What does Seldon mean for mandatory age retirement provisions for partners and employees in future?
Last month the Employment Tribunal handed down its judgment in Seldon v Clarkson Wright and Jakes. The judgment follows the Supreme Court’s decision to send the case back to the Tribunal in April 2012. As a quick reminder, the Supreme Court upheld the aims for the compulsory retirement age identified by the Tribunal in its original 2007 decision. The Court, however, remitted the case to the Tribunal to consider whether the choice of the mandatory age (“the MRA”) of 65 years was a proportionate means of achieving those aims. The Tribunal held that it was proportionate in the circumstances at that time.
Background
Mr Seldon, a partner in Clarkson Wright and Jakes (the Firm), was compulsorily retired on 31 December 2006, the end of the year in which he reached 65 (as provided by the partnership deed). Mr Seldon wished to continue working for the Firm after his retirement. His proposal that he become a consultant or salaried employee for another three years was rejected. He issued employment tribunal proceedings arguing that he had been directly discriminated against on the grounds of age.
Dismissing the claim, the Tribunal held that compulsory retirement was a proportionate means of achieving the following legitimate aims:
- Retention of associates by providing them with the opportunity of partnership after a reasonable period (“the retention aim”);
- Facilitation of partnership and workforce planning with realistic expectations as to when vacancies would arise (“the planning aim”);
- Creation of a congenial and supportive workplace by minimizing the expulsion of partners through performance management (“the collegiality aim”).
Therefore, despite his suffering less favourable treatment as a consequence of his age, the Tribunal held that Mr Seldon’s treatment was justified. Mr Seldon appealed.
The Employment Appeal Tribunal (“the EAT”) allowed the appeal in part. It found that while the collegiality aim justified the adoption of a mandatory retirement age, the Tribunal was not entitled to fix that age at 65 because there was no evidence that partner performance would drop off around that age. However, uncertain of the conclusion the Tribunal would have reached by reference to the first two aims alone, the EAT remitted the case to the Tribunal for the question to be assessed afresh. Mr Seldon appealed.
Both the Court of Appeal and the Supreme Court dismissed the appeal. The Supreme Court held that the first two aims (retention and planning) were both directly related to the legitimate social policy aim of sharing out professional employment opportunities fairly between the generations; the collegiality aim was limiting the need to expel partners by way of performance management, which was directly related to the dignity aims recognised and accepted by the European Court of Justice. However, the Supreme Court thought it too constraining to deny the Tribunal the opportunity to consider whether the aims justified specifically the chosen retirement age of 65 years and so the case was remitted back to the Tribunal.
Proportionality
The Tribunal in its decision last month considered whether the mandatory retirement age was an appropriate and reasonably necessary means of achieving the retention and planning aims. The collegiality aim was not subject to a separate proportionality assessment (see below). It was necessary to consider each aim separately.
The Tribunal rejected submissions made on behalf of Mr Seldon that the planning and retention aims alone could never justify a mandatory retirement age because the two aims could be achieved by any retirement age (Mr Seldon sought to argue, unsuccessfully, that therefore the collegiality aim should govern the mandatory retirement age and that the age of 65 years could not be a proportionate means of achieving collegiality because such evidence as there was indicated no decline in performance before the age of 70).
As to the retention aim, the Tribunal observed that the retirement age had to be sufficiently low so as not to discourage associates who may leave for firms with more immediate partnership prospects. It also had to be sufficiently high otherwise associates may become concerned: about partners having to retire before the end of their careers; that the duration of partnership would not meet their expectation; or that there may be insufficient time as partners to make proper provision for retirement. Similarly, the Tribunal held that to the extent workforce planning was influenced by staff retention considerations it could not be achieved by any retirement age. In the Tribunal’s words, the age had to be such ‘that the aims of the partnership are fulfilled not only in the provision of legal services but also in the progression of younger solicitors to provide and extend such legal service’. The Tribunal also thought the planning and retention aims were as important, if not more important, as the collegiality to the development, continuation and success of the practice.
On the proportionality of each of the two aims, the Tribunal had to reach its decision by reference to the date of Mr Seldon’s compulsory retirement from the partnership in December 2006 and to the partnership’s reasonable needs, working practices and business considerations at that time. It observed that there had to be a balance between the needs of the firm, the partners and the associates. Partners were to be encouraged to spend their professional careers with the firm to establish a successful and continuing legal practice, but not to an age where succession cannot be assured and associates lose interest and leave.
The Tribunal concluded that there was not one single age that would fulfil the firm’s aims of associate retention and workforce planning – they could have selected another in a narrow range of ages to achieve the two aims. The Tribunal therefore had to consider the other factors that contributed to the selection by the firm of the MRA of 65 years to determine whether that age was appropriate.
Those other factors relevant at the time included for example:
- The consent of all partners to the retirement age of 65 and, as persons of equal bargaining power, their signing of the partnership agreement;
- The retention of the MRA of 65 in the partnership agreement was not regarded by the partners as controversial;
- The Default Retirement Age (“the DRA”) was set at 65 at that time, as was the state pension age for men (60 for women);
- The European Court of Justice has upheld a MRA of 65 for a variety of different aims in different cases brought before it; and
- The fact that mandatory retirement achieves the third aim of the firm, collegiality.
Particular emphasis was placed by the Tribunal on the mutual consent and the DRA of 65 years in reaching its decision. It noted however that the position might well have been different if the date of Mr Seldon’s forced retirement had been after the abolition of the DRA in 2011 and the planned changes to the state pension age (which by 2020 will increase to 66 and by 2026 to 67, with further rises in the pipeline thereafter).
Exclusion of collegiality
As already mentioned, the Tribunal did not consider whether the MRA was proportionate to the collegiality aim notwithstanding Mr Seldon’s submissions that not only did the MRA fail the proportionality test vis-à-vis the aim of collegiality but also that the retirement age proportionate to the collegiality had to be the only proportionate retirement age under the planning and retention aims. This decision of the Tribunal is explicable in the light of the earlier EAT judgment where the collegiality aim was found to be the only successful ground of appeal.
When the case was before the EAT it was held that a mandatory retirement age could be justified by the collegiality aim in principle but that it was not so justified in Mr Seldon’s case. The proposition that performance at work dropped off at 65, which underpins the collegiality aim, was not supported by evidence and involved stereotyping. The EAT held that such “sketchy” material that was put before it in fact suggested that the performance did not begin to tail off until the age of 70. The EAT remitted the case to the Tribunal to consider whether it would reach the same conclusion by reference to the retention and planning aims alone. Hence, the EAT decision excluded the collegiality from the proportionality assessment by the Tribunal.
The Tribunal therefore did not have to establish what retirement age would be appropriate and reasonably necessary to achieve collegiality. Nonetheless, it considered the issue in the light of Mr Seldon’s submissions. The Tribunal felt unable to determine a mandatory retirement age for partners to achieve the collegiality aim because the evidence before it concerned employees and workers and was not focused on or relevant to partners in law firms. It did, however, find that the collegiality aim could be a factor to take into account when considering the proportionality of the MRA as a means of achieving the other two aims. And, indeed, the Tribunal did take into account that mandatory retirement was a means by which collegiality could be achieved in deciding that the MRA was appropriate and reasonably necessary to fulfil the aims of retaining associates and workplace planning.
What does the judgment mean for partnerships and employers now and in the future?
The Tribunal’s decision in Seldon was of its time and on its particular facts. It provides little real comfort for other firms or employers on the issue of whether 65 would be regarded as a proportionate retirement age now or in the future, or indeed whether it is proportionate to have a mandatory retirement age at all. It will depend on the individual firm or employer being able to establish (with evidence):
- legitimate social policy aim(s) which the firm or employer is pursuing and which the mandatory retirement age progresses, such as workforce planning, staff retention, intergenerational fairness and dignity;
- that the provision is a proportionate (appropriate and necessary) means of achieving those aims, having regard to the reasonable needs, working practices and business considerations of the individual firm at the relevant time;
- that it balances the needs of the firm, and the older and younger members of the workforce; and
- that there is no less discriminatory means of achieving the firm’s legitimate aims.
MRA clauses in partnership agreements signed by all the partners may assist firms to compulsorily retire partners while reducing the risk of successful related age discrimination claims by those partners. But here too caution is required. While highlighting it as a strong factor, the Tribunal was explicit that the consent was not determinative. Furthermore, in Seldon all partners signed the partnership deed in 2005. This enabled the Tribunal to find them to be in an equal bargaining position. Whether the consent argument would have any sway beyond partnerships is doubtful given the obvious difficulties in establishing an equal bargaining position between employer and employee in ordinary employment relationships.
What remains of the collegiality aim? While the EAT left some scope for the argument that the retirement age of 70 might be justifiable, the case appears to have for the time being closed it off pending emergence of empirical evidence on the stages of decline in partner performance. It remains however a salutary reminder to all firms and employers of the need for cold hard evidence relevant to their own firm’s particular circumstances to support their justification of a mandatory age provision, and the level at which it is set.
