News
Partnerships and Age Discrimination
12 January 2009
A compulsory retirement clause based on succession planning grounds finds favour with the EAT.
In a decision given on 19 December 2008 in the case of Seldon v Clarkson Wright and Jakes, the EAT found in favour of two succession planning arguments used by the defendant firm to justify a compulsory retirement clause in a partnership agreement.
The case was an appeal from an earlier Employment Tribunal decision that also ruled in favour of the defendant firm in upholding a provision in its Partnership Agreement requiring Partners to retire at 65. Mr Seldon, a Solicitor and Partner in that firm, did not want to retire and so brought a claim against his firm arguing that the requirement to retire contravened age discrimination legislation. While such a clause has always been considered as directly discriminatory, it will nonetheless be lawful and enforceable provided the firm can show that it is justified. For this, a firm would need to show that the clause was included to satisfy a legitimate aim and was proportionate.
The succession planning arguments used by the firm before the ET and EAT, which both considered did establish legitimate aims, were:
1. That the clause was required because it enabled the firm to give Associates the opportunity and expectation of becoming Partners in the future, without which they might leave the firm;
2. The clause facilitated workforce planning both in individual departments and in the firm itself. The firm and the Associates could work out when advancement was likely to occur by considering when Partners would retire.
There were a number of arguments presented both in support of the clause and against it and the EAT has given some useful guidance as to what grounds for justification of such a clause will be accepted and what will not. We shall consider these in a subsequent briefing.
The case has not finally been determined as one of the grounds used by the defendant firm did not succeed and so the case was remitted back to the Employment Tribunal to consider whether the two grounds that did were sufficient, without the third, to enable the Employment Tribunal to find that the clause was indeed justified and proportionate.
The ground that failed was based on a "collegiality" argument, i.e. that the firm did not want to use performance management to remove under-performing Partners, as this would undermine the collegiate culture of the partnership. However, by relying instead on a fixed compulsory retirement age, the firm was making a stereotypical assumption that someone at 65 would be less able to perform effectively. An assumption such as this is discriminatory. It needs to be not an assumption, but a properly considered decision supported by evidence, which in this case the firm was unable to provide. That evidence will, in our view, be hard to find in any case as it needs to be referable to the specific retirement age chosen.
For further information and advice on reviewing Partnership or LLP Agreements, please contact Michael Archer on 0207 240 3474.
Further Information
Full briefing note (PDF 45 KB)