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There is no umbrella law allowing for the compulsory retirement of partners based purely on age
Historically, partners at some firms have satisfied themselves that their partnership or LLP deeds would pass age discrimination muster on a number of factors: they had all agreed that the retirement provisions, the legitimate aims approved in the case law of providing opportunities to younger members of the firm (’dead man’s shoes’) and of avoiding humiliating discussions about the performance of older partners (’collegiality’) applied to them, and employees could be retired lawfully at 65. So why not partners?
Many of those firms have performance management provisions in place. If it is the case that performance reviews inevitably descend into unseemly arguments, then that must already be happening; or if not then collegiality is not a good argument.
Some firms have not reviewed their retirement provisions for many years, or if they have that fact will be put in the balance in any dispute, albeit as a makeweight and not a case winner. The designated retirement age for employees has been abolished, so 65 is no longer the touchstone many thought it might be.
Some firms have been waiting for the Seldon case to be resolved before addressing the issue of partner retirement. Although Seldon has been remitted to the Employment Tribunal (ET) for a determination as to whether designating age 65 as the partner retirement age in that case was proportionate, for the purposes of the profession at large the case is over, because it is clear from the Supreme Court judgments that each case must be decided on its own particular facts.
Furthermore, the ET has been told that, in reaching its decision in Seldon, it may take into account that 65 was the designated retirement age for employees in 2006, when Leslie Seldon was retired compulsorily. So the eventual decision of the ET may be weighted accordingly.
Almost every law firm deed I see contains potentially unlawful retirement provisions. The possible exposure to retired partner claims is one of the largest uninsured contingent liabilities that most firms have, it being well-known that discrimination compensation is unlimited. Firms put a great deal of effort and resources into drafting their crisis management plans, but this issue is left aside.
Considerable reliance is placed on the expectation that partners will accept that their fate is inevitable and will not make a fuss. Until it happens to them, firms do not hear about the many confidential negotiations that take place between firms and departed partners, or partners who are proposed to be ushered out, in which age discrimination is raised and taken account of, either by way of a decision that the partner will not be departing after all or in the level of payout agreed between said partner and the firm.
Now that the Supreme Court judgment is available, it is clear that firms have a considerable number of hurdles to surmount before any compulsory retirements on the grounds of age can be declared as lawful.
In the words of Lady Hale: “All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified.”