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Dealing with retirement and issues affecting an ageing workforce may trouble many employers.  This article looks at a recent Employment Tribunal decision that found a firm’s mandatory retirement age of 65 for partners did not amount to direct age discrimination and it identifies practical steps employers should take to reduce the risk of claims for age discrimination and unfair dismissal.

Workforce plan

In Seldon v Clarkson Wright & Jakes [2012], Mr Seldon, a partner at law firm Clarkson, Wright & Jakes, was forced to retire when he reached the age of 65, in line with the firm’s partnership deed.  Mr Seldon complained that this was age discrimination. The case went to the Supreme Court last year, which held that the law firm had identified legitimate aims (staff retention, workforce plan and dignity) that could potentially justify the compulsory retirement of a partner at 65. The case was remitted to the Employment Tribunal to consider whether the firm’s chosen retirement age was a proportionate means of achieving the aims identified. The Employment Tribunal found in favour of the law firm and decided that the compulsory retirement of a partner at the age of 65 was justified as a proportionate means of achieving a legitimate aim.  There was, therefore, no age discrimination.

Partnership deed

In deciding whether the retirement age of 65 was proportionate, the Employment Tribunal considered the following additional factors:

  • Consent: all of the partners consented to the firm’s retirement age, and signed a partnership deed to this effect. The Tribunal considered that this was a strong factor to be taken into account, especially as all the partners were in an equal bargaining position. Further, Mr Seldon himself had previously considered that the age of 65 was a reasonable target for retirement;
  • Default retirement age: although the statutory default retirement age has now been repealed, at the time Mr Seldon was dismissed the Age Regulations permitted employers to retire employees (though not partners) at or over the age of 65. The Tribunal considered this an important factor when assessing the justification of the choice of a retirement age of 65;
  • State pension age: the fact that the mandatory retirement age coincided with the state pension age was also a relevant consideration;
  • European Court of Justice case law: the ECJ has upheld a mandatory retirement age of 65 for a variety of different aims;
  • Collegiality aim (contributing to a congenial and supportive workplace culture by limiting expulsion of partners through performance management): the Tribunal was mindful that the collegiality aim might be a factor to consider when considering proportionality in respect of the aims of retention and planning.

Default retirement age

In light of these factors, the Employment Tribunal concluded that the firm’s compulsory retirement age of 65 was proportionate and therefore objectively justified. However, this finding does not give employers carte blanche to dismiss employees at the age of 65. The decision to dismiss Mr Seldon was taken in 2006 and the Tribunal conceded that its findings may have been different if based on facts arising today, given that the default retirement age has now been abolished. Employers should, therefore, continue to exercise caution before compulsorily retiring an employee.

Appraisal system

Employers should have individual discussions with all employees about their future plans, perhaps as part of an annual or six-monthly appraisal system. Employers should:

  • Have these discussions with all employees, not just those that are older or who appear to be approaching ‘retirement’ age;
  • Ask open questions about the employee’s future plans for the short-, medium- and long-term and discuss (where appropriate) the business’ plans for these periods;
  • Avoid asking questions that could be seen to be discriminatory, such as asking when someone might retire or making suggestions that the employee should be considering retirement.

If an employee indicates that they do wish to retire, there is no problem in talking to them about the date for their retirement and any adjustments they may wish to make to their working arrangements or hours in the lead up to retirement. However, an employee is free to change their mind, up until the point that they have given notice to terminate their contract.

Capability procedure

In the case of Mr Seldon, one of the reasons put forward by the firm for its retirement age was that it wished to limit the ‘undignified’ expulsion of partners through performance management. Where an employee is performing poorly and their performance cannot be improved, an employer can instigate a capability procedure and ultimately dismiss an employee on the grounds of capability. All discussions and meetings should be properly documented to minimise the risk of any subsequent unfair dismissal or discrimination claim.

Older workers should not be treated more harshly than others with regard to their performance and employers should deal with any performance problems as they arise for any employee. However, in those cases where there are performance problems with older workers, employers should not avoid invoking capability procedures just because of the employee’s age.

Whether an employer can justify mandatory retirement will, to a large extent, depend on the nature of the organisation; employers should always consider taking legal advice before dismissing an employee for any reason.

For more information on this article, to discuss how these issues might affect your business or to discuss business law matters in general,  please contact our Employment Law team or call 0117 904 6000.