Compulsory retirement: more confusion

Age discrimination is one of the fastest-growing categories of Employment Tribunal claim. In the last full year for which figures are available, there were 6800 claims, as against only 5200 the previous year and 3800 in 2008-9. The number of claims now easily beats that under, for instance, race discrimination.

These numbers are almost certainly set to rise as a result of a Supreme Court judgment about compulsory retirement this week.

When the government announced last year that compulsory retirement was to end, Philip Booth saw this as ‘another nail in the coffin of freedom of contract’. He was right to do this, as it was just one more way in which employers’ flexibility in the use of labour was to be diminished. While it is right, and probably necessary, for many of us to work longer, the government should not be laying down rules in this way. The difficulties of removing older workers who can no longer meet the requirements of a particular job are considerable, and if some employers choose – not all would do so – to set a retirement date, that ought to be their prerogative.

The Supreme Court has thrown all this up in the air again by ruling, in the case of Kent solicitor Leslie Seldon, that employers can still set a retirement date. Oddly, though, they declined to say whether the partnership involved, Clarkson, Wright and Jakes, had an appropriate retirement policy. They left this up to an employment tribunal to decide.

The Supreme Court judges, led by Lady Hale, argue that lawful reasons for compulsory retirement include opening up younger people’s prospects for advancement, planning the future of a business by arranging succession dates, and restricting the need for sacking older workers for incompetence. In general, businesses will have to be able to show a ‘public interest’ in their compulsory retirement policy.

This judgment, while welcome in some ways, is likely to open yet another can of worms. Employers may see this as a green light for reintroducing retirement dates. But anybody made to retire against their will in this way is bound to appeal by claiming that the ‘public interest’ does not apply in their particular case.

A government spokesman limply says that ‘this decision confirms that businesses can justify a compulsory retirement age based on legitimate aims’. But this is no use to a business in a situation where it has to take a gamble that ever-quirky tribunals will see it their way and there are no upper limits on compensation for age discrimination claims.

Once again, we see that poorly-drafted employment laws and creative judicial interpretations are adding to business uncertainty. And this is on the watch of a government which claims it will reduce the burdens on employers.

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

9 thoughts on “Compulsory retirement: more confusion”

  1. Posted 30/04/2012 at 09:03 | Permalink

    Another interesting case in The Times today, though one which was so complicated I had to read the law report four times. A civilian police worker faces a job regrading which says he must have a law degree to progress further. He doesn’t have a law degree and, at 62, is not able to get one before planned retirement at 65. He thus claims indirect age discrimination. The claim is upheld by a tribunal, but this verdict is reversed by the Employment Appeals Tribunal. The Court of Appeal supports the EAT. Now, however, the Supreme Court says that the original tribunal was correct – the claimant was discriminated against. However the original tribunal asked the wrong questions, so it has been remitted to them to reconsider.
    How much did all this cost the taxpayer so far? Answers to Harriet Harman, please. More importantly, how on earth can small businesses make sense of this kind of thing?

  2. Posted 30/04/2012 at 09:35 | Permalink

    I’m afraid I’m confused by your confusion. It was always going to be the case that following the abolition of the specific rules on retirement, it would be open to employers to keep a retirement age that they could show was justified. The Supreme Court decision is a technical one about the nature of the justification defence and employers should not be looking to it for any practical guidance of general application. This is a court after all, not an HR consultancy.

    If there is a practical lesson for employers here, then it is that justified forced retirement is a theoretical possibility, but it should only be used where the employer can demonstrate a clear need for it – rather than a general desire to have the flexibility to sack 65 year olds without legal repercussions. Such cases are likely to be quite rare and the safest course is for employers not to pick an age at which they will dismiss employees. If the employee is doing a job that needs doing and is doing it well, then he or she should be allowed to stay.

    By the way, there is nothing odd about the Supreme Court not deciding the proportionality issue. That is a question of fact and the Supreme Court does not decide the facts, it makes rulings on important points of law. There was never any question of them deciding the issue themselves, it was always going to be remitted. That’s how it works.

    I’m not sure I understand what you want the law to be. Should there be a defence of justification in cases of age discrimination or not? If there is to be one, should it be wide and open or narrow and closely defined? Which bit of the law do you think is poorly drafted and do you have suggestions for improvement?

  3. Posted 30/04/2012 at 10:24 | Permalink

    Darren beat me to it with his wise words. I would add that any employers who “may see this as a green light for reintroducing retirement dates” would need be acting in a spectacularly risky not to say foolhardy way.

  4. Posted 30/04/2012 at 10:34 | Permalink

    Thanks for this, Mr Newman. You link to a very interesting blog which I shall look at again. But as you say yourself, you are an employment law anorak! My point here was that it is difficult for non-anoraks to make much sense of what is going on in the indirect age discrimination case. It is surely not unreasonable for employers to ask for a degree in a relevant subject, as here. Whether experience substitutes for a degree is very much a matter of opinion, but the law seems to be that you are taking a big risk if you ask for graduates. Its not only older workers who might be indirectly discriminated against either I suppose.

    I know when I rob a bank that I am breaking the law. Entrepreneurs wishing to take on employees need the same kind of certainty. Employment law does not offer it.

    The recent spate of anti-discrimination legislation has been costly for employers and it is far from certain it has done very much for its intended beneficiaries as a group: US evidence suggests such legislation reduces hirings of “protected” categories,

  5. Posted 30/04/2012 at 10:44 | Permalink

    Darren’s wise words are, as uisual, on the money. I would only add that any employers who “see this as a green light for reintroducing retirement dates” would be, in my opinion, be spectacularly misguided.

  6. Posted 30/04/2012 at 12:45 | Permalink

    I was thinking of the Seldon case rather than Homer with my comments. I don’t think as it happens that Homer prevents employers from asking for a relevant degree. However in that case the employee had 30 years experience of the Criminal Justice system which certainly beats the one year of criminal law I did as part of my LLB. I also don’t see how passing exams in Land law, Equity and Trusts, Tax Law etc would make him any better at his job or any better qualified for it. It will be for the tribunal to look at the employer’s justification and adjudicate.

    We expect too much of the law if we expect employers to understand and apply the case law as it comes through. They need good sensible advice from people who have read the cases and can put them in the proper context. In my business for example I rely on my accountant to understand what I need to know about tax and advise me accordingly. If the Supreme Court reached a decision on corporation tax i wouldn’t dream of reading it and altering my behaviour according to what I understand the case to say – I will need to have it explained to me.

    Employment law is the same – and I don’t see the problem with that.

    Glad you like the blog. I’m an anorak and proud!

  7. Posted 30/04/2012 at 15:38 | Permalink

    @Darren – but this is precisely the point. Restriction on freedom of contract brings with it costs that reduce wage levels or reduce employment opportunities or both, though it is good business for lawyers just as the tax code is good business for tax accountants. It is interesting that you use the word “forced” for the situation where two parties agree a retirement age by contract and “sacked” when the contract is enforced. Ironically, we are one country in the EU with relatively good employment records for older people (in the EU as a whole only 45% of people between 55 and 64 work). This kind of legislation can serve to increase the risk of employing older people – just as the risk of employing young people in (say) Spain is very high.

  8. Posted 30/04/2012 at 21:28 | Permalink


    I understand that all employment law is a fetter on the discretion of employers and that if you take a pure free market position that can harm employment. The logic of the position is that you would abolish all employment law.

    If you want to make that case then fine – but don’t try that old ‘good for lawyers’ argument which simply sidesteps the fact that employment law protects employees. Freedom to contract is a myth in employment because the vast majority of employees have no bargaining power and the terms they are presented with are on a take it or leave it basis. The law has stepped in to protect employees from the harsher consequences of that fact by imposing a basic obligation to act reasonably in dismissing and to avoid discrimination based on certain protected characteristics. Society is the better for that because the alternative is not a free market paradise but social unrest based oninsecurity and exploitation.

    Of course one other big interference in the freedom of contract is the freedom for union members to join a union on terms agreed rather than imposed by statute. Would you also want to restore this freedom by repealing the restrictions placed on union activity and their relationship with members imposed by the last Conservative Government?

  9. Posted 01/05/2012 at 08:44 | Permalink

    @darren – you make a series of assertions about the economics of this without any evidence which makes me wonder how much of the economic evidence you have examined. But, firstly, just because I believe that employment law has gone too far does not mean that you can deduce from that that I believe in no employment law (just as it is not a logical deduction of your case that you believe only in state-imposed terms and conditions of employment). It is also not true that the vast majority of employees have no bargaining power – that is just an incredible statement. There is a lot of evidence that the effect of employment law is to reduce opportunities for the most disadvatnaged (older people, younger people, less skilled and so on) though it might raise job security for those who have more standard access to the labour market (at the expense of reducing wages). Would I restore freedom to unions and their members? Yes, I would, in fact. Though, if they also had their immunities removed, I think that unions would return to a more constructive role of providing welfare functions for their members, including bargaining for employees who had less bargaining power and providing legal services and advice. I would welcome that. I think that non-politicised unions could play an important role where regulation currently does. I come from one of the biggest docks towns in the country. When the ndlb scheme was imposed (for all the well-meaning reasons you suggest – it was a form of employment regulation applied to one market) the docks were destroyed (slipped from third port to about 30th, I think). Within months of the scheme being abolished, the dockers were doing overtime for the first time in years; they were earning decent money and the jobs were open to anybody (not just the son’s of dockers as when I was young).

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