Seldon v Clarkson Wright & Jakes [2010] EXCA Civ 899

Why care?

The Employment Tribunal, and then the Employment Appeal Tribunal, held that the compulsory retirement of a partner in a law firm was not an act of unlawful discrimination under the Employment (Age) Regulations 2006 as it was a proportionate means of achieving a legitimate aim.

Regulation 30 of the Age Regulations provides that setting retirement ages of 65 or above for employees will not be discriminatory but there is no such exception for partners. Therefore, any compulsory retirement provision for partners may be discriminatory unless objectively justified.

The Regulations also provide that it is unlawful for a firm to discriminate against a partner "in the way they afford him access to any benefits or by refusing to afford; or by subjecting him to any other detriment, or deliberately not affording, him access to them" by expelling him from the partnership; or by subjecting him to any other detriment (Reg 17).

The case

Mr Seldon was a partner in a firm of solicitors for 35 years. The partnership deed stated equity partners should retire on 31 December following their 65th birthday, or on such later date as the partners shall from time to time and for the time being decide. (There was no power to expel a partner for unsatisfactory or poor performance, as such a power was considered to be disruptive of the internal harmony and collegiate atmosphere within the firm. When the 2005 deed was being discussed among the equity partners, no mention was made about changing the compulsory retirement provision.) Accordingly, Mr Seldon was retired after his 65th birthday although he had wanted to continue working for the firm on a consultancy basis.

The tribunal dismissed his claim of direct age discrimination. It held that although he had suffered less favourable treatment on the grounds of age, this treatment was objectively justified as the following aims were legitimate:

a)
 ensuring that associates are given the opportunity of partnership after a reasonable period, thereby ensuring that associates do not leave the firm;
 
b) facilitating the planning of the partnership and workforce across individual departments by having a realistic long term expectation as to when vacancies will arise; and
c) limiting the need to expel partners by way of performance management, and thus contributing to the congenial and supportive culture in the firm.

Mr Seldon then appealed to the EAT, which dismissed all his grounds save the assumption that performance dropped off at 65. This was not supported by any evidence from the firm and involved stereotyping.

Once again, Mr Seldon appealed. The Court of Appeal held that (following the Heyday decision, which came out between the EAT and the Court of Appeal hearings) the EU Framework Directive permitted Member States to derogate from the principle of equal treatment by justifying direct age discrimination. Heyday held that Regulation 3 of the Age Regulations (allowing direct and indirect age discrimination if it is a proportionate means of achieving a legitimate aim) was lawful.

Article 6 of the Framework Directive refers to legitimate aims including legitimate employment policy, labour market and vocational training objectives. This is not a test which private employers need to satisfy in seeking to justify direct age discrimination. The Court of Appeal held that the appropriate test is whether an employer’s actions are consistent with the social or labour policy of the UK which justified the Regulations themselves.

The Court of Appeal held a private employer’s aim of producing a happy workplace, and to allow people to retire with dignity is consistent with the UK Government’s social policy justification for the Age Regulations.

As the firm was a partnership and the rule was contained within its partnership deed, it was held to be agreed by parties of equal bargaining power and this was of relevance to the decision. It was reasonable to assume that Mr Seldon had agreed to the rule at one time.

The Court held that in cases involving a mandatory retirement age, the justification must be assessed at the point of termination: 1) was the rule justified?; and 2) was the application of that rule applicable in the circumstances? The Court noted that generally the point of a mandatory rule is that it is mandatory, and therefore did not expect the second question to do much more than repeat the justification under the first question most of the time.

Finally, the Court held that it is not possible to overturn a compulsory retirement age because a higher age would be less discriminatory. If it were, then there would always be an older possible retirement age and therefore no retirement age would be justified which is contrary to Recital 14 of the Framework Directive, which says, "This Directive shall be without prejudice to national provisions laying down retirement ages".

What to take away

The Court of Appeal’s decision is generally supportive of those who wish to enforce retirement. On the facts of each situation, two types of aim appear to be legitimate: "dead men’s shoes" (i.e. providing juniors with the chance of promotion and enabling workforce planning by identifying when vacancies were likely to open up) and "collegiality" (ie limiting performance management and therefore contributing to a "congenial and supportive workplace").

The default retirement age of 65 for employees did not apply in Mr Seldon’s case because he was a partner. This is due to be removed in October 2011 in any case, meaning employers who wish to compulsorily retire employees will be required to justify their decision in a similar way to the firm in this case. Without the default retirement age, an employer choosing a retirement age will have to do so only following research, showing evidence to support the principle and the age itself.

Source: http://reaction.taylorwessing.com/reaction/Newsletters/LawAtWork/2010_09_02.html#subject1