Supreme Court rules on Compulsory Retirement Age

25 April 2012

The Supreme Court has today handed down its long awaited decision in Seldon v Clarkson Wright & Jakes relating to whether employees can be compulsorily retired at a given age.  The case is of huge importance to all businesses as it tackles the thorny issue as to whether to retain a compulsory retirement age and, if so, whether it should be 65 or any other age.

Mr Seldon was a solicitor, and a senior partner, in the Kent firm of Clarkson Wright & Jakes.  The firm compulsorily retired him at aged 65 and so he brought a claim against the firm for age discrimination.  His claim was rejected by the Employment Tribunal, and so he unsuccessfully appealed to the Employment Appeal Tribunal.  He also lost at the Court of Appeal stage.  Finally, the case reached the Supreme Court, which this morning also rejected most of his appeal, although one particular issue was sent back down to the Employment Tribunal for further consideration.

Of great help to employers is the lead judgment, which lays down guidance that assists those businesses trying to decide whether or not to retain a compulsory retirement age.  In the view of the Supreme Court, it was possible, in Seldon’s case, for the firm to “ justify” compulsory retirement on the basis of 3 particular aims put forward by the firm which were considered “legitimate” for these purposes.  They were:

  1. Giving junior lawyers an opportunity of becoming partners within a reasonable time, thereby incentivising them to remain with the firm;
  2. Facilitating “workforce planning” in the sense that members of the firm would know when vacancies might be expected; and
  3. Limiting the need to expel underperforming partners so as to preserve the “congenial and supportive” culture of the firm.

The first two aims have been described as being directly related to “inter-generational fairness”. The third aim is in order to preserve an employee’s dignity. 

Although employers no longer have the benefit of the default retirement age to rely upon when their employees reach the age of 65, the “road map” given by the Supreme Court in this judgement for employers wishing to retain a compulsory retirement age may be looked upon as the next best thing.

The Court has confirmed there is no need to identify the particular “aims” at the time a retirement policy is articulated and adopted – it can be for the Court to draw conclusions subsequently, should there be a challenge and the employer’s aims can, at that late stage, be put forward.  Nonetheless, on a practical level, it certainly makes sense for businesses now to review where they stand in relation to this important issue so that they can be clear as to what their policy is going to be, and how they will seek to justify that policy, should it come to be challenged. 

The case applies to all employment situations - not just partnerships.  The judgment confirms that it is not just a matter of adopting the aims confirmed as legitimate, by the court, but to make sure they are properly applied.  So, if you already have good performance management procedures in place, the third aim (i.e. limiting the need to put older, underperforming people through a performance management process so as to preserve the “congenial and supportive” culture of the employer) is unlikely to be an applicable or legitimate aim.

We shall obviously be examining the Judgment in detail, and if you should have any questions in the meantime, please do not hesitate to contact any member of our Employment Team.

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