After Seldon

October 12, 2010

This opinion piece was written for Managing Partner Magazine

Most law firms, in their partnership or members agreements, require partners to retire when they reach a certain age. Such provisions constitute discrimination on the grounds of age and must be justifiable as a proportionate means of achieving a legitimate aim if the firm is successfully to defend a discrimination claim.

Following the Seldon judgments, firms which choose to have (or retain) a compulsory retirement age must abandon any complacency and be very clear on the answers to the following questions:

  • What are the firm's aims in retiring partners at a particular age?
  • Are those aims legitimate?
  • What is the compulsory retirement age that is proportionate to achieving those objectives?

Legitimate aims

The Court of Appeal held that it was permissible to justify having a compulsory retirement age by reference to a legitimate aim other than that which was specified at the time the measure was introduced. Not with standing this, a responsible firm will ensure that, when the measure is introduced, the firm is clear as to its aims. This question should be considered when the partnership or members agreement is being prepared or amended, and not when a claim is brought. Agreement by all partners to the provision is a relevant consideration but not conclusive as to the legitimacy of aims or proportionality of the provision.

In Seldon, Clarkson Wright & Jakes cited numerous objectives which the retirement provision was designed to achieve, only three of which were considered to be legitimate aims which might justify discrimination on the grounds of age. These were: providing promotion opportunities for associates within a reasonable period; workforce planning; and collegiality (avoiding the risk of destroying a collegiate culture on expelling older partners when their performance deteriorated due to age).

Firms which have in place performance management procedures effective to retire partners whose performance has declined to unacceptable levels will be unable to use the collegiality argument. Firms without performance management procedures which wish to rely on this argument will need to undertake some analysis of the age at which partner performance usually deteriorates. Any unlucky firm which faces a claim will want to have ready the evidence on which it has relied to support the choice of a particular age.

The right age is heading north

In Seldon, the Court of Appeal held that a compulsory retirement age of 65 was justified (but only with reference to the first two aims which the Court found to be legitimate, and not with reference to the aim of collegiality). In this context, there were two significant findings. The first was that, where a partnership’s aim is consistent with the social objective that has justified the legislative provision, that aim is lawful provided a proportionate means of achieving the aim is adopted. The second, which was the Court of Appeal’s sole answer to the question of whether 65 was an age which could be justified, was 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 these two findings, it is highly questionable whether, if Seldon were to be decided after the abolition of the default retirement age for employees on 1 October 2011, it would be decided in the same way.
 
Law firms would be well advised to review their compulsory retirement age every 5 years or so and to carry out the first review in advance of 1 October 2011. After that date it appears that the choice of age 65 will no longer be supported by government social policy. The abolition of the default retirement age of 65 will necessarily impact the promotion prospects of the younger workforce and require workforce planning to be undertaken differently. The social policy may retain as its objective producing a happy workforce but it will be by no means clear that the avoidance of tensions arising from having to performance manage partners will take precedence over the unhappiness caused by forcing the retirement of partners who continue to feel they have much to contribute.

After October 2011, firms will have to give much more careful thought to what retirement age is appropriate for the particular aims which the firm is seeking to achieve. In light of the forthcoming abolition of the default retirement age for employees and the fact we are generally living longer and healthier lives, the justifiable compulsory retirement age for partners in law firms is likely to be north of 65.

Given the fact that there is no limit on the damages that can be awarded for age discrimination, law firms cannot afford to get this wrong. The disappearance of compulsory retirement ages and the rise of strong performance management is confidently predicted.


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