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Court of Appeal Decision on Mandatory Retirement Ages

In the meantime, the UK Court of Appeal has confirmed, in the case of Seldon v Clarkson Wright and Jakes, that a mandatory retirement age for partners in a law firm (to whom the DRA does not apply) can be justified. Given the proposed abolition of the DRA, this case will be of interest to employers looking to retain, and so justify, a retirement age going forward.

Mr Seldon, a partner in a law firm, was compulsorily retired at the age of 65 in accordance with the terms of the partnership deed. The firm accepted that this was directly discriminatory on grounds of age but argued that it could be justified, as it was a proportionate means of achieving legitimate aims. It was established that the law firm's aims were:

1. ensuring associates were given the opportunity of partnership after a reasonable period;
2. facilitating the planning of the partnership and workforce across individual departments by having a realistic long term expectation as to when vacancies will arise;
3. limiting the need to expel partners by way of performance management, thus contributing to the congenial and supportive culture in the firm.

The Court of Appeal found that all of these aims were legitimate. Where a private employer is concerned, there is no requirement for the aims of a mandatory retirement age to be of a social policy or public interest nature, provided that they are consistent with the government's social policy justification for the age discrimination legislation. There is also no need for the aims to have been consciously recognised at the time the mandatory retirement age was introduced.

The Court also found that the retirement age of 65 was proportionate. The fact that the law firm could have chosen a different (higher) age which would have been less discriminatory to some, did not automatically mean that 65 was not justified. Further, the fact that the legislation currently provides for a DRA of 65 for employees supported the firm's choice of 65 as being a fair and proportionate cut-off point.

Commentary

The Confederation of British Industry has expressed concern that without some form of alternative to the default retirement system, managing the end of employees' careers will become much harder and there will be an increased risk of age-based litigation. The Seldon case provides some indication of the justification arguments that employers may have to run in support of compulsory retirement following the abolition of the DRA. Whilst it identifies a number of legitimate aims that are capable of justification, it is clear that supporting evidence would need to be produced both as regards the decision to implement a retirement age and the choice of any particular age.

It is also worth noting that the Court of Appeal took into account the equal bargaining power between partners in a law firm in reaching agreement on the retirement age. In an employer/employee relationship, there will seldom be such equality of bargaining power, which may well affect any analysis as to justification.

Justification issues aside, there are also more practical issues on which the government's consultation on the removal of the DRA seeks opinion: how might its removal affect the provision of insured benefits (which are traditionally provided up to retirement age); and how would the fact that employees may now find themselves being dismissed or having to resign rather than reaching retirement, affect their status in employee share schemes, many of which tend to class employees as "good" or "bad" leavers? No doubt it will be some time before these issues are ironed out.

This entry was written by Lorna Scamman.