Motor Industry Legal Services
Seldon v Clarkson, Wright and Jakes, Ashford Employment Tribunal; Hampton v Lord
Chancellor and anor, London South Employment Tribunal
Compulsory retirements of partner and office holder
In two separate cases, employment tribunals examined whether the retirement ‘dismissals’ of
non-employees were objectively justified and hence not age discriminatory. In the first case,
the tribunal held that the retirement of a partner by a law firm was justified where, among other
things, it was important that solicitors in the firm could identify possibilities for career
advancement. In the second case, on the other hand, a different tribunal upheld the age
discrimination claim of a judicial office holder (Recorder), finding that the compulsory
retirement age of 65 applicable to Recorders was not a proportionate means of ensuring that
judicial vacancies continued to arise.
Preamble
The most controversial provisions of the Employment Equality (Age) Regulations 2006 SI 2006/1031
are those allowing for the compulsory retirement of ‘employees’ at or over the ‘default retirement age’
of 65. These are the subject of a challenge by Heyday, a membership organisation backed by Age
Concern, which argues that they are contrary to the EC Equal Treatment Framework Directive
(No.2000/78). If the challenge is successful before the European Court of Justice, the default
retirement age provisions will surely be removed from the Regulations – in which case, all retirement
dismissals will constitute direct age discrimination under Reg 3 unless they can be objectively justified.
The two cases below provide us with a taste of how arguments as to objective justification might run in
the retirement context. The ‘employers’ concerned could not rely on the default retirement age
provisions (and hence had to run the justification defence) as the individuals whom they compulsorily
retired were not ‘employees’ – one was a ‘partner’ (within the meaning of Reg 17) and the other an
‘office holder’ (within the meaning of Reg 12).
Facts of Seldon
The partnership deed of Clarkson, Wright and Jakes (CWJ), a law firm based in Kent, provided for the
compulsory retirement of partners. It stated that a partner’s retirement would occur on 31 December of
the calendar year in which he or she attained the age of 65, or on such later date as the partners
decided. Owing to this, S, an equity partner of the firm, was scheduled to retire at the end of 2006. In
mid-2005 he opened discussions with W, the firm’s managing partner, with a view to securing a postretirement role.
In April 2006, S’s proposal to continue working for the firm after his retirement was rejected at a
partners’ meeting, as there was no business case for it. The partners decided that, as a gesture of
goodwill, S would instead be given an ex gratia payment of £30,000 upon his retirement. In late 2006,
S threatened to bring an age discrimination claim, at which point the firm withdrew the offer of the ex
gratia payment, saying that it had been made on the basis of goodwill which was no longer present.
After retiring as scheduled, S lodged claims of direct age discrimination (in respect of his compulsory
retirement) and victimisation (in respect of the non-payment of the £30,000).
The tribunal was satisfied that S ceased to be a partner by virtue of the terms of the partnership deed,
and that this amounted to an ‘expulsion’ within the meaning of Reg 17(8)(a), potentially giving rise to a
direct age discrimination claim. Since it was accepted by the parties that compulsory retirement was
an act of less favourable treatment on age grounds, the next question for the tribunal was whether S’s
retirement expulsion was objectively justified as a proportionate means of achieving a legitimate aim.
Legitimate aims set out
A number of potential aims were put forward by CWJ, the following of which were found by the tribunal
to be legitimate:
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to ensure that associates (senior solicitors) are given the opportunity of partnership, thereby
ensuring that they do not leave the firm
to facilitate the planning of the partnership and workforce, having a reasonable expectation as
to when vacancies will arise
to limit the need to expel partners by way of performance management, thus contributing to
the congenial and supportive culture in the firm.
With regard to the first two legitimate aims, the tribunal noted that solicitors who decide to make a
career in private practice often aspire to equity partnership. For CWJ – which had a strategy for growth
and the preservation of a reputation for the quality of its legal services – the recruitment and retention
of able solicitors and associates with the potential to achieve partnership was clearly a legitimate aim.
Moreover, the existence of the retirement age of 65, evidence suggested, played a significant part in
achieving this aim.
Furthermore, the tribunal declared itself ‘satisfied that it was the aim of the partnership to create a
congenial and supportive culture among the partners’. Contributing to this was the lack of power under
the partnership deed to expel a partner for underperformance. A performance management
procedure, the tribunal accepted, would be ‘a demeaning affront to the partner’s dignity’ and ‘could be
divisive’. In contrast, compulsory retirement allowed the partners ‘to avoid facing an underperforming
partner who is nearing retirement with his or her lack of contribution and to allow the partner to “coast”
towards retirement’.
Partner’s retirement justified
The next question was whether the retirement age of 65 was a proportionate means of achieving the
legitimate aims that the tribunal had identified. Assessing the negative effects of compulsory
retirement, the tribunal noted that S had lost a share of the firm’s future profits; benefits; the right to
practise as a solicitor in the firm; and job fulfilment and the society of colleagues. On the other hand,
the tribunal continued, some partners might not want to continue in practice after the age of 65;
compulsory retirement is not an event that occurs without warning; partners have the opportunity to
plan for retirement; retirement at 65 coincides with the payment of the state pension; such retirement
had been agreed by the partners; and retirement avoids the possibility of an underperforming partner
being confronted with that underperformance.
Having carried out the balancing exercise between the reasonable needs of the firm and the effect of
the retirement policy upon S, the tribunal concluded that, in this case, compulsory retirement at 65 was
proportionate. Accordingly, S’s retirement dismissal was objectively justified, meaning that his direct
age discrimination claim under Reg 3(1)(a) failed. S succeeded, however, with his victimisation claim
under Reg 4. The tribunal was satisfied that the offer of £30,000 was made by the partners as a
goodwill gesture in recognition of S’s retirement after years of service to the firm; it was not made
upon condition that S made no age discrimination claim. When S gave notice of his intention to bring
such a claim – clearly a protected act under the victimisation provisions – the offer of £30,000 was
withdrawn by reason of that protected act, to S’s detriment.
Facts of Hampton
H held the judicial office of Recorder. Until 1998 the retirement age for Recorders was 70, but, as
Recordership is viewed as the first stage of the potential progression to the Circuit and High Court
Bench, the then Lord Chancellor decided that this should be reduced to 65, in order to create
opportunities for others to sit. In early 2007, H, who had attained the age of 65, was compulsorily
retired from his position. He responded by bringing a direct age discrimination claim under Reg 3(1)(a)
of the Age Regulations. It was accepted by the parties that H, as an ‘office holder’ within the meaning
of Reg 12, could be protected by the age discrimination rules. Furthermore, it was agreed that he had
suffered less favourable treatment on the ground of his age. The key question for the tribunal, then,
was whether the Recorders’ retirement age of 65 could be objectively justified.
Retirement age not proportionate
The tribunal accepted the respondents’ argument that the aim of maintaining a reasonable flow of new
appointments to the office of Recorder and candidates for a post in the full-time judiciary was
legitimate. Turning to the question of proportionality, the tribunal considered two further arguments put
forward by the respondents, which the tribunal termed the ‘new intake argument’ and the ‘sufficient
experience argument’.
The ‘new intake’ argument was that the presence of Recorders between the age of 65 and 70 would
prevent the recruitment of younger Recorders who would be in the pool for appointment to other
judicial roles. The tribunal pointed out that this argument ignored the fact that around 3 per cent of
Recorders were appointed as Judges each year, meaning that a number of vacancies are created in
any event. Furthermore, a significant number of Recorders fall outside the pool eligible for promotion
because they do not meet the minimum sitting requirement of 15 days a year. If these were removed
from office, this would create further vacancies. Finally, the tribunal noted that if the retirement age of
65 were removed there would still be a large pool (on the evidence, 1,138) of Recorders eligible for
promotion. In the tribunal’s view, ‘given that all Recorders must have attained a certain standard of
competence in order to be recruited and retain their posts, there is no evidence that reducing the
number in the pool to 1,138 is unlikely to produce 3 per cent of suitable candidates’.
The ‘sufficient experience’ argument ran as follows: the presence of Recorders aged over 65 would
reduce the availability of the more challenging cases to those in the pool for appointment, meaning
that those in the pool would be less able to gain sufficient experience to qualify them for consideration
for judicial appointment. The tribunal gave this short shrift, stating that, as the respondents
acknowledged, ‘steps could be taken to ensure that those in the pool are allocated the right type of
case for them to gain experience’. In the circumstances, the tribunal concluded that the imposition of a
retirement age of 65 for Recorders was not a proportionate means of achieving the respondents’
legitimate aim. Accordingly, it upheld H’s direct age discrimination claim.
Comment
The above decisions provide useful illustrations of the kinds of factors tribunals might take into
account in assessing objective justification of retirement dismissals – an issue that will become
extremely important if the default retirement age provisions are removed from the Age Regulations,
either in response to the Heyday challenge or following the Government’s promised review of the rules
in 2011. It must be remembered, however, that illustrations are all these cases can provide, as each
‘objective justification’ case will turn on its particular facts. As the tribunal stated in Seldon, for
example, ‘different considerations will apply in every case. Types of partnerships are many and varied.
For example, a partnership between a father and son in a family business bears little resemblance to a
major international law firm structured on a corporate basis.’
There are two specific issues arising from the above cases that we should draw attention to. First, in
Seldon, the tribunal essentially accepted that the partners’ retirement age was a proportionate means
of achieving the legitimate aim of limiting the need to subject partners to a performance management
process. This, in our view, is dubious. As those in the human resources field will surely agree, a lack
of performance management is likely to lead to a less rather than a more ‘congenial and supportive
culture’. The tribunal’s finding also smacks of a suggestion that older partners are more likely than
younger partners to be underperforming.
Perhaps the most interesting argument in the Hampton case was one not actually run by the
respondents – that is, that the Recorders’ retirement age of 65 could be justified with reference to the
legitimate aim of ensuring ‘the diversity of the judiciary – the composition of the judiciary according to
gender and/or colour or ethnic origin’. If such an argument is ever likely to succeed – and it does not
sit easily to attempt to justify discrimination in one area in order to promote diversity in others – it is
likely to be in a field such as the judiciary, traditionally the domain of the white male. Nevertheless,
there is surely a much more suitable and proportionate method of promoting diversity here – the use
of the positive action options available in the sex and race legislation.
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