Shortly before the Government's announcement on the default retirement age (DRA), the Court of Appeal delivered its first substantive judgment on objectively justifying compulsory retirement in the case of Seldon v Clarkson, Wright and Jakes. 

Mr Seldon was a partner in a law firm and was compulsorily retired at age 65. He brought an Employment Tribunal claim alleging that he had been directly discriminated against on the grounds of his age.  Mr Seldon was not an employee and was not covered by the default retirement age in the Employment Equality (Age) Regulations 2006.  Therefore, the firm had to objectively justify their decision to retire him by demonstrating that the retirement rule was a proportionate means of achieving a legitimate aim. 

The Court of Appeal has upheld the Tribunal's ruling that in this case compulsory retirement at age 65 was a proportionate means of achieving the legitimate aims of:

• ensuring associates were offered the opportunity of partnership after a reasonable period;

• facilitating workforce planning across the firm by setting realistic long term expectations as to when vacancies would arise; and

• promoting a supportive workplace culture by limiting expulsion of partners through performance management. 

Impact on employers

The decision provides useful guidance for employers who will have to objectively justify compulsory retirement from next year.  Although the arguments considered reflected the context of a small law firm, it is likely that the underlying principles will be relevant to many workplaces.  The Court's endorsement of the compulsory retirement policy is therefore encouraging for those employers keen to retain a compulsory retirement rule even after the DRA is abolished.

• Employers do not have to show a "legitimate social policy objective"

The European legislation provides that age discrimination may be objectively justified in pursuit of legitimate aims, including legitimate employment policy, labour market and vocational training objectives.  Mr Seldon argued that private employers must show such legitimate "social policy" aims to meet the test of justification and that, as the firm's aims of succession planning and associate retention applied only to itself, these did not amount to social policy reasons.  This was rejected by the Court, which confirmed that the "social policy objective" is not a test that private employers have to meet.

• Agreement between parties of equal bargaining power is a legitimate factor

The firm's partners had all agreed to the clause in the partnership agreement governing compulsory retirement and the majority considered it to be in their collective interest.  In determining whether compulsory retirement is objectively justified, the court said it is legitimate to take into consideration the fact an agreement has been reached between parties of equal bargaining power. 

• Limited exceptions do not undermine a compulsory retirement rule

 The fact that the compulsory retirement clause in the partnership agreement contained a limited exception allowing some partners to be kept on beyond age 65 did not mean that the rule was unclear or undermined the firm's recruitment and promotion aims.

• Once a retirement rule is justified, its application to a particular employee will rarely require further specific justification

Mr Seldon argued that, even if the firm's retirement policy could be objectively justified, the firm had not shown that enforcing the rule was justified in his particular case.  This was also rejected: once the rule has been objectively justified, its enforcement against a particular individual will need little further justification, as that enforcement will be viewed as part and parcel of the proportionate means of achieving the legitimate aim.

• Objective justification of chosen policy is key, not consideration of possible alternatives

Mr Seldon argued that a cut-off age of 66 would have been less discriminatory.  The Court pointed out that the selection of a particular retirement age would always be more discriminatory to individuals of that particular age.  The essential question is whether an organisation can objectively justify compulsory retirement at the particular retirement age it has chosen. 

19 August 2010

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