Forcing retirement: justifying a compulsory retirement age

A recent decision by the Supreme Court offers employers some much sought after guidance regarding the use of compulsory retirement ages following the abolition of the Default Retirement Age (DRA) last year. The case of Seldon v Clarkson Wright is now a leading authority for age discrimination.

Mr Seldon was a partner at a law firm which had a policy of retiring partners at the age 65. In line with this policy Mr Seldon was compulsorily retired when he reached this age, however, Mr Seldon claimed this amounted to direct age discrimination.

The subsequent employment tribunal found that the firm had three aims in using a compulsory retirement age:

• To ensure younger members of staff were given the opportunity of partnership so as to prevent them leaving the firm.
• To facilitate the planning of the partnership and workforce across departments by having long-term expectations of when vacancies will arise.
• To limit the need to expel partners due to poor performance and avoid unseemly debates about performance.

For a compulsory retirement age to be lawful, the aims of the employer’s policy must be legitimate for the purpose of justifying it. Such a legitimate aim must also relate to a social policy objective – such as promoting employment opportunities across generations – rather than just an objective of the business, such as maximising profit or competitiveness.

A second requirement is that the means of achieving those aims must also be proportionate to the aim and be (reasonably) necessary to achieve it.

In the case of Seldon, the Employment Tribunal held that the aims of the firm’s retirement policy were justified and did relate to a social policy; however, Mr Seldon appealed this decision right up to the Supreme Court. Upon dismissing Mr Seldon’s appeal, the Supreme Court held all three of the firm’s aims were legitimate and related to social policies of promoting opportunities among younger workers (aims 1 and 2) and maintaining employees’ dignity (aim 3).

Nevertheless on dismissing Mr Seldon’s appeal, the Supreme Court did refer an important issue back to the Employment Tribunal – whether the retirement age of 65 was the correct age to compulsorily retire partners.

Implications of the case for employers:

Whilst the decision in this case appears to give employers the power to cull older employees from their workforce, this is not the case. In putting a compulsory retirement age in place, any employer will have to justify their policy and show their means of achieving their policy are reasonable. Failure to do so will put employers at risk of costly employment tribunal claims. It is important to note that the particular circumstances of each case will be an important factor in determining whether an aim is justifiable and what might be a justifiable aim for one employer will not necessarily be justifiable for another.

There will be a range of circumstances where an employer will be able to justify a compulsory retirement age. However, as yet there is no guidance on what age it will be reasonable to compulsorily retire an employee until the employment tribunal in Seldon v Clarkson Wright returns a final decision on this point.

Holmes & Hills Solicitors' offers Employment Law advice services to employers across Essex and Suffolk operating in a range of different industries.

Posted 15/05/2012 by:
David Dixey
Senior Chartered Legal Executive in Litigation & Employment Teams

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