Can a clause within a Partnership Agreement requiring compulsory retirement at 65 be justifiable? Niall McMullan considers a recent court ruling on this question
Can a clause within a Partnership Agreement requiring compulsory retirement at 65 be justifiable? This is the question the Supreme Court has been asked to determine in the case of Seldon v Clarkson Wright and Jakes.
Mr. Seldon was a partner in a law firm that had a policy of retiring partners at 65. The firm required him to retire when he reached this age, in accordance with the terms of his Partnership Agreement. He brought a claim to the Employment Tribunals in England that this clause was discriminatory and that it substantial disadvantaged older partners of the firm in comparison to that of younger partners. Mr. Seldon believed that this clause could not be justified.
The case was dismissed in the first instance and Mr. Seldon appealed the decision of the Employment Tribunal. The Employment Appeal Tribunal (EAT) said that the Tribunal was correct to find that ensuring associates of the law firm have the opportunity to become a partner after a reasonable period and facilitating the planning of the partnership and the workforce across individual departments were legitimate aims of the firm. These became known as “the dead man’s shoes” aims. However, the EAT did not agree with the law firm that the third aim of maintaining the friendly culture of a firm by avoiding confrontation with underperforming older partners could be legitimate. This is known as the “collegiality” aim. The law firm did not produce evidence that older partners had particular performance difficulties.
Mr. Seldon appealed the decision of the EAT, however the Court of Appeal dismissed his appeal. Mr. Seldon argued in the Court of Appeal that “the dead man’s shoes” aims could not be legitimate aims of the employer in retiring him at 65, and further that the EAT were correct to dismiss the “collegiality aim” as illegitimate. The Court of Appeal held that all aims by the law firm could be justified as legitimate in retiring Mr. Seldon. If the firm’s aims were to provide employment prospects for young people and encourage young people to seek employment by holding out good promotion prospects, that it is at least consistent with social policy. Further, it was a legitimate aim of the law firm to have a cut off age i.e. 65 after which individuals are required to retire to avoid forcing an assessment of a person’s falling-off in performance, therefore maintaining a confrontation-free workplace.
The Supreme Court will now decide whether the law firm’s decision to retire Mr. Seldon at 65 was lawful. The decision is expected in January 2012.
This case is important for companies involving business partnerships as, although the retirement rules that apply to employees do not apply to partnerships, partners can still claim age discrimination.
The commencement of this case predated the case R v The Secretary of State for Business Innovation and Skills – the so called “Heyday” case. This case forced the previous government to abolish the default retirement age (DRA), effective from 1st October 2011. The abolition of the DRA means employers can no longer dismiss an employee aged 65 without justification. If an employer wishes to retire an employee at 65 they must be able to objectively justify their reason for doing so in accordance with employment legislation.
Employers who have concerns with employees and retirement procedures should seek appropriate legal advice.