- Case To Provide Clarity On Whether Firms Can Set Own Retirement Age

The ability for organisations to set the retirement age of their own staff now that the default age of 65 has been removed will come under close scrutiny tomorrow (17 January 2012) at a Supreme Court hearing.

The case was brought by Mr. Leslie Seldon, a former senior civil litigation partner at Clarkson Wright and Jakes, and focuses on whether the law firm’s aim of retiring partners at 65 was legitimate and justifiable (“the Seldon case”).

According to national law firm, Irwin Mitchell, the hearing will be one of the most significant age discrimination cases to date, as it should provide businesses with clearer guidance in relation to their own retirement policies now that the default age (DRA) was abolished in October 2011.

Clarkson Wright and Jakes claims that its retirement policy, which led to Mr. Seldon leaving the firm when he turned 65, allows it to plan for succession more effectively and provide associates with a clear opportunity of partnership. It also argues that it avoids the need to expel partners through performance management, thus contributing to the congenial and supportive culture in the firm.

These justifications based on dignity and intergenerational fairness had been endorsed by the European Court of Justice in relation to a national default retirement age. This case, known as Heyday, ultimately contributed to the UK changing the law and abolishing the DRA. These justifications were however accepted by the Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal in the Seldon case, in relation to whether a private employer could have its own DRA.

The Court of Appeal’s judgement meant that a private employer could justify having its own DRA if it had a legitimate aim and the particular DRA chosen was a proportionate means of achieving that aim; and provided that it did not contradict the social or labour policy aims that the UK used to justify the original state DRA.

Tom Flanagan, partner and head of employment at Irwin Mitchell, said: “This is a very important case and no doubt it will be watched very closely as it will go some way towards providing greater clarity  on whether businesses  can retain or introduce their own retirement age.

“So far the Employment Tribunal, the Employment Appeal Tribunal and the Court of Appeal have agreed that the law firm’s aims were legitimate and the retirement age was, on the facts of this case, a proportionate means of achieving those aims. The outcome from this hearing could however change all this and make it more difficult in the future for businesses to justify their own retirement age according to their private aims.”

Mr. Flanagan added: “If Mr. Seldon is successful, companies would probably have to make their aims in relation to any retirement policy more specific and clarify them in advance. At first glance that might suggest that it would be even more difficult for an employer to justify its own DRA, so fewer would try to do so.

“On the other hand, it could be said that those limitations on being able to justify a DRA exist already, even in the light of the current state of the Seldon case.

“Perhaps the difficulty in justifying a DRA arises out of the perception that it is necessary to have only one DRA, across the board, if at all. In a multi-faceted business, there could be a number of different outcomes on the issue of a DRA, such as being unable to justify one at all; being able to justify one for the whole workforce; justify one for some of the workforce; or justify more than one for different groups of employees. Whatever the approach, there would have to be clear aims and evidence of the impact of the policy.

“One reason why it might still be relevant for employers to consider having their own DRA is the possibility of a rise in the number of age discrimination cases as employers begin to apply a rigorous performance management system to those to whom they did not do so before the abolition of the DRA.

“Whilst the outcome of performance management is often to improve and retain employees, if the result is to dismiss someone who has reached what would have been the DRA before it was abolished, it might not be too difficult to raise the ‘inference of discrimination’.

“It’s hard to predict at this stage how likely this will be, but I would expect an increase in cases for a period – say one to two years – with an eventual reduction as performance management techniques have been applied to the once retired employees for a time. One would have to question whether it would be more reasonable, and indeed dignified, to have a managed departure against a justifiable DRA or range of them.”