Court ruling could particularly help small businesses to force elderly employees to retire.

A new Supreme Court ruling could make it easier for small businesses to implement compulsory retirement for elderly employees, according to City law firm RPC (Reynolds Porter Chamberlain LLP).

The case (Seldon v Clarkson Wright and Jakes) was brought by a lawyer who was forced to retire from his firm upon reaching the age of 65. The Supreme Court held that legitimate grounds for businesses to require elderly employees to retire include maintaining intergenerational fairness and a retiring employee’s dignity. Once a legitimate aim is identified the employer then has to show that the retirement age adopted was a proportionate means of achieving the particular aim.   

According to RPC, the Supreme Court ruling means that:

• A fixed retirement age designed to preserve an elderly employee’s dignity by avoiding the need for performance management can be a legitimate aim.   
• It may be easier for businesses that don’t have performance management systems in place, such as small businesses, to justify this.

Simon Henthorn explains, Senior Associate at RPC: "Small businesses may not have sophisticated performance management systems in place to review an employee’s performance with them, so a fixed retirement age may preserve an employee’s dignity and avoid unpleasant and costly disputes about performance.

"Though more controversial than a retirement age designed to preserve fairness between different age groups, the ruling means that for some businesses it may be possible to require underperforming staff to retire to save them the embarrassment of reviewing their performance.

"Larger businesses with dedicated HR teams are more likely to have capability procedures, monitor staff performance and provide feedback more frequently so they will find it difficult to say that they need to use compulsory retirement to save the dignity of an elderly employee."