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Source
Employment Law Journal
Date
12 November 2014

Age discrimination: a review of recent cases

Since the abolition of the default retirement age on 6 April 2011, dismissal by reason of an individual being at or approaching retirement amounts to direct age discrimination pursuant to section 13(1) of the Equality Act 2013. However, unlike direct discrimination on the basis of the other protected characteristics, direct age discrimination can be objectively justified pursuant to section 13(2). If an employer can demonstrate that the 'ageist' treatment was "a proportionate means of achieving a legitimate aim", a claim will fail. As such, this defence can dramatically hamper an individual's ability to bring a successful age discrimination claim under the UK regime. But how has the justification defence been interpreted by the courts?

This article will look at two recent decisions that have grappled with the issue. It will also examine another age discrimination case dealing with a different dilemma: the motivation of those involved in a decision-making process.

The end of the road for Seldon

On 13 May 2014, the Employment Appeal Tribunal (EAT) handed down the latest judgment in the Seldon v Clarkson Wright & Jakes litigation that has been litigated for almost eight years. Mr Seldon was a partner at a law firm, Clarkson Wright & Jakes. He brought a claim on the basis that the firm's policy of mandatory retirement for partners at the age of 65 was discriminatory. At the time, employees could be lawfully retired at the default retirement age of 65, but the retirement of partners had to be justified. The firm's position was that the policy was justified on the basis that it: (1) enabled senior solicitors the opportunity of partnership; (2) assisted in short and long-term workforce planning; and (3) contributed to the congenial and supportive culture in the firm by reducing the need to performance manage partners out of the partnership. The firm also put forward three additional arguments; that the policy (4) enabled all partners who remained at the firm to become senior partner; (5) promoted financial retirement planning; and (6) protected the traditional partnership model. The three latter grounds were not accepted by the employment tribunal at first instance and were not at issue on appeal when the case reached the Supreme Court.

The Supreme Court held that all three of the identified aims were legitimate, commenting that the "first two identified aims were staff retention and workforce planning, both of which are directly related to the legitimate social policy aim of sharing out professional employment opportunities fairly between the generations…..[and]…..the third was limiting the need to expel partners by way of performance management, which is directly related to the "dignity" aims accepted [by European case law]".

The issue of whether the firm's means of a mandatory retirement age policy specifically at the age of 65 (as opposed to any other age) was proportionate in achieving those legitimate aims was remitted back to the employment tribunal. Lady Hale, giving the leading judgment, stated that: "There is a difference between justifying a retirement age and justifying this retirement age. Taken to extremes, their first two aims might be thought to justify almost any retirement age. The ET did not unpick the question of the age chosen and discuss it in relation to each of the objectives."

Therefore, the central question remitted back to the employment tribunal, and appealed more recently to the EAT, was whether "the age could be lawfully and properly chosen as 65 rather than some other less discriminatory age" in justifying the legitimate aims found by the Supreme Court.

Mr Seldon's case was that either 68 or 70 would be an age which would have served the same legitimate aims and would be less discriminatory. In specifically observing the test (first used by the Court of Appeal and adopted by the Supreme Court) to determine proportionality, namely whether the means were "reasonably" necessary in achieving the legitimate aim, the EAT concluded that 65 was an appropriate age. The EAT commented that, in the context of age discrimination, it was essential to qualify the necessity of the means with the word "reasonably". Without that qualification, it would always be less discriminatory to choose a day (or more) later than any given retirement age, as long as that later date could be a means to justify the legitimate aim. However, the judgment made clear that this reasonability element was not the same as the 'band of reasonable responses' test used for unfair dismissal purposes, but rather a full and proper consideration of what was reasonable given the facts before the court.

The EAT appeared to acknowledge the difficulty of the task for both employers and tribunals as age is by its very nature determined at one point in time. It confirmed that the issue for tribunals "is to determine where the balance lies: the balance between the discriminatory effect of choosing a particular age…and its success in achieving the aim held to be legitimate. That balance, like any balance, will not necessarily show that a particular point can be identified as any more or less appropriate than any other particular point."

The judgment of the EAT has most likely brought to an end the Seldon litigation. Although the firm in that case was able to justify its policy, that is not to say that justifying a mandatory retirement age will be easy in the future. However, for those employers who are still considering compulsory retirement, what key points can be taken from the decision?

  1. Whilst a mandatory retirement age of 65 in Seldon was found to be a proportionate means of achieving a legitimate aim, this does not mean that the specific age of 65 will be justified in other cases. It is worth remembering that at the time, 65 was the default retirement age for employees and this is likely to have influenced the outcome. The default retirement age has since been abolished.
     
  2. Any mandatory retirement policy must be able to demonstrate that it is reasonably necessary and appropriate to achieve a legitimate aim. Choosing the "right" age will be essential. It may be sensible to set an upper age limit mirroring an employee’s entitlement to receive their company pension, or at least the state pension age, in order to negate potential prejudice arguments by individuals.
     
  3. Employers can choose which objectives to pursue provided that, " (i) these objectives can count as legitimate objectives of a public interest ….. and (ii) are consistent with the social policy aims of the state and (iii) the means used are proportionate, that is both appropriate to the aim and (reasonably) necessary to achieve it." In relation to (iii), the "means have to be carefully scrutinised in the context of the particular business concerned in order to see whether they do meet the objective and there are no other, less discriminatory, measures which would do so." It is this proportionality test that is likely to prove the most difficult for employers to satisfy.
     
  4. In relation to (i) and (ii) above, two established categories of legitimate aims are: (i) inter-generational fairness (for example, facilitating access to employment by young people or enabling older people to remain in the workforce); and (2) dignity (for example, avoiding the dismissal of employees on grounds of underperformance).
     
  5. Legitimate aims can generally only be achieved by the application of general rules or policies. Whilst the courts have not ruled out the possibility that there may be cases where the particular application of the rule has to be justified on an individual basis, these would be very rare.

Can cost concerns alone be a legitimate aim?

The recent European Court of Justice (ECJ) decision in Specht and Ors v Land Berlin [2014] EUECJ C-501/12 provides further guidance on what the ECJ considers to be a proportionate means of achieving a legitimate aim.

In this case, Mr Specht brought an age discrimination claim on the basis that German federal law permitted pay to be calculated on the basis of employees' "seniority". Seniority was defined by reference to employees' age. The German government wanted to implement a new system whereby pay was determined by experience. However, in transitioning from the old to the new system, the German government allowed existing employees to maintain their existing level of pay which was based on their age (to avoid a number of employees having to suffer a reduction in pay). Mr Specht claimed that (1) the old system of pay was directly discriminatory on grounds of age; and (2) the transitioning that allowed existing employees to keep their level of remuneration based on a discriminatory scheme also amounted to age discrimination.

Unsurprisingly, the ECJ found that the old system was discriminatory. Whilst it accepted that the aim of rewarding previous experience (including length of service) was legitimate, it found that it went beyond what was necessary – the pay grade was assessed not on professional experience but on age.

The ECJ then analysed the transitioning scheme. It ruled that although it was ultimately predicated on the old discriminatory scheme, and therefore also discriminatory, transitioning in that way was justified. It was legitimate to protect existing employees from suffering loss of salary, and such protection constituted an overriding reason in the public interest. Furthermore, in light of the number of civil servants that would have to be re-classified in the absence of the transitional process, it would have been an excessive use of administrative resources requiring case-by-case considerations.

It is not surprising that the ECJ found that the German government's aims were legitimate. As with Seldon, any factor that can be considered in the interests of public or social policy is likely to pass this hurdle. However, what is more interesting is that the ECJ found that the German government's means were in part justified by reason of administrative resources (i.e. costs). Whilst this is not inconsistent with the line of domestic cases that have established that cost burdens alone cannot justify discrimination, it may well leave the door a-jar for more such arguments.

Was performance dismissal tainted by age?

The recent EAT decision in Reynolds v CLFIS (UK) Ltd & Ors, looked at a different issue and decided a point of law that had not previously been considered.

Ms Reynolds, a doctor and expert in the field of medical underwriting, had worked as the Chief Medical Officer at CLFIS since 1968. She was made redundant in 2006 but re-engaged as a consultant until that consultancy was terminated on 31 December 2010 for poor performance. At the date of termination Ms Reynolds was 73 and she brought a claim alleging age discrimination.

The decision to terminate was taken by the most senior manager in the business, Mr Gilmour, following a presentation of a report prepared by two other managers which highlighted performance issues. The termination was found to have been carried out in an underhand way without any effort to discuss the issues with Ms Reynolds and that her age had featured in the consideration about her future at the company. However, the employment tribunal held that Mr Gilmour's "approach may have been misguided, reprehensible even, but this did not make it discriminatory". It found that none of the factors that he relied upon to terminate the consultancy were related to Ms Reynolds' age.

Ms Reynolds' appealed to the EAT primarily on the ground that the tribunal had misdirected itself by only considering Mr Gilmour's motivation and none of the mental processes of other individuals who were involved in the decision-making process.

The EAT upheld the appeal and remitted the case to a freshly constituted employment tribunal. It adopted the approach in Amnesty International v Ahmed [2009] ICR 1450 in distinguishing acts of discrimination that are inherently discriminatory (where no further inquiry into motive is required) and where, as in this case, the act complained of is not discriminatory itself but may be considered so by underlying motivations. The employment tribunal stated that the crucial factor in the case was that "even though it was known that other identified people were involved in a significant way in the process which led up to Mr Gilmour's decision to terminate the Claimant's contract, the mental processes of those people were never examined. That, in my judgment, was an error of the law."

Key points

  1. Once the burden of proof had shifted in this case, it was for the employer to prove that the decision to terminate the agreement was "in no sense whatsoever" on the ground of age. For the tribunal to properly assess whether the employer has discharged that burden, it had to consider the mental processes of others whose views had influenced the decision to terminate.
     
  2. This could potentially involve the consideration of the mental processes of a number of individuals and it is not clear what level of involvement will merit an assessment. However, the principle is only likely to apply to individuals known to have been involved in a material way in the process leading up to a decision.

Conclusion

Age discrimination continues to throw up interesting but tricky issues of law. However, statistics show that it remains difficult for an employee to succeed in a claim under the age discrimination rules. But, as highlighted in this article, this does not mean that dismissal decisions which are (or could arguably be) connected to age should be taken lightly by employers.