28/07/10

By Claire West

The Court of Appeal has today rejected an appeal from Mr. Leslie Seldon at age 65, following a long period of service as a partner at a firm of solicitors, Clarkson Wright & Jakes.

Rachel Dineley, employment partner and head of the Diversity and Discrimination Unit at law firm Beachcroft LLP said: “The decision will be of particular interest to professional services firms and other partnerships. It takes a conservative line to what is an increasingly important issue for many organisations.

"There has been a lot of controversy about the provision in regulation 30 of the Employment Equality (Age) Regulations 2006, which allows for compulsory retirement of employees at the age of 65 or above and this was an issue of much debate in the Heyday case, which upheld the provision , at least for now. The so called ‘default retirement age’ is currently under review and the coalition government is committed to its ultimate abolition.

"However, this rule does not apply to partners, and the Seldon case specifically deals with partners and is plainly most relevant to all non employees.

“Retirement age is a tricky business for all organisations. For the time being employers can still fairly retire employees at or after 65 if they follow the prescribed procedure. This case tells us what they may need to do in relation to non-employees, and, looking ahead, what they will need to do in relation to employees when the default retirement age comes to be abolished.

"Whether you can retire a non-employee depends on whether there is an objective justification, which will rarely be a straightforward issue. As the case makes clear, you may only lawfully discriminate against partners on grounds of age if you can justify it — that is to say that you have a legitimate aim and that you use a proportionate means of achieving the aim or aims. This is a general principle that underlies the rules as a whole, although there are some exceptions for particular types of treatment in respect of employees - for example in the provision of benefits and in relation to retirement. This judgement clearly also holds useful lessons for employers who may have to objectively justify retiring employees, in the foreseeable future.

"It is clear that careful analysis is required, and should be documented, as individual decisions are made, and these should be kept under review. A blanket policy may be dangerous, particularly as the needs of a business may change over time together with the age profile of its workforce. Employers must ask themselves, ”what is the rationale for this approach, and does it stand up to scrutiny?”

"Some employers have already taken the plunge and operate successfully without a compulsory retirement age. If the workforce is well managed, under-performance should be addressed at all levels, whatever the age of the individual in question. Where partners are owner-managers, the position is likely to be more complex, and the issues more wide-ranging and sensitive to address. For example, succession and financial planning may be essential and should be agreed upon.

"Historically partners have been reluctant to tackle performance issues among their peers. However, partnerships need to take a commercial approach too, and many firms are now run on corporate lines. Indeed, many would say that partners should be held accountable for performance as a matter of good business practice and as an example to the staff whom they employ. "

In the Court of Appeal the Department of Business Innovation & Skills was also represented (as an ‘intervener’), highlighting the importance of the issues under consideration.

CWJ’s justification that compulsory retirement at 65 is a proportionate means of achieving a supportive culture within the partnership by avoiding the need to confront or expel older partners who were underperforming, was partially upheld by the Employment Appeal Tribunal , who noted that expecting performance to drop off at 65 was a stereotypical assumption without an evidential basis. Mr. Seldon appealed, in part in reliance on this point.
The Court of Appeal reviewed the issues and arguments in the Heyday case on the justification of the default retirement age on a national basis and took a consistent approach. (The Heyday case went to the European Court of Justice before the default retirement age was upheld in the High Court here).

The Tribunal had been entitled to find, as legitimate aims, that the partners’ retirement arrangements served to:

- ensure associates were given the opportunity of partnership after a reasonable time;

- facilitate the planning of the partnership, and workforce by having a realistic long term expectation as to when vacancies will arise; and

- limiting the need to expel partners by way of performance management, thus contributing to the congenial and supportive culture of the firm

These aims were consistent with the justification for the regulations which permit age discrimination where it can be objectively justified and in particular Regulation 30 which permits the compulsory retirement of employees at 65 or above.

Furthermore, the Court of Appeal recognised that in choosing 65 as the retirement age for partners there is a distinction between a cut-off date in relation to the ‘dead men’s shoes’ aims (the first two, above) and the ‘congeniality ‘ aim, where the firm linked age 65 specifically with under performance. It was also important to note the retirement age of 65 was the subject of agreement between parties of equal bargaining power.