“Need a degree to get a pay rise – don’t bother if you’re 61 or older!”

“Want to work beyond the age of 65 – afraid not, it’s in our Partnership Deed!”

These may sound like the worst job adverts in the world, but in fact they are the subject matter of two cases whose judgments were handed down by the Supreme Court last week (25 April 2012). These key cases are set to challenge employer’s attitude to age and retirement. What will these decisions mean in practice for employers?

KEY FACTS

In Homer v Chief Constable of West Yorkshire Police, Mr Homer worked as a legal adviser for the Police National Legal Database (PNLD) since 1995. In 2004, a new job profile was brought in stating that employees in this role had to have a law degree – this did not affect Mr Homer. However, in 2005 his employers implemented a new, graded career structure where to achieve the top pay scale; you had to have a law degree. Mr Homer applied to be on the top grade but this was rejected as he did not have a law degree. Mr Homer argued this was indirect age discrimination as, at age 61, he was prevented from completing the degree before he retired aged 65!

In Seldon –v- Clarkson, Wright and Jakes, Mr Seldon was a partner in a law firm. As he approached his 65th birthday he realised that he needed to keep working so asked the partners if he could exercise his rights under the then Age Regulations and request to work beyond his retirement age. The partners told him he had to retire at 65 as there was a clause in their Partnership deed requiring compulsory retirement. This, Mr Seldon argued, was direct discrimination on the grounds of his age.

(Although decided under the old Age Regulations, the cases still have relevance under the Equality Act 2010.)

AGE DISCRIMINATION AND OBJECTIVE JUSTIFICATION

It is unlawful to treat a person less favourably because of their age or to use a policy, criterion or practice (a PCP) which has an adverse and detrimental effect on one age group when compared to another. These principles of direct and indirect age discrimination have been enshrined in the Equality Act 2010. However, unlike other forms of discrimination, an employer is able to escape liability if it can show it had an objective justification in both direct and indirect discrimination cases. This means that an employer may be able to explain their treatment on legitimate business or other proportionate grounds. The test for objective justification in both direct and indirect discrimination was thought to be the same; however, the Supreme Court has ruled on how these two types of discrimination should be viewed by the courts.

DECISIONS OF SUPREME COURT

Mr Homer was successful in establishing that PNLD’s requirement of only allowing promotion on the basis of a law degree was indirectly age discriminatory. The case will now return to the employment tribunal to decide if PNLD were objectively justified in their requirement for employees to have a law degree to attain the top promotion where an employee is close to retirement.

In Mr Seldon’s case the Court accepted the employer’s defence that asking partners to retire was objectively justified. It had legitimate aims – to give junior employees a clear career path to partnership, to retain associates, and to allow for partnership planning. The Court agreed that its aims were both individual in nature but also were part of the wider public interest (referred to as “inter-generational fairness” and “dignity” by the Court, following earlier European Court of Justice Guidance). However, whilst, the Court accepted that asking partners to retire was a proportionate means of achieving these aims –were these aim achieved by a partner retiring at age 65? What about 68, or 70? The case was therefore sent back to the employment tribunal to consider whether using age 65 was a proportionate means of achieving those aims in the circumstances of the particular business.

PRACTICE POINTS

Where do these decisions leave us? It’s all about objective justification – showing that the aims justify the means.

The Court have accepted that employers need to plan for the future of their business, retain or attract staff, treat older employees with dignity – sparing them the need to performance manage them - or to have incentives for job promotion. The Court has also shown that the test for objective justification in direct discrimination is more onerous on an employer as it must show both an individual and a public interest justification.

For example, in Mr Homer’s case, why was a law degree necessary to achieve the highest pay grade? Why was Mr Homer’s experience and skills set not enough to justify the top grade? These are issues that the employer will now have to address before the employment tribunal. Similarly in Seldon, yes, the employer was entitled to plan for the future and be fair to those coming up through the ranks, but why did the partners have to retire at 65?

These decisions do not restrict the use of fixed retirement ages or PCPs that might adversely affect one age group; however, employers must be able to demonstrate that the adverse consequence is justified because:

1. It has a legitimate aim;
2. It has properly assessed that aim in the context of its business;
3. It has also, in the case of direct discrimination, properly assessed that that aim falls within the wider public interest;/
4. The methods used to achieve those aims are necessary and appropriate; and
5. There are no “non-discriminatory alternatives”.