Out-Law / Your Daily Need-To-Know

Expert: ruling gives 'very little comfort' to employers looking to defend compulsory retirement age in partnership case

Out-Law News | 04 Jun 2013 | 10:35 am | 3 min. read

Employers looking to defend or reintroduce a mandatory retirement age will find "very little comfort" in last week's decision allowing a law firm to force a partner to retire at 65, an expert has said.

Christopher Mordue of Pinsent Masons, the law firm behind Out-Law.com, said that the employment tribunal's finding would be "difficult to directly translate" into an ordinary employment relationship, due to the nature of the partnership structure. The case was referred back to the employment tribunal last year, after the Supreme Court found that a compulsory retirement age could be justified if it was "founded on legitimate social policy aims".

"The key justification for the retirement age in this case was that it created openings for associates to be promoted to partnership, not only assisting succession planning but enabling the recruitment and retention of associates who would leave the firm if they could see no opportunity for career advancement," Mordue said. "While similar arguments can be used in the employment context, they are unlikely to be as clear cut outside of a partnership structure with a very linear internal career progression pathway."

"Another key factor – again reflecting the nature of the partnership - was that the retirement age had been agreed by all of the partners in their partnership deed, with the partners being in an equal bargaining position with each other. Again, that factor is unlikely to be present in an ordinary employment relationship where a retirement age is imposed by the employer," he said.

He said that although it would not be impossible for an employer to justify a mandatory retirement age following the decision and that of the Supreme Court, doing so would be an "onerous task".

"The process of justification has to be evidence-led and the employer would need to demonstrate very clearly, and in a concrete way, the problem created by operating without the retirement age. Furthermore, the employer will have to show that the chosen age is proportionate to achieving that objective, meaning that it has to be clear why the same objective cannot be achieved not only without any retirement age but also without a higher retirement age," he said.

Leslie Seldon, a partner in law firm Clarkson Wright and Jakes, had claimed that his forced retirement in 2006 was an act of direct discrimination under the Age Equality Regulations, which were replaced in 2010 by the Equality Act. Direct discrimination occurs when a person is treated less favourably then another would have been in comparable circumstances; however the Employment Equality (Age) Regulations create an exception where the treatment is "objectively and reasonably justified by a legitimate aim" and the means of achieving that aim are "appropriate and necessary".

Last year, the Supreme Court ruled that the firm could justify a compulsory retirement age for its partners on the grounds of enabling them to retain staff and allowing them to plan for the retirement of partners. It referred the case back to the employment tribunal to consider whether the age of 65, as specified in the firm's deed of partnership, was "proportionate" as opposed to selecting another age.

Ruling that it was, the employment judge said that there had to be a balance between "the needs of the firm and of the partners and of the associates"; the last of which could have seen the retention of partners in their 70s and 80s as "a limitation upon the opportunity for advancement".

"The age had been in the partnership deed for as long as could be remembered and the clause was retained in the most recent partnership deed without discussion," the judge said. "It was an age that [Seldon] described as a reasonable target. It was not an age with which any of the partners had expressed disagreement. The partners, including [Seldon], were in an equal bargaining position when they consented to the inclusion of the rule."

"The fact that a higher or lower retirement age could have been agreed does not mean that the age selected was not appropriate and reasonably necessary ... The aims were to assist the retention of associates and facilitate planning. It is not, in the view of the Tribunal, correct to argue that any retirement age would achieve the two aims," the judge said.

The judge noted that when Seldon retired in 2006 the default retirement age (DRA) for employees was also 65. This was abolished in 2011. Had Seldon retired after the abolition of the DRA and planned changes to the state pension age, it may have been more difficult to justify a mandatory retirement age for partners of 65, the judge said.