives to pursue, provided that they can count as legitimate objectives of a public interest nature and are consistent with the social policy aims of the state and finally, that the means used to implement them are proportionate i.e. that is both appropriate to the aim and reasonably necessary to achieve it.