What legitimate social policy could justify retiring a partner or employee?
The Supreme Court will decide after Clarkson Wright & Jakes partner Leslie Seldon was given permission to fight his former firm over its decision to retire him at the age of 65.
Seldon argues that his firm was wrong to enact the partnership agreement and retire him because, he claims, it could not justify the action.
The snowballing fight predates R (Age UK) v The Secretary of State for Business Innovation and Skills – the so-called ’Heyday’ case that in June 2009 forced the former government to scrap the default retirement age (DRA).
Yet Seldon v Clarkson Wright & Jakes is of similar significance, say employment lawyers, in that it will determine what social policy can be used to justify retiring a partner or employee.
“It’s hugely significant for employers who are trying to understand their position regarding the retirement of older people,” comments Mishcon de Reya head of employment Joanna Blackburn. “It’s a huge green area – planning succession is a big issue.”
The Seldon counsel line-up is similar to that of Heyday, with Cloisters’ Robin Allen QC going head-to-head with Blackstone Chambers’ Dinah Rose QC.
In Heyday Allen acted for Age Concern in its challenge to the then government’s interpretation of the Europe-wide Equal Treatment Framework. Rose acted for the government.
Allen argued that, just because discrimination could be justified, it did not make it legal. The government won the case, but in his judgment Mr Justice Blake said had the government not announced a review of the DRA, he would have found against it.
In Seldon, from the Employment Appeal Tribunal (EAT) stage Allen was instructed by the Equalities and Human Rights Commission to act for the partner.
Rose, meanwhile, was instructed to act as an intervener for the secretary of state in support of the firm.
Blackstone Chambers’ Thomas Croxford has been instructed to act for the firm.
The Court of Appeal (CoA) held that the EAT had been right to find that the firm could justify the retirement because it enabled associates to move up the ranks to partnership; it facilitated the planning of the partnership and gave the workforce long-term expectations on when vacancies would arise; and it limited the need for partners to be expelled by way of performance management, thus contributing to the congenial and supportive culture of the firm.
This last point is the most contentious one for employment lawyers.
Russell Jones & Walker associate Samantha Mangwana says: “It makes sense to go to the Supreme Court because nobody agrees with [the CoA decision]. It’s a point that means you can dress up a dismissal as a justified retirement.”
Applying the ’collegiality’ point to the partnership structure, she adds, is particularly difficult when you are managing the careers of partners at the top end of a firm’s structure.
Norton Rose employment partner Paul Griffin agrees. “We don’t want to performance-manage older partners out,” he says. “It’s all very laudable, but not particularly robust in my view. The CoA says it might be justifiable, but not in all cases.”
Kingsley Napley partner Michelle Chance says: “A number of firms are trying to increase profitability by freeing up equity points for younger partners joining the equity by retiring partners of a certain age at the top of their locksteps – particularly partners of a certain age who may be perceived to be underperforming.”
If Allen is successful at the Supreme Court firms will have to find a legitimate social aim to retire older partners.
According to Cloisters barrister Ed Williams this will inevitably lead to more litigation as the employment market tests through the courts precisely what criteria can be applied.
Williams asks: “Could it become a social policy to deregulate the labour market because that would save money? Would cutting the national deficit be a legitimate social aim?”
From October, when the DRA is officially scrapped, employees and partners will be on an equal footing legally when it comes to retirement.
The issues discussed in Seldon, which is not expected to reach the Supreme Court until 2012, will define how future generations end their working careers.
Bigger retirement packages
Michelle Chance, partner, Kingsley Napley
The Supreme Court decision will provide partners with age discrimination arguments to raise in negotiations with their firms to try to increase their retirement packages, even if they are reluctant to go all the way to tribunal. If these arguments have been endorsed by the highest court in the land they will have more force and carry more weight.
Paul Griffin, partner, Norton Rose
Some of the CoA reasoning for the justification points was flimsy. Age discrimination is unique – it covers the whole population rather than certain sectors.
On the point about collegiality, we do not want to performance-manage older partners out.
It is all very laudable, but not particularly robust in my view. The CoA says it might be justifiable, but not in all cases. Scrapping the default retirement age was necessary, but now all the justification tracks have to be brought together.