Supreme Court Hands Down Seldon Judgment

Increase in Discrimination Claims Now More Likely

25.04.2012

Whilst a judgment handed down today (25 April 2012) at the Supreme Court has left the door open for allowing businesses to set their own retirement age for staff – it is only if the reasons for doing so meet both their own and  public policy objectives.

The case, viewed as one of the most significant for years on the issue of age discrimination, involves Mr. Leslie Seldon, a former senior civil litigation partner at Clarkson Wright and Jakes (CWJ).

Although the default retirement age (DRA) was abolished in October 2011, it is theoretically possible for organisations to introduce their own retirement age as long as they have a legitimate aim and the particular DRA chosen is a proportionate means of achieving that aim.

CWJ claimed that its retirement policy, which led to Mr. Seldon leaving the firm when he turned 65, satisfied those requirements as it:

• allowed effective succession planning of partners and the workforce;
• provided associates with a clear opportunity of partnership, so aided retention (both of these two reasons were referred to as the “collegiality” reasoning); and
• avoided the need to expel partners through performance management,  (the “dignity” point).

The Supreme Court has accepted the principle that a private employer could have its own DRA, but is also appears to have effectively narrowed the circumstances in which there can be a legitimate aim by declaring that, in addition to its own internal legitimacy, an employer must equate its aims to wider public policy objectives such as those relating to employment policy, the labour market or vocational training. It also called on Tribunals to drill down more closely into an employer’s assertions about the aim being pursued and the means of doing so, and not accept broad propositions.

In this case, the Supreme Court accepted that CWJ’s aims set out above were legitimate, having regard to the public policy objectives in the previous paragraph. However, it thought that there had not been sufficient scrutiny of whether the chosen retirement age of 65 was a proportionate means of achieving those aims, the Supreme Court defining “proportionate” as “appropriate” and “necessary” to achieve the aims.

Therefore, the case is being sent back to the Employment Tribunal in order that it might carry out that closer examination. Only then will there be a final conclusion on the overall issue of whether this employer is entitled to have its retirement age of 65 for partners.

The latest judgment in this long-running case could, therefore, make it more difficult for organisations to justify their own retirement age.

National law firm, Irwin Mitchell, represented Age UK in its intervention in the Supreme Court, having acted for it in the earlier Heyday case in the European Court of Justice, which gave rise to this line of cases in the first place. Declan O’Dempsey, of Cloisters Chambers, was the barrister instructed to appear for Age UK in the Supreme Court, having also acted for Age UK alongside Robin Allen QC in the Heyday case.

Irwin Mitchell Partner and national head of employment, Tom Flanagan, commented:

“This is an eagerly awaited judgment as the outcome provides businesses with clearer guidance in relation to their own retirement policies after the DRA was abolished in October 2011.

“The Supreme Court has required what looks like a more restrictive interpretation of those issues, which means that an employer can have its own DRA, but only if its legitimate aim satisfies public policy objectives, as well as its own internal ones, and it is prepared to gather sufficient evidence in order to justify the means of achieving it. Having said that, as the case, itself, shows, many “internal” aims are likely to reflect the main social policy aims in any event.”

Nevertheless, Mr. Flanagan predicts that companies are likely to be less inclined to introduce their own retirement age, and, in fact, the Supreme Court cautioned employers against adopting their own DRA without careful scrutiny. The “price” for that may well be an increase in the number of age discrimination cases if they do not apply their performance management systems fairly and evenly.

He said: “Employers are already being encouraged to apply more rigorous performance management processes to older employees so that a dismissal at ‘a certain age’ might be viewed as justified for poor performance, not age.

“The ‘inference of discrimination’ may be clear in these cases as it may not be difficult to infer that a dismissal now of someone who could have retired last year is because of their age. The case would be even stronger if the performance management being applied to older employees is different to what was applied to them previously, and is in any way different to what is applied to the rest of the workforce.
 
“It is my view that employers would be at greater risk of age discrimination claims if they try to ‘performance manage’ out those who could have been retired before the abolition of the DRA particularly in ways which were not applied to them before then.

“I would not be surprised to see a large increase in age discrimination cases, at least for two or three years, until employers can show, if they can, that the ‘new’ performance management processes are applied evenly across the whole workforce.

“We may also see the Government issue guidance on this area, or the Equality and Human Rights Commission updating their Codes of Practice to take account of the principles of the Judgment, although that may not happen until the Employment Tribunal have reached their decision and any subsequent appeals are dealt with. There is potentially still a long way to go before employers have real clarity on what they can and cannot do.”