The Supreme Court recently handed down judgments in the cases of Seldon v Clarkson Wright and Jakesand Homer v Chief Constable of West Yorkshire Police, both of which dealt with age discrimination and retirement. Seldon related to direct age discrimination, whereas Homer concerned indirect age discrimination. The Supreme Court held that the test for justifying direct age discrimination is different from (and narrower than) the general test for justifying indirect discrimination.
Equality Act 2010
Both claims related to the Employment Equality (Age) Regulations 2006, now replaced by the Equality Act 2010. However, the discrimination suffered could easily have been brought under the Equality Act. The Age Regulations transposed Council Directive 2000/78/EC into UK laws on age discrimination. As Lady Hale said in her judgment in Seldon: “Age is a relative newcomer to the list of characteristics protected against discrimination.”
What is age discrimination?
Regulation 3 defines age discrimination as one person treating another differently or putting them at a disadvantage on the grounds of age, while being unable to “show the treatment or, as the case may be, provision, criterion or practice to be a proportionate means of achieving a legitimate aim.”
Age discrimination has been before the European Courts on a number of occasions and this well-litigated area has provided some sound reasoning for what can be held as a ‘justifiable reason’. In her judgment, Lady Hale reviewed the case law and listed what could be justifiable at paragraph 50: “ the aims of the measure must be social policy objectives, such as those related to employment policy, the labour market or vocational training.” She continued “flexibility for employers is not in itself a legitimate aim; but a certain degree of flexibility may be permitted to employers in the pursuit of legitimate social policy objectives.”
She also provided a list of nine aims that the European Courts have recognised as ‘legitimate’:
- Promoting access to employment for younger people;
- Efficient planning of the departure and recruitment of staff;
- Sharing out employment opportunities fairly between generations;
- Ensuring a mix of generations in staff, to promote exchange of experience and new ideas;
- Rewarding experience;
- Cushioning the blow for long-serving employees who may find it hard to find new employment if dismissed;
- Facilitating the participation of older workers in the workforce;
- Avoiding the need to dismiss employees on the ground that they are no longer capable of doing the job, which may be humiliating for the employee concerned; and
- Avoiding disputes about the employee’s fitness for work over a certain age.
She said “the measure […] must be both appropriate to achieve its legitimate aim […] and necessary in order to do so,” continuing: “The scope of the tests for justifying indirect discrimination [and] any age discrimination […] is not identical. It is for member states […] to establish the legitimacy of the aim pursued.”
In Seldon, the claimant was an equity partner in a firm of solicitors. In 2005, he signed a partnership deed, which included a clause stating that all partners would retire on 31 December of the year they reached 65. Before reaching 65, however, Mr Seldon realised he would need to work another three years for financial reasons and approached the firm with a view to continue work as either a consultant or a salaried employee. His proposal was rejected.
He ceased being a partner on 31 December 2006, in line with the deed and began proceedings in March 2007, alleging that termination at the mandatory retirement age was direct age discrimination. The respondents claimed that the treatment was justified and put forward six legitimate aims, including:
- Making sure associates are given the opportunity of partnership after a reasonable period, thereby ensuring they do not leave the firm;
- Facilitating the planning of the partnership and workforce across individual departments by having a realistic long-term expectation about when vacancies will arise; and
- Limiting the need to expel partners by way of performance management, thus contributing to a congenial and supportive culture.
At the Employment Tribunal, it was held that these three reasons were legitimate aims and, having balanced the needs of the firm against the impact on the partners, it was a proportionate means of achieving a supportive culture and encouraging staff to stay. However, the Employment Tribunal was not asked whether 65 was the correct age for compulsory retirement.
Employment Appeals Tribunal
Mr Seldon appealed to the Employment Appeals Tribunal; they agreed with the tribunal but remitted the claim for consideration of the question of an appropriate retirement age. The claim was dismissed at the Court of Appeal and then went before the Supreme Court.
In her judgment, Lady Hale held that “the first two identified aims of staff retention and workforce planning were both directly related to the legitimate social policy aim of sharing out professional employment opportunities fairly between the generations […] The third aim was limiting the need to expel partners by way of performance management, which is directly related to the dignity aims accepted in Rosenbladt and Fuchs. It is also clear that the aims can be related to the particular circumstances of the type of business concerned. I would therefore accept that the identified aims were legitimate.”
Lady Hale also remitted the claim back to the Employment Tribunal for consideration of whether 65 was an appropriate mandatory retirement age in this case.
Mandatory retirement age
Following the judgment in Seldon, it would now appear that employers can set a mandatory retirement age and enforce it. However, they will have to consider the reasons for the rule and whether it is in place for legitimate social policy reasons. As Lady Hale said: “There is […] a distinction between justifying the application of the rule to a particular individual, which in many cases would negate the purpose of having a rule, and justifying the rule in particular circumstances of the business. All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified.” [My emphasis.]
In Homer, Lady Hale again gave the leading judgment. The claimant argued that after an internal reorganisation he was unable to reach the highest grading threshold because he did not hold a law degree and would not be able to obtain the qualification before reaching the normal retirement age. When Mr Homer was recruited, a law degree was not essential if the post-holder had exceptional experience and skills in criminal law. Being a retired Detective Inspector, he was deemed to have these skills.
Under the Age Regulations, Reg 7 deals with the relevant indirect discrimination: “It is unlawful for an employer, in relation to a person whom he employs at an establishment in Great Britain, to discriminate against that person –
(a) in the terms of employment which he affords him;
(b) in the opportunities which he affords him for promotion, a transfer, training or receiving any other benefit;
(c) by refusing to afford him, or deliberately not affording him, any such opportunity; or
(d) by dismissing him, or subjecting him to any other detriment.”
The failure to allow Mr Homer across the third threshold was held to fall within this regulation. Lady Hale defined the law of indirect discrimination as “an attempt to level the playing field by subjecting to scrutiny requirements which look neutral on their face but in reality work to the comparative disadvantage of people with a particular protected characteristic.” In relation to the claimant, she states: “A requirement which works to the comparative disadvantage of a person approaching compulsory retirement age is indirectly discriminatory on grounds of age.” However, she added the caveat that “the resulting scrutiny may lead to the conclusion that the requirement can be justified. But if it cannot, then it can be modified so as to remove the disadvantage.” As justification was not considered by the Employment Tribunal, the claim was remitted to them to deal with this aspect.
However both Lady Hale and Lord Hope commented on this area. The former gave an overview of the approach that needs to be taken when dealing with justification in indirect discrimination, saying: “A provision, criterion or practice is justified if the employer can show that it is a proportionate means of achieving a legitimate aim.” She went on to say that “it is not limited to the social policy or other objectives derived from […] the directive, but can encompass a real need on the part of the employer’s business.” This would appear to suggest that indirect age discrimination can be justified if an employer can show that the objective is derived from a ‘real need’. However, it must be proportionate, defined by Lady Hale as “a measure [that] has to be both an appropriate means of achieving the legitimate aim and (reasonably) necessary in order to do so.” She commented that the Employment Appeals Tribunal, who had dismissed the claim but said that if there was discrimination it would not have been justified, had been sceptical about whether requiring an employee to hold a law degree before attaining the highest threshold was appropriate to recruitment and retaining staff within the organisation.
Lord Hope used stronger language: “I cannot accept that discrimination on the grounds of age can be regarded as justified simply because eliminating it would put others at a disadvantage that is not related to their age.” He went on to say that “age is a characteristic which changes with time. A disadvantage to others which is unrelated to their age will not be a ground in itself for holding that the age-related discrimination of the person who complains of it must be regarded as justified.”
While these cases turned on their own facts, both provide a useful indication of how the courts will consider justification in direct and indirect age discrimination claims, especially with regard to retirement.
On the face of it, it may appear that a mandatory retirement age that is directly discriminatory can be justified if it is for social policy objectives. However, employers should be wary of jumping to the conclusion that a mandatory retirement at 65 can now be lawful because social policy considerations, such as the need to progress staff up through the ranks, are more likely to apply to partnerships such as law firms, accountants and surveyors. Also, an employer will need to present good evidence from within its organisation that the social policy objectives are actually met by the policy. Many employers will be unable to do this and therefore will be unable to justify discrimination.
For more information on age discrimination matters please contact Lyons Davidson’s employment law team.