Partnership Retirement age: 65 and out!
This summer saw the end of the long drawn out litigation brought by Leslie Seldon, a former partner of law firm Clarkson, Wright & Jakes, against his former firm that its mandatory retirement age of 65 was age discriminatory. An Employment Tribunal found that Clarkson, Wright & Jakes' mandatory retirement age of 65 was a proportionate means of achieving the legitimate aims of work force planning and staff retention and therefore did not amount to direct age discrimination.
Unlike the other strands of direct discrimination, direct age discrimination can be objectively justified if it can be shown to be a proportionate means of achieving a legitimate aim. The regulations covering age discrimination at the time of Mr Seldon's "retirement" allowed employers to retire employees at the default retirement age of 65. However, this was not applicable to partners in respect of whom there was no default retirement age. This provision has subsequently been repealed in meaning that compulsory retirement at any age, whether of partners or employees could amount to direct age discrimination unless objectively justified.
Mr Seldon was compulsory retired from the partnership of Clarkson, Wright & Jakes at the end of 2006, the year in which he reached 65, in accordance with the terms of the partnership deed. Mr Seldon wanted to work on, but the partnership rejected his request. Mr Seldon then launched Employment Tribunal proceedings arguing that his mandatory retirement was direct age discrimination.
Clarkson, Wright & Jakes argued that the mandatory retirement age of 65 was necessary for the purposes of:
- retention i.e. to create regular vacancies in the partnership to encourage ambitious associates to stay;
- planning i.e. compulsory retirement helped facilitate the planning of the partnership and workforce generally; and
- collegiality i.e. creating a congenial environment and culture by limiting the expulsion of partners through under performance.
An Employment Tribunal found in the firm's favour. Mr Seldon appealed with limited success to the Employment Appeal Tribunal which found that the grounds put forward by Clarkson, Wright & Jakes could be legitimate grounds of objective justification but there was no evidence to support the view that partners' performance dropped off at 65. Mr Seldon continued his appeals working his way up to the Supreme Court which agreed with the Employment Appeal Tribunal. The Supreme Court also held that the test for objective justification of direct age discrimination is different to that for indirect discrimination in that the aims must be consistent with the public policy aims of the state. It identified intergenerational fairness and dignity as two legitimate aims.
The case was remitted to an Employment Tribunal to consider the evidence to support Clarkson, Wright & Jakes arguments in light of the Supreme Court's guidance. The Employment Tribunal held that the aims of retention and planning were evidenced and that Mr Seldon's compulsory retirement at 65 was objectively justified.
So what does this mean to you? Many partnership agreements will have a compulsory retirement age, others will have removed such a clause following the abolition of the default retirement age. Arguments about succession planning and intergenerational fairness can be put forward to justify a retirement age. However, you need to give careful thought as to what that age should be, whether the state pension age or otherwise, and why such retirement age is reasonable balancing both intergenerational fairness and dignity in the workplace in order to justify a retirement age.