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Mr Seldon, a partner in a law firm, brought a claim of age discrimination when he was forced to retire at age 65. Because he was a partner rather than an employee, the (now repealed) default retirement age provisions in the Employment Equality (Age) Regulations 2006 did not apply. His employer nevertheless had to prove that Seldon’s treatment was justified as a ‘proportionate means of achieving a legitimate aim’. The tribunal held that his compulsory retirement was a proportionate means of achieving the legitimate aims of:
- ensuring that associates have the opportunity to become a partner after a reasonable period
- facilitating the 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 congenial and supportive culture in the firm
The EAT upheld the tribunal’s decision in all but one respect. The tribunal was entitled to conclude that objectives 1 and 2 were legitimate but its approach to objective 3 was flawed. While promoting congeniality between partners could be a legitimate aim, the suggestion that partners of or around the age of 65 are more likely to under-perform involved a stereotypical assumption (precisely what the legislation is designed to prevent). In principle such a rule could be justified but it was not in this case. The employer here produced no evidence that partners at age 65 had particular performance problems.
When the case reached the Court of Appeal, Mr Seldon tried a new argument – that employers can only rely on social policy aims to justify direct age discrimination. Rejecting this, the Court of Appeal held that the aims pursued by an employer are not limited to social aims – but they must be at least ‘consistent with the social and labour policy of the UK which justified the regulations’. Aims 1 and 2 above (referred to as ‘dead men’s shoes’ aims) were clearly justified said the court. As for aim 3, the court said this also could be legitimate because it was intended to produce a happy workplace which said the court, ‘has to be within or consistent with the government’s social policy justification for the regulations’.
Mr Seldon appealed to the Supreme Court which dismissed his appeal and sent the case back to the tribunal. While it dismissed the appeal, the court did provide some significant guidance on justifying direct age discrimination – which requiring an employee to retire at a particular age will inevitably be.
The types of legitimate aims that can be used to justify direct age discrimination are different from the aims that can be used to justify indirect discrimination. They must be based on ‘social policy objectives’, such as those related to employment policy, the labour market or vocational training. This means the aims must be of a ‘public interest nature’, rather than purely individual reasons particular to one employer’s situation (e.g. cost cutting or improving competitiveness).
European case law has identified two broad types of legitimate aim in direct age discrimination cases:
- ‘inter-generational fairness’, which can mean various things, including facilitating access to employment for young people, sharing work fairly between the generations, and enabling older people to remain in the workforce
- preserving the ‘dignity’ of older workers, i.e. avoiding the need to involve older workers in incapacity or under-performance processes
Applying them to Mr Seldon, the Supreme Court endorsed the three aims accepted by the tribunal. The first two related to inter-generational fairness and the third to preserving dignity.
It is not necessary, when seeking to justify discrimination, for the legitimate aim to have been articulated by the employer at the time, or even realised. The aim must be genuine, but could be a rationalisation after the event.
However, the Supreme Court emphasised that such aims must stand up to scrutiny in that each employer must show that they are legitimate in their case. For example, if the aim is to improve recruitment of young people, has the employer got a problem in recruiting the young? And seeking to avoid performance management for one section of the workforce may not be a legitimate aim if the employer already has sophisticated performance management measures in place.
The means of achieving the chosen aim must be appropriate and necessary – i.e. proportionate. This involves looking at whether, in the context of the particular employer, there are less discriminatory ways of achieving the same objective. In retirement cases, the key issue will be the age chosen for retirement, and whether this is proportionate. And it was this issue that was sent back to the tribunal to decide.
The Supreme Court also confirmed that it is not necessary to justify application of a retirement age to each individual – it is permissible for employers to have a general rule about retirement.
Seldon v Clarkson Wright and Jakes
Comment
- Whilst we now have some clarity on the issue of legitimate aims, this is only one part of the justification defence. The case has now been sent back to the tribunal to decide whether, on the specific facts, a mandatory retirement age of 65 was an appropriate and necessary means of achieving the legitimate aims in Mr Seldon’s case – so he could still win. But it’s possible that the tribunal’s ultimate decision may not be helpful because it may take into account that Mr Seldon’s retirement occurred at a time when retirement of employees at that age was permissible under the law. This would not be the case in relation to any compulsory retirements now.
- This case concerned a retirement in the context of a professional services partnership deed and therefore the aims upheld by the court should be viewed in that context. There are differences between the way partnerships are run and a traditional employment relationship and therefore the aims justified in this case may not always read across to employment.
- Showing that an aim is legitimate in the circumstances of the employer’s own business may not be at all straightforward. For example, an employer cannot simply assume that a fixed retirement age will assist with inter-generational fairness issues such as recruitment or promotion opportunities for younger workers – assertions will not suffice, actual evidence will be needed.
- Employers with sophisticated performance management measures in place are highly unlikely to be able to justify having a retirement age to avoid confrontation with under-performing workers (the ‘dignity’ aim).
- Arguably, from a practical point of view, this decision has changed very little. Every employer will still need to give very careful consideration to any retirement age they choose to rely upon and document how that retirement age can be justified in their particular business. Compulsory retirement will remain extremely high risk for employers - staff who are forced to retire are likely to feel that they have nothing to lose by pursuing a tribunal claim, particularly as compensation for unlawful discrimination is unlimited.
- Since the abolition of the default retirement age, most employers have now abolished fixed retirement ages and it is inconceivable that they would re-introduce them now, and certainly not on the back of this decision.
- For an essential critique of the misreporting in the press of this case, we’d recommend Darren Newman’s ‘Forced retirement: have the press over-egged Seldon?’
Some reactions
CIPD
The CIPD has urged employers to remember the business benefits of recruiting, retaining, engaging and motivating a diverse workforce and the value that an ageing workforce can contribute to business and the economy. Dianah Worman, the CIPD’s Diversity Adviser, commented ‘the main messages to be taken from this complex ruling are the difficulty of providing well evidenced reasons to justify the retention of a retirement age and the importance of good performance management to safely dismiss a person fairly on the basis of capability rather than their age. Since the removal of the default retirement age ... most businesses have dealt with the banning of compulsory retirement without skipping a beat, and there is significant evidence of good practice delivering real business benefits ... Compulsory retirement should only be implemented in exceptional and well evidenced circumstances, which should be applied across all forms of employment. For business, labour market economics and societal reasons, employers should not interpret the Seldon judgement as an indication that maintaining a retirement age is an easy or desirable option. On the contrary, we believe it points to the legal complexities of stacking one up when challenged’.
TAEN
Chris Ball, Chief Executive of TAEN – The Age and Employment Network commented: ‘While clearly it is unfortunate that the court has ruled against Mr Seldon, who wished to carry on working, there are a number of positives that can be taken from this case. Firstly, Mr Seldon will have the chance to present his case to the tribunal on the issue of whether his enforced retirement was a “proportionate” response to the underlying aims the firm was trying to achieve. He may still win. More generally, through its careful process of unpacking the tests of justification of enforced retirement, the Supreme Court has clarified the issues considerably. To be “legitimate”, aims must have an underlying social policy purpose rather than constitute anything that smacks of stereotyping. Moreover, the court has made it clear that the gravity of the effect upon the employee discriminated against has to be weighed in assessing the necessity of the particular measure chosen. Mr Seldon will doubtless take heart from this comment and ensure that the tribunal understands the impact on him. One implication of the decision is that where employers have sophisticated performance management approaches in place, they will have to adhere to them and apply them fairly to all employees. This ruling has taken us forward in recognising that stereotypes of the older worker are no longer acceptable. Employers will need to be very careful when shedding older staff from now on. Employers will have to show that both the underlying aims of forced retirement are legitimate and then go on to show that retirement itself is the only way to achieve these aims. This sounds like quite a tough test and it is right that it should be. The judgement is a welcome move forward in the fight against age-discrimination’.
CBI
Neil Carberry, CBI Director for Employment & Skills Policy, said: ‘This ruling confirms that, at least in principle, companies are able to set their own retirement age. However, this does nothing to fill the vacuum left by the government’s scrapping of the default retirement age. If employers want to set a retirement age that is suitable for their workforce, and know for sure whether it is legitimate, they will still have to go through a costly and lengthy legal process. The government cannot continue to pass the buck. Employers need to know how to handle the sensitive issue of retirement, with adequate protection to discuss plans with their staff, and better guidance on when a retirement age is justifiable’.
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