What does the Seldon retirement decision mean for employers?

Consultant editor Darren Newman argues that the significance of the Supreme Court decision in the Seldon retirement case lies in the wider implications of the fact that justification of direct age discrimination must be based on social policy objectives.

Employers looking for clear guidance on whether or not they will still be entitled to force employees to retire will find little to help them in the Supreme Court decision of Seldon v Clarkson Wright and Jakes [2012] UKSC 16 SC, which involved the forced retirement of Mr Seldon, a partner in a law firm, at the age of 65. This is no criticism of the Supreme Court, however. The job of the highest court in the land is to decide questions of law on matters of public importance. It is not an HR consultancy and it is not its role to give helpful guidance to employers.

In Seldon, the Supreme Court was looking at the nature of the "legitimate aims" that can be used as the basis of a justification defence in cases of direct age discrimination. It is an odd feature of equality law that age is the only protected characteristic where direct (as opposed to indirect) discrimination can be justified. Section 13(2) of the Equality Act 2010 provides that, where the protected characteristic is age, less favourable treatment will not be discrimination if it is a "proportionate means of achieving a legitimate aim". This is, word for word, the same test of justification that is used for indirect discrimination for age and most of the other protected characteristics in accordance with s.19. However, the Supreme Court has held that this straightforward wording is too simplistic. The test is not the same for direct and indirect discrimination, because for direct discrimination the concept of a legitimate aim is a much narrower one.

The difficulty arises because s.13(2) of the Equality Act 2010 seeks to implement art.6(1) of the Equal Treatment Framework Directive (2000/78/EC) and must therefore be interpreted in line with the case law of the European Court of Justice (ECJ). Article 6(1) gives specific examples of the sort of aims that can be used as the basis for justified direct discrimination, and the ECJ has made clear that the aims pursued must be "social policy" aims, such as those related to employment policy, the labour market or vocational training.

Lady Hale gave the leading judgment in Seldon. She noted that, over the years, the ECJ has identified two kinds of "legitimate aim". The first is "intergenerational fairness", which includes facilitating access to employment by young people, and sharing limited opportunities to work in a particular profession fairly between the generations. The second she labels broadly as "dignity". This can include avoiding the humiliation involved in the dismissal of older workers on the grounds of incapacity or underperformance, or avoiding "unseemly" disputes about capacity or underperformance.

All that the Supreme Court has done in Seldon is to confirm that the aims put forward by the law firm where Mr Seldon was a partner to justify its policy on retirement are legitimate in that they fall within the scope of the legitimate aims recognised by the ECJ. This is a far cry from any general finding that forced retirement is a legitimate business practice.

Neither does the ruling indicate that the forced retirement of Mr Seldon was justified. The case has been remitted to the employment tribunal to decide this point, and Mr Seldon still has everything to play for in arguing that 65 is an arbitrary age and that there is no evidence that solicitors of this age are so much more likely to perform poorly that it is appropriate to force them to retire rather than deal with the embarrassment of subjecting them to performance management. The firm may be in a stronger position in arguing that a path for promotion needs to be cleared for younger solicitors moving up the profession - but this argument will have to be tested in the context of the particular situation faced by the firm.

Whatever decision the tribunal eventually reaches, it will be of little practical impact for employers as a whole. Every case will depend on its own particular circumstances and the fact is that employers have a steep hill to climb if they want to justify a continued policy of forced retirement. They certainly cannot rely on a general desire to retain as much flexibility as possible: a legitimate social policy objective needs to be found. The far safer option is for employers to assume that, as long as an employee is doing a job that needs to be done, and is doing it well, he or she should remain in post irrespective of age. There will be exceptions to this rule, but not many.

The real legacy of Seldon will, I suspect, lie in the wider implications of the fact that direct age discrimination cannot be justified in the same way as indirect discrimination, and needs to be based on social policy objectives.

Take the recent case of Woodcock v Cumbria Primary Care Trust [2012] EWCA Civ 330 CA. This involved an employer bringing forward an employee's notice of redundancy in order to prevent him from gaining the windfall of enhanced pension entitlements that would otherwise have accrued because of his age.

The Court of Appeal held that the employer was pursuing a legitimate aim of carrying out redundancies and that choosing to do so in a way that avoided a great deal of unnecessary expense was proportionate in the circumstances. However, it is difficult to see how Woodcock can stand up in the light of Seldon. What legitimate social policy objective was the employer pursuing in bringing forward notice of redundancy as it did? It would appear that the only justification that the employer had was based on the needs of its business rather than any social policy objectives recognised by the ECJ.

If that is correct, then in cases such as Woodcock there is in fact no possibility of a defence of justification even where the costs involved are massive. If the less favourable treatment is not covered by a legitimate aim, the issue of proportionality does not arise. It is perhaps in cases such as this that the impact of Seldon will be most keenly felt.

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