The purpose of this article is to analyse two high profile decisions handed down from the Supreme Court (the highest UK Court) which has sought to tackle the issue of when direct and indirect age discrimination might be justified. The cases dealing with direct and indirect age discrimination shall be referred to as Seldon and Homer respectively.
The Equality Act 2010 (EQA) permits direct and indirect age discrimination where an employer can justify this adverse treatment i.e., where it can be shown that the discrimination of an employee because of age is a “proportionate means of achieving a legitimate aim”.
By way of a reminder, here are two practical examples of direct and indirect age discrimination:
- Direct – an IT company with a policy of not recruiting older employees because they do not fit in with the youthful culture of the company; and
- Indirect – where an employer imposes a requirement for a minimum number of years’ experience for a particular job that places younger employees at a disadvantage.
Seldon – Direct Age Discrimination
- Mr Seldon was a partner of a solicitor’s firm.
- He was subject to a mandatory retirement age of 65 years old which was contained within a partnership agreement.
- Upon reaching 65 years’ old, Mr Seldon asked the other partners if he could continue to work beyond 65.
- His request was rejected on the basis of there being no sufficient business need.
- Upon termination, Mr Seldon issued proceedings against the firm for direct age discrimination.
The Supreme Court’s (the Court) Decision
It was agreed by both parties that Mr Seldon had been forced to retire. The question that needed to be considered was whether or not this treatment could be justified. To answer this, the Court had 3 issues to consider:
1. Whether all three aims of the retirement clause identified by the employment tribunal (retention of associates, workforce planning and allowing an older or less capable partner to leave without the need to performance manage them out i.e., allow them to leave with dignity) were capable of being legitimate aims and therefore able to justify the age discrimination.
The Court agreed that the three aims could be legitimate. Whereas the employment tribunal had stated that these were individual aims of the business, the Court stated that these aims were legitimate social policy reasons such as sharing out professional employment opportunities fairly between the generations and dignity.
It was also noted that UK Law and EC Law are not compatible in so far as they treat justification for direct and indirect age discrimination. EC Law focuses on whether age discrimination could be justified for public interest reasons (employment policy, labour market or vocational training) in direct contrast to UK law which looks at purely individual reasons particular to the employer’s situation. The Court has stated that UK Law must be interpreted in light of EC Law i.e., there must be consideration of public interest reasons where seeking to justify direct age discrimination not simply reasons particular to an individual employer’s situations i.e. cost saving or increasing competitiveness.
2. Whether the firm has not only to justify the retirement clause generally but also the application of it in the individual case.
The Court stated that once an aim has been identified, it has to be asked whether it is legitimate in the particular circumstances of the employment or partnership concerned.
3. Whether the employment tribunal was right to conclude that relying on the clause in this case was a proportionate means of achieving any or all of the legitimate aims.
On this point, the Court referred the case back to the employment tribunal to consider whether the choice of 65 years old in this case was a proportionate means of achieving a legitimate aim (i.e. was it appropriate and necessary?).
What does this mean for you?
On the face of it, you may see this decision as a precedent for it being lawful to force staff to retire at 65 or having any other fixed retirement age. This is not the case as there were specific factors which applied to this solicitors’ practice which would not be relevant to every organisation. Unfortunately, the judgment goes no further in giving any guidance on whether 65, 70 or any other age would be a justifiable retirement age.
This case does however set out that the test for justifying direct age discrimination is different and narrower than the test for justifying indirect discrimination. To justify direct age discrimination, an employer must be able to show that there is a potentially legitimate aim, which is capable of being a public interest aim and that aim is legitimate in the particular circumstances of the business.
Whilst this case does not tell us what an appropriate retirement age would be, it does indicate that compulsory retirement may be possible in very specific circumstances. Employers should however take from this decision that each case is likely to be different. Any employer wishing to have a fixed retirement age is going to have to ensure that the legitimate aims satisfy the public policy requirements as well as its own. To be on the safe side an employer should ensure there is an audit trail in place to support its decision should its policy come under scrutiny.
Will this decision change an employer’s approach? Possibly not. Many employers have already abolished fixed retirement ages, choosing instead to rely upon good performance management. For those who continue to rely upon a fixed retirement age or wish to introduce one, our advice is that they must consider whether they need a policy that discriminates against people because of their age and if so, whether they are able to justify that policy.
Homer – Indirect Age Discrimination
- Mr Homer began working for the Police National Legal Database (PNLD) as a legal advisor in 1995 at which point the role did not require a law degree or equivalent.
- In 2005 PNLD introduced a new grading structure to improve career progression and offer more competitive salaries. PNLD’s aim was to recruit and retain the best staff.
- Of the new grading structure Mr Homer met the 1st and 2nd thresholds but not the 3rd.
- In order to reach the 3rd and highest threshold, he would have to acquire a law degree.
- At this time Mr Homer was 62 years old and the law degree would take 4 years which would take him beyond his retirement age of 65. As such he could not benefit from the increased salary and status.
- Mr Homer brought a claim under the Retirement Regulations (that have now been repealed) on the basis that the requirement for the law degree was indirectly discriminatory on the grounds of his age i.e., the requirement to have the law degree caused a particular disadvantage to someone as old as him compared to younger employees.
The Supreme Court’s (the Court) Decision
The Court held that Mr Homer was put at a disadvantage by the requirement to have a law degree before retirement, when he did not have the time to acquire it; if the requirement could not be justified then it would constitute indirect discrimination. The Court provided some useful guidance on the test for justification but concluded that the case should be sent back to the employment tribunal to consider the question of justification. The tribunal will now have to assess whether the aim of recruiting and retaining the best staff was legitimate and if so, whether that aim was proportionate in the sense that were the measures used to achieve that aim appropriate and reasonably necessary.
The Issue of Justification
It was noted by the Supreme Court that the range of aims capable of justifying indirect discrimination is greater than those available in the context of direct justification – see the case of Seldon (which is summarised in a separate legal update). Whereas it would not suffice for direct discrimination, a real business need on the part of the employer and nothing more could justify indirect age discrimination. The tribunal will also have to explore whether PNLD could have achieved its aim by other non-discriminatory means.
What does this mean for you?
As the case has been sent back to the employment tribunal for a decision in relation to justification, this case does not tell us anything more than we already knew in so far as justification is concerned. What the case does highlight though is that whilst a real business need alone may be sufficient to establish justification, employers will need to be aware that an employment tribunal when considering if the requirement was reasonably necessary, enquire whether there were non-discriminatory alternatives.
If you would like any further advice on age discrimination issues, please contact Rachael Jessop using the contact information below.
Rachael Jessop, Solicitor
+ 44 (0) 1604 871143
This update is for general guidance only and does not constitute definitive advice.