The old statutory retirement procedure (applicable prior to 6 April 2009) which, if correctly followed, protects an employer from unfair dismissal and/or age discrimination claims, only applies to employees.  When someone who is not an employee is compulsorily retired, it will be necessary to show that the retirement can be objectively justified.  The contrasting decisions in Seldon v Clarkson Wright and Jakes and Hampton v Lord Chancellor and Ministry of Justice demonstrate how easy it is for Tribunals to arrive at different conclusions when considering justification.

Seldon v Clarkson, Wright and James

The Seldon case involved the compulsory retirement of a partner in a relatively small firm of solicitors at age 65.  The justification relied on by the partnership was to:

  • ensure that associates had the opportunity of partnership and were therefore retained;
  • facilitate planning because it would be known when vacancies would arise;
  • limit the need to expel partners by way of performance management;
  • ensure that each partner could expect to become senior partner at some point;
  • encourage employees and partners to make financial provision for retirement; and
  • avoid a situation in which it would be preferable to keep associates as employees or salaried partners rather than equity partners.

In assessing the test of justification, the Tribunal had both to consider whether the aims put forward by the partnership were legitimate and, if so, whether compulsory retirement was a proportionate means of achieving those aims. 

The Tribunal accepted that the first three aims were legitimate but it rejected that the last three could be.  The Tribunal then went on to consider whether compulsory retirement was a proportionate means of achieving the three accepted legitimate aims.  It held that, on balance, the test of proportionality was met.

Mr Seldon’s argument on proportionality was limited to the third legitimate aim (that of limiting the need to expel partners by way of performance management).  Mr Seldon asserted that the same aim could be achieved in a non-discriminatory way by monitoring performance and giving performance warnings before expelling a partner.  This was rejected by the Tribunal who accepted that monitoring performance in the way suggested would affect the culture of the partnership.  The conclusion is surprising: there are not many other areas of employment law in which it would be viewed as acceptable to dismiss someone rather than have to deal with underlying performance issues. 

However, it appears that the tribunal’s decision was limited to its facts. The Tribunal emphasised that the nature of the relationship between partners (particularly in a relatively small firm) is very different from an employer/employee relationship.  The Tribunal also appears to have been influenced by the fact that the partnership deed had only been entered into in 2005 and that Mr Seldon had raised none of his concerns at that time.

Hampton v Lord Chancellor

Although the Tribunal in the Seldon case attempted to limit its decisions to the facts of that case and, in particular, the nature of partnerships, it appeared that the test of justification was being interpreted as being a fairly low bar.

However, the Seldon decision can be contrasted with the decision in theHampton case which involved the compulsory retirement of recorders at age 65.  The justification advanced in Hampton was very similar to that in Seldon.  It was argued by the Ministry that it needed to maintain a flow of appointments in order to have candidates for the full-time judiciary (who are generally required to have served 2 years as a recorder).  Until 1998, when the retirement age was reduced to 65, the retirement age for recorders had been 70.  When the Age Regulations were introduced, reverting to a retirement age of 70 was considered. However, this was resisted by the Lord Chancellor on the grounds that it would “reduce the pool from which full-time judges are selected, so reducing quality and diversity”.

The Tribunal held that the Ministry’s aim was legitimate and went on to consider proportionality.  The Tribunal rejected the assertion that compulsory retirement was a proportionate means of achieving the Ministry’s aim.  It held that there was no evidence that recorders would want to sit until 70.  In fact, what evidence there was suggested the contrary.  There was also no evidence that having a retirement age of 70 would have an impact on the ability of the Ministry to produce suitable candidates for the full-time judiciary.  In fact, a reduction in vacancies would likely lead to greater competition and therefore a higher quality of appointees.

Unlike the Seldon case, in which the Tribunal were keen to stress the special nature of partnerships, the Tribunal in Hampton sought to give some clarity on how the test of justification should be interpreted.  It specifically endorsed the decision in Hardys & Hansons plc v Lax [2005] EWCA Civ 846 (a case of indirect sex discrimination) in which it was stated:

“The principle of proportionality requires the tribunal to take into account the reasonable needs of the business. But it has to make its own judgment, upon a fair and detailed analysis of the working practices and business considerations involved, as to whether the proposal is reasonably necessary."

In other words, the Hampton Tribunal held that compulsory retirement was not “reasonably necessary” to achieve the Ministry’s aim.

Implications

It is necessarily the case that justification will turn on the facts of any particular case and whether future Tribunals accept “reasonably necessary” as short hand for proportionate in age discrimination cases remains to be seen; both the Seldon and the Hampton cases have been appealed to the EAT.  There is also the question posed by the Heyday litigation (not considered by the Tribunal in either Seldon or Hampton) about whether there should see a stricter test of justification in cases of direct age discrimination than cases of indirect discrimination.

However, the Hampton case in particular demonstrates that if an employer wants to rely on justification it is well advised to come to the Tribunal prepared to advance evidence in support of its case that its legitimate aim is proportionate.  Mere assertions are likely to be vulnerable to a challenge by an employee that (as in the Hampton case) the reality of the situation is quite different.

Seldon -v- Clarkson, Wright and James (4.12.07, ET case no.1100275/07)

Hampton -v- Lord Chancellor [2008] IRLR 258