Professional firms and the abolition of the DRA

 By John Davies, head of technical, ACCA

Until this year, employers have been entitled to compulsorily 'retire' employees at the default retirement age (DRA) of 65. With the abolition of the DRA in 2011, attention is now turning to how businesses of different kinds should adapt to the new situation.

One aspect which understandably concerns many is in what circumstances can businesses still 'retire' people if there is no longer a fixed point at which this can legally be done?

Under the new rules an employer can still 'retire' a person if the action is 'objectively justifiable' by reference to a 'legitimate aim'. This is a very broad test which will fall to be determined by tribunals and the courts on a case by case basis.

In the case of posts which require very high levels of physical and/or mental sharpness, the situation may be clear cut as to whether a set retirement age is justifiable. But how will tribunals and the courts deal with cases involving professional firms and in particular partners (or equivalent)?

The question of objective justification in the professional context was looked at by the Court of Appeal in 2010 in the case of Seldon v Clarkson, Wright and Jakes, a case involving a law firm.

Like many professional firms, the partnership had a deed which specified a compulsory retirement age (CRA) of 65. One of the partners wanted to work beyond that point but the firm objected. Seldon brought a claim for age discrimination to an employment tribunal, and the case ultimately ended up in the Court of Appeal. In upholding the principle that, to be 'justified', a CRA need not be set by reference to the public interest, the court held that the test must be whether the aims of the employer or partnership are consistent with the policy goals which are inherent in the anti-age discrimination legislation, which are, in the employment field, essentially to ensure that age is not used to bar people from obtaining gainful employment.

The court took into account the firm’s claim that a fixed retirement age facilitated a congenial and supportive firm culture which allowed younger staff to advance to partner level and to allow individuals to 'retire with dignity' (as opposed to being expelled as a consequence of performance management action). It also accepted, crucially, that in the case of a partnership deed, a CRA may be agreed by parties of equal bargaining power.

It appears therefore that there will remain scope for partnerships (professional or otherwise) to argue that an internal CRA remains viable at partner level even after the abolition of the statutory DRA.

All such firms should nevertheless consider whether such a rigid practice is necessary or desirable bearing in mind the value to them of the retention of essential skills and experience. It should also be noted that what may be objectively justifiable by reference to partners (or equivalent) will not necessarily extend to the firm’s employees.