Supreme Court rules on justification of enforced retirement
The Supreme Court has handed down its judgment in Seldon v Clarkson Wright and Jakes – the long-running case concerning the question of whether the compulsory retirement of a partner in a firm of solicitors was justified under the Employment Equality (Age) Regulations 2006. In dismissing the claimant’s appeal, the Court held that the justification tests for direct and indirect age discrimination are not one and the same. Although the wording of the justification defence in Reg 3 does not differ depending on the form of discrimination, it must be read consistently with the jurisprudence of the ECJ, which has shown that direct age discrimination can only be justified by reference to legitimate objectives of a public interest nature, rather than purely individual reasons particular to the employer’s situation. However, the Court went on to confirm that staff retention, workforce planning and limiting the need to expel partners by way of performance management are all legitimate aims capable of justifying direct age discrimination, as they fall within the two categories of social policy objective identified by the ECJ: ‘inter-generational fairness’ and ‘dignity’.
A clause in the partnership deed of the law firm Clarkson, Wright and Jakes (CWJ) provided for the compulsory retirement of partners at 65. When S was retired, he argued that this was unjustified direct age discrimination contrary to Reg 17, which prohibits such discrimination in partnerships. It being accepted that the retirement clause was directly discriminatory, an employment tribunal (Brief 847) examined CWJ’s defence of objective justification, finding that CWJ had the legitimate aims of ensuring that senior solicitors are given the opportunity of partnership; facilitating partnership and workforce planning; and creating a congenial and supportive firm culture by limiting the need to expel partners by way of performance management. The tribunal found that a retirement age of 65 was a proportionate means of achieving these aims and rejected S’s claim of direct discrimination.
On appeal, the EAT (Brief 869) held that the tribunal had correctly approved CWJ’s legitimate aims. However, the third aim was based on a discriminatory stereotype that partners’ performance tends to drop at 65. This particular aim could not, therefore, justify a retirement age of 65 in the absence of any evidence that performance tends to fall off at this age. As a result, the EAT remitted the case to the same tribunal to reconsider the question of justification by reference to the two remaining legitimate aims. S appealed unsuccessfully to the Court of Appeal (Brief 908), before appealing three questions to the Supreme Court: (i) whether the three aims of the retirement clause were capable of being legitimate aims for the purpose of justify direct age discrimination; (ii) whether the firm has to justify both the retirement clause generally and its application to S; and (iii) whether the tribunal was correct to conclude that the clause was a proportionate means of achieving any of the three aims.
In dismissing S’s appeal and confirming the decision of the EAT to remit the case to the tribunal, Lady Hale – with whom Lords Hope, Brown, Mance and Kerr were all in agreement – observed that the tribunal had reached its decision prior to the development of an extensive body of ECJ jurisprudence concerning the justification of age discrimination. These cases showed that, contrary to the tribunal’s view, the justification test for direct discrimination is narrower than for the indirect form: direct discrimination can only be justified by reference to legitimate objectives of a public interest nature, rather than purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness. In this respect, the ECJ had identified two broad categories of legitimate social policy objective: ‘inter-generational fairness’ and ‘dignity’. Applying the ECJ jurisprudence to the instant case, Lady Hale held that the staff retention and workforce planning aims were not, as S contended, simply individual aims of the business, but instead fell within the category of ‘inter-generational fairness’. Furthermore, the aim of limiting the need to use performance management to expel partners clearly fell within the ‘dignity’ category of legitimate aim. As a result, all three aims had the requisite ‘social policy/public interest dimension and were thus legitimate.
On the question of proportionality, Lady Hale stressed that this requires an employer or partnership to show that the means adopted to achieve the aim are both appropriate and necessary. Noting that the case was already being remitted to the tribunal as a result of the EAT’s ruling on the performance management aim, Lady Hale stated she would not rule out the tribunal considering whether the choice of age 65 was a proportionate means of achieving the first two aims, as ‘there is a difference between justifying a retirement age and justifying this retirement age’. Lord Hope added that it would be proper for the tribunal to take into account the fact that, when the clause was agreed and when S was retired under the clause, there existed a designated retirement age of 65 for employees. As a final matter, Lady Hale held that where it is justified to have a general rule – such as a compulsory retirement age – the existence of that rule will usually justify the treatment which results from it. However, she stressed that while it will not be necessary to justify the application of a retirement age to a particular employee (for that would negate the purpose of having such a rule), it is necessary to justify the rule in the particular circumstances of the business.
Although the case was decided under the Age Regulations – which were repealed with effect from 1 October 2010 – Lady Hale recognised that the principles she identified would apply equally to the justification of direct age discrimination under S.13(2) of the Equality Act 2010.
This case will be reported in the next edition of IDS Employment Law Brief.
Further information: http://www.supremecourt.gov.uk/docs/UKSC_2010_0201_Judgment.pdf