This article was written for the Association of Partnerships Practitioners newsletter
The Court of Appeal has handed down its judgment in the long-running case of Seldon v Clarkson Wright & Jakes.
Mr Seldon was a partner in the law firm Clarkson Wright & Jakes until 2006. He was compulsorily retired in accordance with a term in the partnership agreement of CWJ in the December following his 65th birthday. Mr Seldon brought a claim in the Employment Tribunal claiming that his enforced retirement was discriminatory on the grounds of age.
The original decision of the Employment Tribunal
The Employment Tribunal held that the enforced retirement of Mr Seldon was discriminatory on the grounds of age, but that it was justified as a proportionate means of achieving the following legitimate aims:
- Ensuring that associates were given the opportunity of partnership after a reasonable period as an associate;
- Facilitating planning of the partnership and workforce across individual departments; and
- Limiting the need to expel partners by way of performance management, thus contributing to the collegiate culture in the firm.
With regard to (3), the Employment Tribunal also held that it was reasonable to select the age of 65 as the retirement age because it was not unreasonable to assume that some partners who have reached the age of 65 are not able to make as great a contribution as they had done in the past.
The decision of the EAT
Mr Seldon appealed to the Employment Appeal Tribunal and argued various points including the following:
(a) The tribunal was wrong in treating as relevant the fact that the provision was agreed between the partners. The EAT disagreed, drawing an analogy with Bridge v Deacons and saying that the tribunal rightly attached some significance to the fact that the collective parties have agreed a scheme which they consider to be fair.
(b) The objective of encouraging associates to stay could have been achieved in other ways, for example by having a provision allowing the firm to give notice compelling a partner to retire on 12 months notice if an associate was waiting to take his place. The EAT rejected this argument, noting that the giving of such notice could create much unpleasantness between the waiting associate and usurped older partner.
(c) Contributing to a supportive and collegiate culture was not capable of being a legitimate aim because it was not a proper business objective. The EAT disagreed, stating that CWJ’s desire to foster a supportive and collegiate environment was manifestly a legitimate objective.
(d) If creating a collegiate environment was a legitimate aim, there was no justification for choosing 65 as the appropriate age. The EAT agreed with Mr Seldon on this point, criticising the assumption which the Employment Tribunal had made (in the absence of any evidence in support) that the performance of a partner would decline at 65. If a firm wanted to argue that performance of partners deteriorated after a particular age, it would have to analyse carefully the age at which performance actually started to fall off and be prepared to provide some evidence in support of the choice of a particular age.
By upholding legitimate aims (1) and (2) as found by the Employment Tribunal, Mr Seldon lost before the EAT. He appealed to the Court of Appeal.
The Heyday case
One of the central issues to be decided in the Court of Appeal in Seldon was a point which arose from the decision of the High Court in the Heyday case, a claim brought by Age UK against the Government challenging the lawfulness of the Age Discrimination Regulations and, in effect, the national retirement agent for employees of 65. Various questions regarding the interpretation of the European directive underlying the Age Discrimination Regulations were referred to the European Court of Justice. The ECJ held that as long as the UK government had legitimate employment policy, labour market and vocational training aims, and provided that the Age Discrimination Regulations were a proportionate means of achieving those aims, the Age Discrimination Regulations would be lawful.
The matter was sent back to the High Court to decide these two questions, and Mr Justice Blake found in the Government’s favour. A key factor in persuading the Judge to find in the Government’s favour was its promise to review the state retirement age in 2010.
The Court of Appeal’s decision in Seldon
Mr Seldon asserted in the Court of Appeal that in light of the Heyday case, legitimate aims which were used by employers or partnerships to justify age discrimination had to be of a social policy nature. Mr Seldon argued that those aims relied upon by CWJ were not of a social policy nature but were individual to the needs of the firm, and so the tribunals had been wrong in finding that these aims were legitimate.
However, the Court of Appeal rejected this ground of appeal, stating that. It is the United Kingdom?s regulations or law which must be justified by reference primarily to social and employment policy choices. That is not the same as saying that a particular employer must only have a social or employment policy aim. Indeed, the Court of Appeal acknowledged that employers or partnerships may have slightly mixed motives, but that if their aims were consistent with the social policy aims of the government, they would be legitimate. The Court of Appeal held that the aims relied upon by CWJ were consistent with government social policy and therefore were legitimate.
After dismissing this ground of appeal, the Court of Appeal dealt briefly with Mr Seldon’s other grounds of appeal, which were mainly appeals on points considered by the EAT. The Court of Appeal broadly agreed with the judgment of the EAT.
Finally, the Court of Appeal considered whether the choice of 65 as the age of retirement was a proportionate means of achieving the first two aims which succeeded in the Employment Tribunal of assisting retention of associates and facilitating workforce planning. The Court of Appeal found that whilst the age chosen was very relevant to the collegiality aim (because the firm was essentially arguing that performance fell off at a particular age), it was not relevant to the other two aims, where another age could just as well have been justified. However, just because another age could have been justified, it did not render the choice of 65 disproportionate.
The decision in Seldon has confirmed that partnerships may include retirement age provisions in their deeds as long as they can justify them as proportionate means of achieving legitimate aims. What this means is having legitimate aims for forcing partners to retire when they reach a certain age, which aims must be consistent with government social policy. In Seldon the aims of assisting retention of associates and facilitating workforce planning were held to be legitimate aims. What is also necessary, however, is that the age chosen should be a proportionate means of achieving those aims. Whilst 65 was deemed to be proportionate in Seldon, the Court of Appeal drew support for this finding by saying that the choice of 65 when Regulation 30 actually renders lawful 65 in the employer / employee context must support the choice of 65 as a fair and proportionate cut-off point. Given that the default retirement age for employees is being abolished on 1 October 2011, firms which retire partners automatically at 65 should not assume their retirement provisions to be safe from successful challenge after this point.