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Matthew Howse

Morgan Lewis & Bockius LLP

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Legal Insight: Age discrimination – What you can and can’t do

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 The abolition of the default retirement age in 2011 has meant that age discrimination has now become a major issue for many employers.  

The good news is that, unlike other grounds for discrimination, both direct and indirect age discrimination can be objectively justified. The bad news is that there has, to date, been very little useful guidance from the courts on what amounts to objective justification.
 
Last week, however, the UK Supreme Court handed down two keenly anticipated judgments that dealt with age discrimination. The judgments provide employers with some guidance, but disappointingly do not answer all of the key questions.
 
Seldon: Direct discrimination
 
The first case, Seldon v Clarkson Wright and Jakes, considered whether a law firm could objectively justify a compulsory retirement age of 65 for its partners. Following the abolition of the default retirement age, having a compulsory retirement age is directly discriminatory on the ground of age unless justified.
 
The DRA has never applied to partners though so the Supreme Court’s decision is relevant to employers and employees now that it no longer applies to employees either. 
 
So, could a compulsory retirement age (which amounts to direct age discrimination) be justified?
 
Justification
 
To justify age discrimination, the employer must show that it is "a proportionate means of achieving a legitimate aim". 
 
Legitimate aims
 
In relation to legitimate aims, the Supreme Court stated that direct discrimination must be justified by reference to social policy objectives. These are of a public interest nature (for example, related to employment policy) and are distinguishable from an employer’s purely individual aims such as cost reduction.
 
The Supreme Court accepted that the aims behind the law firm’s compulsory retirement age were legitimate as they related to:
 
  • Staff retention – retaining associates by being able to offer them the opportunity of partnership after a reasonable period
  • Workplace planning – facilitating partnership and workforce planning with realistic expectations as to when vacancies would arise
  • Workplace culture – contributing to a congenial and supportive workplace culture by limiting expulsion of partners through performance management.
 
Proportionate means
 
Given that the law firm had identified legitimate aims, the next question was whether compulsory retirement at 65 was proportionate – was it "appropriate and necessary"?
 
The Supreme Court found that the company had not established that a compulsory retirement age was an appropriate means of achieving the third legitimate aim – congeniality.
 
Unfortunately however, beyond that, the Supreme Court did not answer this question and sent the case to an employment tribunal to consider. The tribunal must now evaluate whether the law firm’s legitimate aims were proportionate.
 
Next steps
 
Much of the press coverage relating to the legal decision suggested that it would now be easier for employers to force employees to retire. Although the Supreme Court confirmed that the law firm had legitimate aims for its policy, it remains unclear whether those aims are proportionate.
 
Going forward, it will be a brave employer that operates a compulsory retirement age. If you operate such a policy, you must:
 
  • Consider the legitimate aims of implementing the policy
  • Consider how these aims meet social policy objectives
  • Consider why it is a proportionate measure (particularly with regard to the retirement age you choose).
 
Homer: Indirect discrimination
 
In the second case, Homer v Chief Constable of West Yorkshire Police, the Supreme Court looked at whether an employer could lawfully implement a practice that prevents people from progressing as a result of their age.
 
The police implemented a policy whereby an employee needed a law degree to achieve the upper pay band in any legal post. Due to his age, Mr Homer could not complete a law degree before he would be automatically retired and it was, therefore, impossible for him to achieve the higher pay grade.
 
Indirect age discrimination
 
Mr Homer brought a claim to an Employment Tribunal alleging indirect age discrimination against the police. Broadly speaking, indirect discrimination occurs when an employer applies a provision, criterion or practice, which puts an employee at a disadvantage because of their age, sex, or other "protected characteristic". 
 
A classic example of this is when female employees are not allowed to work flexibly. This could amount to indirect sex discrimination as more women are likely to seek a flexible working arrangements given that they are usually the ones responsible for childcare.
 
In the present case, Mr Homer claimed that the law degree requirement policy put people in his age group (60-65) at a disadvantage because it meant that they would not remain in employment long enough to obtain their law degree and, therefore, benefit from increased salary and benefits. 
 
The Supreme Court held that Mr Homer had been put at a disadvantage by the police force’s policy and it was, therefore, required to justify the indirect age discrimination.
 
Justification
 
As with Seldon, the Supreme Court has asked an employment tribunal to determine whether the policy was justified, but it did give the tribunal some guidance.
 
Legitimate aims
 
Unlike in a direct discrimination situation, employers can identify purely individual legitimate reasons that are peculiar to them for implementing a policy (such as cost reduction or, in this case, improving competitiveness) in order to justify indirect discrimination. 
 
In indirect discrimination cases, the question of whether the legitimate aims are proportionate is, therefore, likely to be the key determinant on whether the discrimination can be justified.
 
Proportionality
 
On proportionality, the Supreme Court stated that employers should ask themselves the following questions:
 
  • Is your objective sufficiently important to justify limiting a fundamental employee right?
  • Are your chosen means no more than is necessary to accomplish your objective (that is, are there non-discriminatory alternatives?)
On the facts, we believe that the actions of the police force are likely to amount to indirect age discrimination. The main reason for this is that the police did not consider any non-discriminatory alternatives – such as not making the law degree policy apply to existing employees.  
 
Next steps
 
Age discrimination is likely to become a major issue for most employers. Given that the majority are choosing not to implement a compulsory retirement age, the main issues are likely to surround indirect age discrimination. 
 
As a result, they should ask themselves the following key questions:
 
  • Are some employees particularly disadvantaged as a result of company policies/practices
  • If so, can they justify the policies
  • Are there non-discriminatory alternatives?
 

Matthew Howse is a partner and Robert Sinclair an associate in the employment group in the London office of US law firm, Morgan Lewis & Bockius LLP
 
This article was first published by our sister website, www.Businesszone.co.uk.
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Matthew Howse

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