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Seldon v Clarkson Wright and Jakes (Court of Appeal decision)

28 July 2010

Subjects : Redundancy; Retirement
Mr Seldon was a partner at the firm of solicitors Clarkson Wright and Jakes. In accordance with the terms of the partnership deed, he was compulsorily retired by Clarkson Wright and Jakes (the firm) at the end of the year following his 65th birthday. He brought a claim for unlawful direct age discrimination. 

The Employment Tribunal (ET) concluded that he had suffered less favourable treatment on the grounds of age, but that his treatment was justified. A full summary of the decision can be found here, but in short the ET held that the firm had established that the retirement clause in the partnership deed had three legitimate aims:

1.      ensuring associates were given the opportunity of partnership after a reasonable period;

2.      facilitating the planning of the partnership and workforce across individual departments by having a realistic long term expectation as to when vacancies will arise. (This aim and the above were referred to jointly as “dead men’s shoes”); and

3.      limiting the need to expel partners by way of performance management, thus contributing to the congenial and supportive culture in the firm. (This aim was referred to as “collegiality”).

Mr Seldon appealed to the Employment Appeal Tribunal (EAT) which, largely agreeing with the ET, only upheld one ground of appeal (a summary of that case can be found here). The EAT found that the “collegiality” aim (suggesting that partners of or around the age of 65 are more likely to underperform) could not be legitimate as it involves a stereotypical assumption and no evidence to support the existence of performance issues had been produced by the firm.

Mr Seldon obtained the backing of the Equality and Human Rights Commission and appealed to the Court of Appeal on a number of grounds, including that the choice of 65 was not proportionate. He argued that whilst the EAT was right to condemn the assumption that the “collegiality” aim justified fixing the age at 65, it was wrong not to take the same view in relation to the "dead men's shoes" aims. 

Mr Seldon also relied on the Heyday case (reported here) and argued that the effect of the ECJ’s decision in that case was that the firm could only justify use of a retirement clause if it had “social policy objectives” behind it; private, self interested aims could not be legitimate.

The Secretary of State for Business, Innovation and Skills, intervening in the case, contended this point and argued that there was a distinction between justification of the legislation which renders lawful or unlawful the actions of a firm, and looking at the lawfulness of those actions themselves as contemplated by that legislation.

The Court of Appeal dismissed Mr Seldon’s appeal. The main points arising out of the judgement are as follows: 

  •  Private employers do not need to justify age discrimination according to wider “social policy objectives”. It was enough to justify age discrimination according to the purely private aims of the employer provided they were in accordance with the social or labour policy aims that the UK used to justify the Regulations.
  •  The principle that a discriminatory measure can be justified with reference to a legitimate aim identified at a time after the measure was introduced can be applicable in the context of justifying direct discrimination. This principle had been previously applied in Schönheit by the ECJ in the context of indirect discrimination. 
  • In determining whether a compulsory retirement rule is justified at the moment of termination, there needs to be consideration of justification both at the time it was brought into effect, and also in its ongoing application. The Court went on to state that only in exceptional cases will a justified rule be unjustified in its application.
  •  The possibility of selecting other ages for retirement that may have been justified does not automatically render the selection of 65 as unlawful.
  • It was relevant that the retirement clause had been agreed by partners with equality of bargaining power.

Implications

The Court of Appeal’s judgement is timely, coinciding with the launch of the government’s consultation on proposals to scrap the default retirement age (DRA) of 65 for employees from October 2011. Mr Seldon’s case has provided some indication of the justification arguments that employers who wish to continue to implement a retirement age may find themselves having to run.

The ET, the EAT and the Court of Appeal all agreed that the “dead men’s shoes” and the “collegiate” aims were legitimate aims and therefore capable of justification, although it is clear that supporting evidence would need to be produced both as regards the decision to implement a retirement age and the choice of any particular age.

It is also worth noting that the Court of Appeal took into account the equal bargaining power between the partners in reaching agreement on the retirement age. In an employer/employee relationship, there will seldom be such equality of bargaining power, which may well affect any analysis as to justification.

 

A copy of the Court of Appeal judgment can be found here.

A summary of the Employment Appeal Tribunal judgment can be found here.

A summary of the Employment Tribunal judgment can be found here.

Mr Leslie Seldon -v- Clarkson Wright and Jakes (a partnership) [2010] EWCA Civ 899