Snakes and Ladders in the Supreme Court: Seldon v Clarkson Wright and Jakes
On 25 April 2012 the Supreme Court promulgated its ruling in a case that has been followed by a larger (professional and lay) audience than usual. This was the case brought by Leslie Seldon against his former law firm and partners, Clarkson Wright & Jakes. In the writer’s opinion, the judgment resembles the game of snakes and ladders – the Court offers some ladders towards clarity, only to dispose slippery snakes down which employers tumble towards uncertainty again.
The facts: Mr Seldon had a long and successful career at his firm, which he had joined in 1971 and of which he had become Senior Partner and also Managing Partner. Less than a year before he turned 65 he signed a Partnership Deed which provided that any partner attaining the age of 65 would retire soon thereafter. As he approached this milestone birthday, Mr Seldon realised that, for financial reasons, he would need to carry on working for another three years or so.
At the time, the Employment Equality (Age) Regulations 2006 (now replaced by the Equality Act 2010) had recently implemented provisions of the Council Directive 2000/78/EC, establishing a general framework for equal treatment in employment and occupation. Broadly, the Regulations rendered direct and indirect age discrimination unlawful, subject to justification on the basis that the otherwise discriminatory treatment is a proportionate means of achieving a legitimate aim. They also established a default retirement age (DRA) – 65 – which many employers could rely on to lawfully dismiss their employees using a statutory retirement procedure. The DRA and statutory retirement procedure now have been abolished, although the legislation does allow for “employer justified retirement ages” [our italics].
Crucially for Mr Seldon, however, the DRA never applied to partnerships. This is why, now the DRA has been abolished, Mr Seldon’s case has aroused so much interest – he has been ahead of the game, as it were. Many employers hoped that the Supreme Court would help them predict whether or not they are likely to be able to justify their contractual retirement ages.
Mr Seldon brought his case after his partners refused to allow him to continue working beyond the age of 65, and claimed direct age discrimination. The Employment Tribunal (ET) held that compulsory retirement was a proportionate means of achieving the legitimate aims of:
- retaining associates (by giving them the opportunity of partnership after a reasonable period);
- partnership and workforce planning (by giving realistic expectations of when vacancies might arise); and
- contributing to a congenial and supportive workplace culture (by limiting the need to expel partners through performance management).
The ET ruled in favour of the partnership. Mr Seldon invoked his right to appeal all the way up to the Supreme Court.
The Supreme Court gave helpful guidance on the differences between the approach to justifying direct age discrimination, as claimed by Mr Seldon, and indirect age discrimination. Direct age discrimination has to be justified on the basis of social policy objectives; those of a public interest nature which are “distinguishable from purely individual reasons particular to the employer’s situation, such as cost reduction or improving competitiveness”.
Reviewing European jurisprudence, the Supreme Court identified two different kinds of legitimate objectives of a public interest nature: the first is “inter-generational fairness” such as facilitating access to employment by young people; enabling older people to remain in the workforce; sharing limited opportunities to work in a particular profession fairly between the generations; promoting diversity and the interchange of ideas between younger and older workers. The second is “dignity”. This includes avoiding the need to dismiss older workers on the grounds of incapacity or under-performance, thus preserving their dignity and avoiding humiliation, and in avoiding the need for costly and acrimonious disputes in relation to under-performance or capacity.
Accordingly, the ET had correctly identified the legitimate aims being pursued by the firm and also had considered them to be legitimate in the particular circumstances of Mr Seldon’s employment. This was a finding of fact. It is worth noting Lady Hale’s statement that, in the context of inter-generational fairness, it must be relevant that at an earlier stage in his life a partner or employee might have benefited from a rule obliging his seniors to retire at a particular age, nor could it be entirely irrelevant that, in this case, the rule in question had been re-negotiated between the partners relatively recently.
The final outcome of the case still isn’t known. It now has to go back to the ET for it to decide whether the choice of age 65 as the retirement age was in itself a proportionate means of achieving the identified legitimate aims and the Tribunal will therefore be required to consider whether it was both appropriate and necessary in the circumstances – at the relevant time, i.e. in 2006. As in 2006 the default retirement age was alive and well, it is reasonable to suppose that Mr Seldon will lose on this point too.
So what does the case mean for employers? It means that while an employer’s aim must be linked to a social policy aim for the purposes of justifying direct age discrimination, in the context of justifying a compulsory retirement age this may not be difficult, as workforce planning will usually feature in an employer’s reasons for retaining a compulsory retirement age. The greater challenge is the requirement that the aim relied upon must be legitimate in the particular circumstances of the case. In relation to “inter-generational fairness”, Lady Hale said that the recruitment of young people, in order to achieve a balanced and diverse workforce, is a legitimate aim in principle. But, if in fact that employer has never experienced difficulties in recruiting young people and in reality its problem is retaining older and more experienced workers, then that aim may not be legitimate for that particular business. The same applies to “dignity” aims: if an employer already has sophisticated performance management systems, it may not be able to show that it is legitimate to circumvent them for only one section of (or one individual in) the workforce.
The key issue, however, is going to be whether fixing a specific compulsory retirement age is a proportionate means of achieving the legitimate aim. There is a difference between justifying a normal retirement age and justifying a specific retirement age. Lady Hale clearly emphasised that, in this case, the Tribunal must consider the circumstances as they were in 2006, when the DRA was in force, and not as they are now, where there is no DRA.
In other words, the prospects of another employer in a similar situation now, having to justify its choice of a particular retirement age, are likely to be different. Had events in Mr Seldon’s case taken place five years later, his firm would have to justify its choice of 65 without the helpful backdrop of the DRA, and would be pressed to explain why it had not chosen, say, 70, or even 66 or 64 as its compulsory retirement age. In general, this is likely to be problematic. Certain employers may be able to do this by reference to specific requirements applicable to their field of operation, such as, for example, the need for specific levels of effectiveness and alertness in, say, those operating heavy machinery – but even so it will be a courageous employer who chooses a specific retirement age, thereby attracting criticism that it has succumbed to age stereotyping, rather than carrying out specific risk assessments within its workforce, for example. The reality is that justifying a compulsory retirement age now is going to be extremely challenging. All of which, ironically, may not help Mr Seldon.
Originally published by Thomson Reuters GRC. © Thomson Reuters
This article, written by Jessica Corsi, originally appeared on the Complinet website.
The articles published on this website, current at the date of publication, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your own circumstances should always be sought separately before taking any action.