Call us now 01473 688100

When can you compulsorily retire your employees?

Posted on 29th April 2012
Case law

Read our summary for the background facts and full explanation of the court's decision in Seldon v Clarkson Wright & Jakes.

On this page

Meet the author

Simon Quantrill Simon
Quantrill
Managing Partner Telephone: 01473 688100

the claim of direct age discrimination failed because the partnership was able to objectively justify the reasons for its compulsory contractual retirement age

Seldon v Clarkson Wright & Jakes (A Partnership) [2012] UKSC 16

Background

From April 2011 the ability for all employers to compulsorily retire any employee at the default retirement age of 65 was repealed. Now under the Equality Act 2010 the compulsory retirement of any employee amounts to direct age discrimination unless it is objectively justified by the employer.

Unlike other forms of direct discrimination, direct age discrimination can be objectively justified. In order for an act not to amount to direct age discrimination it must be a "proportionate means of achieving a legitimate aim".

The Supreme Court's decision in Seldon v Clarkson Wright & Jakes provides employers with detailed guidance about when an employer's contractual (default) retirement age will be objectively justified and thus not amount to direct age discrimination.

The facts

The claimant, Mr Seldon, was an equity partner in a firm of solicitors. In 2006 Mr Seldon was 65 and was forced to retire from the partnership against his will in accordance with the terms of the partnership deed. For financial reasons Mr Seldon wanted to stay at work for at least another three years. The partnership refused his request to stay on in any capacity. Mr Seldon then brought claims against the partnership in the employment tribunal including direct age discrimination. This claim was brought under the Employment Equality (Age) Regulations 2006 which have now been incorporated into the Equality Act 2010. Although at the time of Mr Seldon's retirement the default retirement age of 65 was in force this did not apply to him because he was not an employee but a partner. The decision in this case, however, also applies to all employees and to the Equality Act 2010 so it is a relevant and binding precedent.

The decision

The Supreme Court had to decide if the original decision of the employment tribunal was correct; it had held that Mr Seldon's claim of direct age discrimination failed because the partnership was able to objectively justify the reasons for its compulsory contractual retirement age. Mr Seldon had appealed against this decision.

At the core of the Supreme Court's decision was confirmation that the employer's reasons for establishing objective justification must fall inside Article 6 of the Equal Treatment Framework Directive (2000/78/EC). Article 6 provides that to justify direct age discrimination the employer's legitimate aims must be "social policy objectives" and not simply reasons particular to the individual employer's situation (e.g. to improve business efficiency or to cut costs).

The Supreme Court reviewed all the relevant European case law and explained what was meant by social policy objectives in the context of age discrimination cases - these include the following examples of legitimate aims:

  • promoting access to employment for younger people
  • the efficient planning of the departure and recruitment of staff
  • sharing out employment opportunities fairly between the generations
  • ensuring a mix of generations of staff so as to promote the exchange of experience and new ideas rewarding experience
  • avoiding the need to dismiss employees on the ground that they are no longer capable of doing the job which may be humiliating for the employee concerned
  • avoiding disputes about the employee's fitness for work over a certain age.
In all cases, however, the measure in question must be both appropriate to achieve its legitimate aim and necessary in order to do so.

At the employment tribunal, the Partnership successfully argued that its legitimate aims included:

  • ensuring the retention of associates by giving them the opportunity of partnership and thereby reducing the risk that they would leave the firm;
  • facilitating the planning of the partnership and workforce across individual departments 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 a congenial and supportive culture in the respondent firm.
The Supreme Court agreed holding that the above aims, "when viewed objectively" qualified as "legitimate social policy".

The Court also confirmed that it was not necessary for the above aims to have been "in mind at the time" the partnership deed was entered into in 2005. The test is satisfied if the aim can be objectively justified at the employment tribunal hearing. It matters little that in this case the partners did not address their minds to the above aims at the time.

Once the legitimate aims have been identified, the next question to be decided is whether the compulsory retirement age of 65 was proportionate and necessary as a means of achieving these aims. Mr Seldon's case has been sent back to the employment tribunal to consider this question. This is because the partnership still has to show that there was not one or more less discriminatory options it could have adopted.

Finally the Supreme Court also made it clear that once the employer has objectively justified any form of direct age discrimination the act or policy can then be applied generally regardless of how it might impact on an individual. This means that provided the employment tribunal decide that the compulsory retirement age of 65 was a proportionate and necessary means of achieving the partnership's aims, the partnership will not be expected to have taken into account Mr Seldon's individual circumstances.

In practice

This decision does not mean you can now safely this week introduce a contractual retirement age and go back to the old days of compulsory retirements at age 65! The decision, however, lets you introduce a compulsory retirement age if you can objectively justify it. And this is probably still easier said than done. The Supreme Court made it clear that:

"Once an aim has been identified, it has still to be asked whether it is legitimate in the particular circumstances of the employment concerned. For example, improving the recruitment of young people, in order to achieve a balanced and diverse workforce, is in principle a legitimate aim. But if there is in fact no problem in recruiting the young and the problem is in retaining the older and more experienced workers then it may not be a legitimate aim for the business concerned. Avoiding the need for performance management may be a legitimate aim, but if in fact the business already has sophisticated performance management measures in place, it may not be legitimate to avoid them for only one section of the workforce.

Finally, of course, the means chosen have to be both appropriate and necessary. It is one thing to say that the aim is to achieve a balanced and diverse workforce. It is another thing to say that a mandatory retirement age of 65 is both appropriate and necessary to achieving this end. It is one thing to say that the aim is to avoid the need for performance management procedures. It is another to say that a mandatory retirement age of 65 is appropriate and necessary to achieving this end. The means have to be carefully scrutinised in the context of the particular business concerned in order to see whether they do meet the objective and there are not other, less discriminatory, measures which would do so."

Provided the above quote has not put you off, please contact Simon Quantrill to discuss how your business or organisation may be able to introduce a compulsory retirement age.

Clear, concise and accurate information for employers and HR professionals

Visit the hrlegal archive

Find out how we can help you

Click here to contact us or phone us 01473 688100

Keep your legal costs down with

Professional telephone and email advice and guidance for solving your everyday employment law and HR issues

No waffle, well written employment law updates and HR news articles, including case reports, helping employers and people managers keep up to date with what's important

Our outstanding employment tribunal litigation service for employers designed to secure the best possible outcome for a value for money cost

Related articles