At the moment, employers that retire staff at age 65 do so without fear of unfair dismissal or age discrimination claims, provided that they follow the statutory retirement procedures, which are straightforward and relatively free of pitfalls

However, this will all change if the Government's proposals, to abolish the default retirement age ("DRA") of 65 and the retirement procedures, are implemented. It is proposed that no retirement procedures can be started after 5 April 2011 and the procedures will not apply to retirements which take effect from 1 October 2011. The consultation period for the proposals ends in October 2010.

Assuming that the proposals are implemented, in carrying out the retirement of an employee, the employer will have to objectively justify the use of a retirement age and each retirement that comes from it. The objective justification will be necessary in order to defend any age discrimination claims.

The recent Court of Appeal decision in Seldon v Clarkson Wright & Jakes concerns the lawfulness of a mandatory retirement age for partners. The case arose because the statutory retirement procedures, as an exemption from age discrimination rules, only apply to employees. So partners and partnerships are in the position now that employers and employees are likely to be in once the DRA has been abolished.

This case is, therefore, a useful guide as to how courts and tribunals may respond to retirements after next year's changes in the law.

The background

Mr Seldon was a partner at a firm of solicitors, and was compulsorily retired after his 65th birthday in accordance with a mandatory retirement age provision in the firm's partnership deed. He brought a claim alleging that this amounted to direct age discrimination.

The tribunal decisions

The tribunal found that Mr Seldon had suffered direct age discrimination, but that this was justified because the retirement provision had three legitimate aims:

i it ensured that there were partnership opportunities for junior staff after a reasonable period;

ii it facilitated the planning of the partnership and workforce because it helped to show when partnership vacancies would arise; and

iii it limited the need to expel partners by way of performance management, and this contributed to the congenial and supportive culture within the firm.

The tribunal concluded that the retirement provision was a proportionate means of achieving these legitimate aims.

The Employment Appeal Tribunal upheld this decision, except in relation to iii, which it found was based on stereotypical assumptions about age and could not justify direct age discrimination.

The Court of Appeal decision

The Court agreed with the EAT. It held that i and ii were:

  • a proportionate means of achieving the legitimate aims in question; and
  • consistent with the Government's social and employment policies.

Implications

When the DRA is abolished, employers will have to review their position on retirement ages and make a decision as to whether to:

  • not have a retirement age at all, in which case ageing employees will only leave if they choose to do so or if they are dismissed for one of the normal reasons for dismissal that apply to the whole of the workforce; or
  • retain a retirement age, in which case the reasons for it will need to be documented and objectively justified. Employers will also need to decide what that age should be in order to meet their business needs. In the Seldon case, the Court accepted 65 as an appropriate age because that had been given accepted status as a retirement age in the age discrimination legislation. If the DRA is abolished, there will no longer be such a reference point.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.