The recent Supreme Court decision in Seldon v Clarkson Wright and Jakes  UKSC 16 – which found that direct age discrimination could be justified and clarified the test for justification that would have to be satisfied – continues to reverberate throughout the legal industry and fuel the debate over mandatory partner retirement within law firms.
In broad terms, mandatory retirement at a particular age, which will be discriminatory, may not result in liability for discrimination if it can be objectively and reasonably justified by a legitimate aim, and if the means of achieving that aim are appropriate and necessary. The decision did provide some clarity on important points of principle, such as the fact that ‘legitimate aims’ must be of a ‘public interest nature’ (as distinct from purely private aims of the firm) and the ‘legitimate aims’ must be those which are actually being pursued by the firm at the date that it seeks to invoke the mandatory retirement provision.
In short, the three ‘legitimate’ aims accepted by the Supreme Court were around (1) ensuring that associates are 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; and (3) limiting the need to expel partners by way of performance management, thus contributing to a congenial and supportive culture in the firm.
However, when considering the Supreme Court’s acceptance of these ‘legitimate aims’, it is essential to keep in mind the particular circumstances of Clarkson Wright and Jakes and the law relevant to retirement (for employees) as existed at the end of 2006 when Mr Seldon was compelled to retire. Clarkson Wright and Jakes, at that time, had 10 equity partners (one of whom was part-time), employed 22 other solicitors and five trainees, and did not have a policy of performance review for equity partners. Further, there was no power within the partnership deed to remove underperforming partners or, indeed, to reduce profit share to reflect underperformance by a partner.
In reality, there are a large number of firms whose circumstances will be very different to those of Clarkson Wright and Jakes, and of course they would not be invoking the provision in the wider context of circumstances which existed in 2006. Nowadays, the majority of firms do have partnership/members agreements which include provisions regarding the removal of partners/members or reductions in profit shares of partners/members, and large numbers of firms do now carry out some form of partner performance review.
Accordingly, it is highly likely that even if firms can successfully argue that their mandatory retirement provisions satisfy the ‘legitimate aims’ test, it will be extremely difficult to successfully argue that they are legitimate in the circumstances of any particular firm on an unknown date in the future.
There also remains the as yet unresolved difficulty of establishing that the particular age specified in a mandatory retirement age provision is the appropriate and necessary age at which a partner/member should retire. Why, for example, would 65 years of age be appropriate and necessary, but 66 years of age would not? The Supreme Court sent the Seldon case back to the Employment Tribunal to consider whether it was proportionate in that case to provide for the mandatory retirement of partners at the end of the calendar year in which they reached the age of 65.
However, the Tribunal will be considering the position as at 2006 when the default retirement age for employees was 65. While it may be relevant for the Tribunal to take account of the default retirement age as established by legislation, the extent to which it is taken into account in the Seldon case will be irrelevant in future cases given that the default retirement age was phased out in 2011.
Some firms still appear to be planning to enforce mandatory retirement age provisions in the future based on the belief that they will not be liable for an act of discrimination because they will be able ‘justify’ forcing people to retire at a particular age. As a matter of law they may be right – but in reality most firms will find it very difficult, if not impossible, to satisfy the ‘justified’ criteria in the future, and will be taking a significant commercial risk if they try and force a partner/member to retire simply because they have reached a particular age.
As there is no limit to the damages that can be awarded for discrimination claims, the risks of an adverse finding do drive one to the conclusion that firms would do better by focusing their energies on ensuring that their partnership/members agreements and policies provide them with effective and less risky mechanisms for managing the partner/member population.
Fergus Payne (pictured) is a partner at the law firm Lewis Silkin LLP, and joint head of its Partnerships and LLPs group. Clive Greenwood is a fellow partner and joint head of the Partnerships there