The People Bulletin

With an ageing population and the accompanying rise in the nation’s welfare bill, it makes sense for those who want to work past their traditional retirement age to be enabled to do so and this is very much the stance of the coalition government. In line with this position, the Default Retirement Age (DRA) (the age – currently 65 – at which employers can impose retirement without giving a reason) is being scrapped from 6 April 2011.[1]

The compulsory retirement procedures set out in the Employment Equality (Age) Regulations[2] will cease entirely from 1 October 2011. This change will inevitably throw up a number of questions for employers with an ageing workforce.

Does this mean that employers cannot retire employees against their will?

The removal of the DRA of 65 in the UK does not necessarily mean that an employer cannot dismiss an employee through retirement when that employee reaches the age of 65 or any other age. However, it needs to be recognised that asking an employee to leave their job because the employee has reached a certain age is direct discrimination which is contrary to the Equality Act 2010.

In what circumstances can an employee be compulsorily retired?

Under the Equality Act both direct and indirect discrimination on the grounds of age can be defended if it can be shown that the discrimination is justified.

The Equality Act, mirroring provisions contained in the Age Regulations, states that the employer does not discriminate against the employee if he can show that his treatment of the employee in respect of the employee’s age is a proportionate means of achieving a legitimate aim.

Are there any exceptions to the rule?

There is no UK case law as yet on when retirement at 65 might be considered to be justifiable in the case of an employee. However, the DRA which applies to employees under the Age Regulations never applied to partners in a partnership. There have been a number of cases brought by partners who were being retired against their will and many of those cases explore the concept of justification. The case law relating to partners is directly relevant to the situation regarding employees post 1st October 2011.

Are there any cases where an employer has been successful in retiring partners against their will?

There have been several, some of which involve cases against law firms! The most famous case is Seldon v Clarkson, Wright & Jakes[3]. In that case the partnership sought to argue that their decision to retire Mr Seldon was objectively justifiable and was a proportionate means of achieving a legitimate aim.

The partnership put forward three justifications. One was to ensure that junior lawyers were given a reasonable opportunity of partnership after a reasonable period of time. Another was that it was necessary to facilitate the planning of the partnership by having realistic long-term expectations as to when partnership vacancies might arise. Finally, they argued that it was necessary to maintain the congenial and supportive culture of the firm by limiting the need to expel partners on the basis of performance.

Did the partnership win on all of those grounds?

The Court of Appeal decided that all three aims were legitimate.  It did not necessarily hold that retirement at 65 was necessary in order to preserve collegiality, but it did find that collegiality itself and the need to limit the number of partners expelled by way of performance management could be legitimate aims.

So what conclusions can we draw from this?

Moving forward, employers have two choices:

• Option 1:  Dispense with the whole concept of retirement as a compulsorily imposed form of termination of employment. This would essentially mean that the employer either waits for the employee to resign when the employee has decided of his or her own accord to give up work; or
• Option 2: the employer seeks to rely upon one of the other potentially fair reasons for dismissal as may be appropriate in the circumstances. It is likely that government guidance will be produced in due course to assist employers in dealing with the absence of a DRA. Any employer, however, who is contemplating compulsorily retiring an employee will need, well in advance of taking any decisions, to map out his purported justification. Attempts to rely upon a legitimate aim which was not consciously recognised when the decision was made will be problematic. Support for the ex post facto justification can be found in Cross v British Airways[4] and also in the Seldon case. However, being clear of the legitimate aim at the time the decision is made is likely to be a safer way to proceed than looking for and hoping to find a legitimate aim subsequently.

The cases where justification defences have been successful all demonstrate that a substantial amount of work needs to be expended by the employer in setting out the justification defence. The more objective evidence which can be collated to justify the legitimacy of the aim the safer it will be to proceed with the dismissal.

Is it not discriminatory in itself to attempt to justify retirement based on the assumption that performance decreases with age?

Yes it is! The Employment Appeal Tribunal which heard the Seldon case rejected this ground, holding that is not self-evident that performance will dip at that age, and there was no evidence to support the proposition that performance decreases at 65.

However, the Court of Appeal disagreed and it is this decision which remains binding. It should be remembered, of course, that decisions taken on stereotypically held views of the effect of age will need to be proved to be justified in order to be lawful.

[1] See also Michael Rubenstein’s story: ‘Mixed reception for scrapping of default retirement age’ in Equal Opportunities Review

[2] www.legislation.gov.uk/uksi/2006/1031/contents/made

[3] www.bailii.org/ew/cases/EWCA/Civ/2010/899.html

[4] www.bailii.org/ew/cases/EWCA/Civ/2006/549.html