When the Supreme Court ruled in Seldon v Clarkson Wright and Jakes that a solicitor could be forced to retire at age 65, the national press ran stories about the “chaos and confusion” faced by employers and indicated that this was a seismic shift in the law. What many overlooked was the fact that the Claimant, Mr Seldon, was in fact a partner rather than an employee. The legal position for partners in partnerships is quite different to that for employees and employers.
So what impact does Seldon have on employers? In practice, the decision is unlikely to have much impact, if any, on employers. In no particular order, here are some of the reasons why employers should ignore some of the more sensationalist press headlines:-
- Since the introduction of age discrimination legislation in 2006, it has never been lawful to have a compulsory retirement age for partners. However, at the time Mr Seldon was retired by his firm, there was a statutory default retirement age for employees of age 65. Whilst this has since been abolished (in October 2011), the Supreme Court noted that it must be a relevant factor.
- Partners are typically regarded as having equal bargaining power with each other, whereas employees are seen as being the “weaker” party in the employee/employer relationship. In the Seldon case, at the age of 64 Mr Seldon had the opportunity to ask for the removal of the compulsory retirement age in the firm’s Partnership Deed, but he did not take it. Instead, he signed up to a new Deed re-confirming that his firm’s partners must retire at age 65. At the time, he was the firm’s senior partner.
- Partnerships operate like a pyramid, with the partners sitting at the top of the business structure and junior staff at the bottom. Whilst staff can progress up the pyramid, they either need existing partners to leave or they need the business to grow to enable the pyramid to retain its shape and stability. It is often argued that the structure makes it difficult for younger staff to make partner unless older partners retire at an agreed point in time. The Supreme Court accepted that compulsory retirement was potentially legitimate where its objective was to assist with the recruitment and retention of staff, aid workforce planning and share limited opportunities between generations. Such an argument is much less likely to justify retirement in the employment relationship because of the mobility of employees and because there are well developed performance management processes (see below).
- There is no recognised process for dealing with underperforming partners as this tends to be addressed by a firm’s Partnership Deed. Partnerships have therefore argued that retirement allows older partners to leave in a dignified manner, without the need for conflict. Employers on the other hand have the benefit of a large body of case law, as well as guidance such as the ACAS Code of Practice. There is an expectation that employers ought to be able to performance manage older workers, rather than forcing them to retire at a particular age regardless of performance levels.
It is likely to be difficult for businesses to justify a particular age as a compulsory retirement age because there are likely to be other methods, which are not discriminatory, to address employers concerns. Tribunals will expect employers to deal with older employees on a case by case basis, and they are unlikely to look favourably upon a blanket retirement age unless the employer can show that the policy is absolutely necessary.
If you are a partnership and you would like guidance on retaining a retirement age, please click here for details.