Firms will be able to force a mandatory retirement age on partners following a landmark ruling that clarifies how age discrimination laws apply to partnerships.
In the case of Leslie Seldon v Clarkson Wright and Jakes (2008), the Employment Appeal Tribunal (EAT) ruled that there are some instances in which partnerships can force partners to retire because they have reached a certain age.
The Kent-based firm faced an age discrimination claim from its former senior partner after it forced him to leave at 65 – the mandatory retirement age. After losing his case in the Employment Tribunal, Seldon went to appeal in the EAT.
The EAT ruling clarified general principles of how age discrimination applies to partnerships, yet recommended that further clarifications are sought in the Employment Tribunal. It is therefore yet to be established whether Clarkson Wright discriminated against Seldon.
The law states that firms can force partners to retire at a predetermined age if doing so is “objectively justified” – although it does not explain what would or would not be an objective justification in practice.
Firms have so far been reluctant to produce formal policies on retirement age because of the prevailing uncertainty over the legislation.
“The age discrimination regulations incorporate an exception for retirement from the age of 65,” said James Davies, head of employment at Lewis Silkin. “For reasons that have never been entirely clear, this applies only to employees and not to partners.”
In the landmark case, Clarkson Wright was able to demonstrate that it had justification in forcing retirement on Seldon because it gave younger associates at the firm a more realistic chance of reaching partnership level. The EAT also accepted that mandatory retirement facilitated forward planning at the firm because it would be clear when vacancies would arise.
However, the EAT rejected the firm’s claim that it aimed to create a “collegiate culture” by limiting performance-related expulsions as it was based on the ageist presumption that performance deteriorated from age 65 and there was no evidence for this before the tribunal.
While this ruling offers firms some clarification on the legislation, questions remain over how effectively it can be applied to the larger firms.
As Davies points out: “The situations in which mandatory retirement can be confidently retained will nonetheless be few and the risks are substantial. Imagine a partner on £300,000 per year who can show they would have worked another five years if not forcibly retired. That’s a £1.5m payout.”