Mandatory retirement ages

Professional services firm partners often think a mandatory retirement age (MRA) in their members’ agreement is a sensible idea, until it starts to loom on their own horizon.

At that point, the reality of being forced out of a career, firm and client base in which they have personally invested so much - and to which they feel they still have so much more to give - can be a bitter pill to swallow.

There have been some notable cases of partners, including accountancy firm partners in the UK, Australia and elsewhere, bringing very high value claims against their firms to seek redress for alleged age discrimination for age-related forced exits, harassment, and other less favourable treatment compared to younger partners. This trend is likely to continue and indeed to increase.

Faced with current economic pressures, many partners are now questioning the lawfulness of their firm’s mandatory retirement age and whether it is still justifiable. So, what do firms and partners need to consider when assessing whether or not their current MRA is lawful and whether there is adequate evidence to support it?

The recent employment tribunal decision in Scott v Walker Morris LLP, whilst not a binding authority, provides a useful exploration of these questions.

It highlights how a tribunal will deconstruct the purported justification of a firm’s MRA and – crucially – will closely scrutinise whether there is adequate evidence to support it. We briefly summarise the key facts and some initial thoughts below.

Mandatory retirement age in operation

Walker Morris LLP is a 57-partner strong firm of solicitors based in Leeds. Since the 1980s, it operated a partner MRA of 60. In 2018, after a decade of disquiet among certain partners about the lawfulness and sustainability of the MRA of 60, a majority of partners voted to retain a modified MRA.

Partners could request an extension to age 63 and a further extension to age 65. Extensions were subject to approval of the board or, failing that, a members’ resolution, as well as satisfaction of certain conditions (not applicable to younger members), including (i) demonstrating exceptional contribution, (ii) agreeing to pass over their goodwill in the business, and (iii) entering into restrictive covenants.

The claimant, Martin Scott, successfully received an extension to age 63. When he failed to receive a further extension to age 65, he brought claims of direct age discrimination.

The tribunal found Scott had been discriminated against because of age, first by the board, and subsequently by the partner group, when they respectively refused to extend his partnership (and delay his retirement) from age 63 to 65; as well as by the firm’s consequent decision to terminate his partnership at age 63.

The evidence

A partner mandatory retirement age is, on its face, direct age discrimination, but it can be justified where it is a proportionate means of achieving a legitimate aim (ie, it satisfies a real business need, has a public interest nature and pursues social policy objectives).

Walker Morris LLP identified two potentially valid aims: (i) workforce and succession planning, and (ii) maintaining a collegiate and cohesive atmosphere (respectively, social policy examples of intergenerational fairness and dignity).

Still, these valid aims were not enough - the firm failed to demonstrate that it faced issues of succession planning or a lack of collegiality, let alone that its MRA was an appropriate way to respond to such issues.

The tribunal noted that the firm could have evidenced its perceived challenges with succession or collegiality through, for example, partner performance data, reflections from exit interviews, modelling around equity bottlenecks or recruitment challenges, but failed to do so.

The tribunal also found that Walker Morris LLP had not adequately considered alternative, less discriminatory options to the MRA (and evidenced such deliberations). The tribunal identified other potential alternative policies, for example: returning influence and equity while retaining partner status; robust performance appraisals and career conversations; part-time work arrangements; an MRA of a higher age; or targeted use of the firm’s power to expel on notice.

Importantly, in considering whether the MRA was proportionate, the tribunal found that the partner vote in favour of the policy (including by the claimant) was ‘a factor’ but ‘not the most important’ and ‘not determinative’.

The firm’s treatment of Scott was therefore held to be unlawful age discrimination.