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Legal: age discrimination

Employment lawyer, Roger Byard, looks at a recent age discrimination case heard at the Employment Appeal Tribunal and considers what the outcome means for partnerships

An immediate consequence of the age discrimination regulations coming into effect in October 2006 was to make all compulsory retirement ages for partners unlawful.  Unless, that is, they could be justified as ‘a proportionate means of achieving a legitimate aim’.  The recent decision of the Employment Appeal Tribunal in Seldon v Clarkson Wright & Jakes has gone some way to identifying what may justify a compulsory retirement age at least for partners in smaller firms and who follow a traditional partnership model.

Mr Seldon was a partner in a small firm of solicitors in Orpington Kent.  By nature it was a traditional firm which was reflected in the absence of performance management procedures for partners and the expectation of younger lawyers that they would in time ‘inherit’ a retiring partner’s practice.  Mr Seldon had signed a partnership deed that provided for a partner to retire at the end of the year in which he reached the age of 65.  Contrary to what his partners expected Mr Seldon decided he did not want to retire then and this led to his expulsion from the partnership on 31 December 2006.  He brought a claim in the Employment Tribunals alleging that by being forced to retire he had been discriminated against on the ground of his age.  The Tribunal decided that the compulsory retirement age of 65 was a direct form of age discrimination but that the firm had shown that it could be objectively justified and dismissed his claim.  Mr Seldon appealed to the Employment Appeal Tribunal (EAT) against this decision.

In its judgement the EAT agreed with many of the Tribunal’s findings.  Importantly it found that the firm had identified a number of legitimate objective reasons which might justify Mr Seldon’s discriminatory treatment.  Creating opportunities for junior lawyers to be promoted, providing a mechanism for long term succession planning within the partnership and maintaining a ‘congenial and supportive working environment’ were all considered to be legitimate reasons to impose a compulsory retirement age.

However the EAT found that the objective of promoting a friendly culture in a small firm by ignoring any performance issues was not justified by imposing compulsory retirement at age 65.  Clarkson Wright & Jakes had suggested that at this age a partner’s performance tended to decline but the EAT found no evidence to support this.  The ‘sketchy’ material before the EAT, suggested only that this could happen around the age of 70.  The EAT decided that what might be a legitimate objective could not be achieved by imposing what was in effect an arbitrary retirement age and sent the case back to the original Tribunal to decide this issue.  As the EAT considered this was a less significant objective than the other two they also asked the Tribunal to decide whether viewed together they were sufficient to justify Mr Seldon’s treatment.

Limited clarification for partnerships

Pending the final outcome of this case only tentative conclusions may be drawn and these are most likely to be of use to partners in smaller firms.  First a compulsory retirement age for partners is potentially capable of being justified.  Secondly, reasons associated with succession planning and motivating junior professionals in their careers appear to provide objectives that might justify the direct discrimination inherent in a compulsory retirement age.

However uncertainty remains about whether succession planning and providing employees with reasonable expectations for promotion would when taken together be sufficient to justify a compulsory retirement age.  Further justifying a compulsory retirement age based on the desire to avoid potential conflict over a partner’s performance will depend on obtaining evidence that there is an age at which there is a reasonable expectation that a partner’s performance would decline.  That is likely to be hard to come by and leaves open the question whether it is any more appropriate to assume a partner’s performance has declined than to measure it against an agreed set of targets.

The EAT emphasised that what might be appropriate for a smaller firm like Clarkson Wright & Jakes would not necessarily apply to larger firms.  They could have said it might not be appropriate to more modern firms.  The partnership model operated by Clarkson Wright & Jakes is in significant decline.  The modern emphasis on the ability of a partner to build their own practice rather than stepping into the shoes of a retiring partner coupled with management of performance both in terms of expectations and delivery is now commonplace in partnerships of all sizes.  The limited liability partnership offers a more corporate identity for all sizes of partnership and if desired, corporate forms of governance to match.  All this suggests that whatever is eventually decided in the Seldon case will not be of universal application.  It is likely to remain an open issue whether the compulsory retirement of a partner at a predetermined age could ever be lawful.

While the law about whether a compulsory retirement age can ever be justified remains unclear here are some practical tips about what partnerships should be doing:

  • Firms need to review their current arrangements and the reasons for which a partner can be asked or required to leave.
  • If the way in which the firm operates means that in practice most partners leave before they reach any compulsory retirement age then consideration should be given to dispensing with it.
  • Those firms that decide to retain compulsory retirement at a particular age should keep detailed records of the discussions that led to that decision and include an acknowledgement that the partners understand that any retirement age is discriminatory.
  • These records should note the reasons why they want compulsory retirement, how the age fixed was decided upon and the basis on which they believe it could be justified.

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