Partnerships: Age-old questions

Partnerships:  Age-old questionsThe need to effectively manage the workforce is the most common justification given by firms for having a fixed retirement age. But, argues Peter McMaster, it is far from being watertight under current legislation.

It has been unlawful to practice age discrimination against your partners since the Employment Equality (Age) Regulations came into effect in October 2006. But what does this mean for the widespread practice of including a mandatory retirement age in partnership agreements? The legal effect of this practice is to oust a partner, willy nilly, on, say, his or her 65th birthday. What more blatant form of age discrimination can you imagine than telling a person who wants to carry on working that tomorrow they join the ranks of the unemployed – merely because they happened to be born before a certain day 65 years ago?

The practice of fixed retirement ages continues because age discrimination is only unlawful in principle. The regulations allow you to do it if you can provide a suitable justification. Workforce management is probably the most common justification advanced for a mandatory retirement age. The argument runs that forcing people out at a certain age creates fresh opportunities for other – younger – people, encouraging them first to join and then to remain in the firm. The improved ability to recruit and retain is for the long-term benefit of the firm.

In a recent decision concerning a solicitors’ partnership, Seldon v Clarkson, Wright & Jakes (2008), the tribunal accepted that compulsory retirement at 65 could potentially be – and in this case was in fact – justified “to ensure that associates are given the opportunity of partnership after a reasonable period as an associate, thereby ensuring that associates do not leave the firm” and “to facilitate planning of the partnership and workforce across individual departments by having a realistic long-term expectation as to when vacancies will arise”.

An awkward question arises when a complainant challenges the particular retirement age enforced, as opposed to the principle of enforced retirement. Any retirement age will produce the two effects described above. Why 65? Why not 70? In Hampton v The Lord Chancellor (2007) a recorder was compulsorily retired at 65. He complained that the decision to force retirement at 65 as opposed to 70 was discriminatory. The Lord Chancellor could not adequately answer the question, why not 70? His justification for using the age of 65 was to ensure a reasonable flow of new appointments and therefore of candidates for appointment as full-time judges, but the Lord Chancellor could not produce evidence that the difference between enforcing retirement at 65 rather than 70 produced an impact that justified the use of 65.

Another potential justification, perhaps peculiar to certain types of professional partnerships, is the prospect that mandatory retirement can limit the need to expel underperforming partners. The tribunal in Seldon noted that the firm had an interest in creating a congenial and supportive culture, and that the interest of sustaining that culture had led the partners to restrict the use of expulsion for underperforming partners.

The tribunal was urged to – and did – conclude that a fixed retirement age could contribute to this goal. The interest of maintaining the special culture of the firm was found to justify the fixed retirement age. The use of a fixed retirement age meant that underperforming partners approaching the retirement age could be dealt with by retirement instead of expulsion.

A potential difficulty with this justification is that it is only convincing for partners approaching whatever retirement age has been fixed by the firm. If the retirement age is set at 65 it does not form any part of the performance management options for an underperforming 42-year-old. The justification may itself be tainted with ageism: in particular, it seems to rest on a supposition that underperformance is a problem closely associated with a particular age group.

The notion that age discrimination can be justified where it is a proportionate means of achieving a legitimate aim presents conceptual challenges that the courts have only just begun to explore. The workforce management justification simply means forcing older people out to give their jobs to younger people. Whatever the perceived benefits for the business, this will provoke unease – unease that may grow as we move away from the situation where this was simply the norm. Moreover, forcing partners making a substantial contribution to the firm to retire at 65 simply to avoid upsetting their underperforming peers creates obvious tensions.

Seldon is under appeal and we can expect to hear more on the subject shortly. However, the regulations have a European dimension and there is a significant political dimension to the whole question of fixed retirement ages – some member states are wedded to the practice. If past experiences of the European Court of Justice’s approach to maternity rights and sex discrimination or the evolution of the Transfer of Undertakings (Protection of Employment) Regulations are anything to go by, it will be a long time before there is anything approaching certainty in this field.

Peter McMaster is a silk at Serle Court