Employment - Supreme Court guidance on setting a compulsory retirement age

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Summary: The Supreme Court has held that an employer can set a compulsory retirement age for its staff, provided it can objectively justify the retirement age given the employer’s particular circumstances. This will not be easy to do.

After the removal of the statutory retirement age for employees last year, some employers have been considering whether to set their own company specific retirement ages for staff instead. Forcing staff to retire at any particular age will be direct age discrimination, unless the employer can objectively justify having such a rule.

The new Supreme Court decision in Seldon v Clarkson Wright and Jakes gives helpful guidance about when an employer will be able to justify having their own retirement age. The case itself concerns retirement from a partnership at age 65, but the same principles apply to retiring employees.

The Supreme Court held that an employer can objectively justify having a compulsory retirement age provided it is a ‘proportionate means of achieving a legitimate aim’. To do this, the employer must show:

  • that its reasons for having a compulsory retirement age tie in with the UK’s general social and economic policy objectives. On the facts of the case, staff retention, workforce planning, and allowing individuals to retire with dignity before their abilities decline were all held to be acceptable aims which were also in the public interest.
  • the aims must be legitimate in the particular circumstances of the employment concerned. For example, improving the recruitment of young people so as to achieve a balanced and diverse workforce won’t be a legitimate aim for having a retirement age if the employer in fact has no problem recruiting the young.
  • the compulsory retirement age must be a proportionate means of achieving those legitimate aims. This will include deciding whether the specific retirement age chosen - whether it is 65, 70, 75 or something else - is the right age to achieve those legitimate aims.

On the facts of the Seldon case itself, the Supreme Court said the partnership’s retirement age satisfied the legitimate aims part of the test, but has referred the case back to the employment tribunal to decide whether setting that retirement age at 65 was proportionate in the circumstances.

Practical points for employers

The Seldon decision does not give employers a green light to introduce company specific retirement ages. Employers will have to show that their aims for setting a retirement age relate to a real business need which reflects a wider social policy objective. In addition, employers will have to show that the retirement age chosen is appropriate in the circumstances. This will be difficult to do, as employers will have to show that less discriminatory measures, such as a higher retirement age, would not work instead.

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