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What you REALLY need to know about Seldon
Pure Employment Law > News > What you REALLY need to know about Seldon

What you REALLY need to know about Seldon

22 May 2012 by Nicola Brown

To read some of the media reports, you might be forgiven for thinking that the Supreme Court’s recent decision in the Seldon case gives employers the go-ahead to force their staff to retire. But as always, the position is far more complicated than the headlines! We take a look at the real story to ensure that you know the implications of Seldon (and the related case of Homer) for your organisation.

Mr Seldon was a partner in the law firm Clarkson, Wright and Jakes (CWJ). Under the terms of the partnership deed, he was forced to retire at age 65 in January 2006, and brought a claim of age discrimination. His case has been to the Employment Tribunal, Employment Appeal Tribunal and the Court of Appeal, and in January 2012 it went to the Supreme Court (formerly the House of Lords).

Here’s a selection of the recent headlines about the Seldon judgment:

The media have reported this as a clear victory for employers (note that Mr Seldon was actually a partner at Clarkson Wright and Jakes (CWJ), rather than an employee – but many of the principles are the same). But while it is true that Mr Seldon’s appeal was refused, and therefore that CWJ’s argument succeeded, the fact is that the Supreme Court have ordered that the case be sent back to an Employment Tribunal – and what they decide will be key. Mr Seldon’s battle is far from over.

The reason for this is that the case established that it is possible for employers to justify forced retirement in some circumstances. The circumstances are the bit that we all need to know more about.

Unlike most other forms of discrimination, direct age discrimination, such as insisting that people retire at a particular age, has a potential defence in law. That defence applies if the retirement is a proportionate means of achieving a legitimate aim.

At earlier stages in the case, the following 3 aims had been put forward as legitimate:

1)    Ensuring that associates were given the opportunity for partnership after a reasonable period as an associate, thereby ensuring that associates do not leave the firm;

2)    Facilitating long term planning by creating a reasonable expectation of when vacancies will arise; and

3)    Limiting the need to expel partners by way of performance management, thus contributing to a ‘congenial and supportive’ culture in the firm.

The last of the above was particularly controversial – can it be right that retirement is used as an excuse to avoid dealing with performance issues in older workers?

The Supreme Court said that in order to justify direct discrimination, the ‘legitimate aim’ relied upon must be a social policy objective and have a public interest, not just something relevant to a private business, such as preserving profits. For example, a legitimate aim may be the need for “intergenerational fairness”, i.e. the importance of giving the younger generation an opportunity to progress through the ranks. Using this test, the Supreme Court confirmed that all 3 were capable of amounting to legitimate aims and therefore could be used to justify compulsory retirement.

However, the key question was whether the retirement of partners (and Mr Seldon in particular) at age 65 was a proportionate means of achieving those aims. That question was remitted to the Employment Tribunal for consideration, and one of the things the Tribunal has been ordered to take into account is that at the time when Mr Seldon was retired, the default retirement age still applied so that employees could be forced to retire at 65.

So what does this mean for employers?

Well, contrary to the headlines, Seldon actually highlights the difficulties that employers would have in forcing an employee to retire. The Supreme Court have confirmed that it is not only a matter of justification – there must be a reason related to social policy and public interest as well.

The next hurdle is that the legitimate aims must be relevant to the employer’s business – there must be evidence to back this up. Then finally, the employer will need to be able to show that the particular retirement age chosen is proportionate in the circumstances – and this will be a particularly tricky area. Why, for example, would you retire an employee at 65 rather than 64 or 66, particularly now that the default retirement age no longer applies?

Seldon raises more questions than it answers, and it would certainly be unwise for employers to think it gives the green light to go back to compulsory retirement. We will watch with interest to see how the case develops, and will of course keep you updated.

The Supreme Court’s judgment can be viewed here.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team on 01243 836840 or enquiries@pureemploymentlaw.co.uk.

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.