A recent Employment Appeal Tribunal (EAT) decision has provided guidance on the inclusion of clauses in partnership agreements which require partners to retire at a fixed age, says UK law firm Morgan Cole Solicitors.
Partnership lawyers had been waiting for some months for the decision of the EAT to be handed down in the case of Seldon v Clarkson Wright & Jakes. The decision was reached at the end of last year.
The decision as to an appropriate retirement age will not be the same for every partnership, but in summary the position is:
- Partnerships with a fixed retirement age rule can, in principle, successfully defend applications to Employment Tribunals under the regulations.
- The justification for imposing a fixed retirement age can include the need to plan for succession in partnerships, giving suitable senior employees some certainty as to when vacancies in the partnership may occur and removing the need for partnerships to impose a performance management regime in order to justify the removal of a partner.
- The fact that partners have agreed a fixed retirement age is something that can fairly be taken into account in deciding whether the fixed retirement age is justified.
- The age that partnerships choose to fix as a justifiable retirement age cannot be assumed to be 65 just because that is the fixed age at which employees can be compulsorily retired. That is the sort of stereotyping which the regulations are seeking to avoid.
- Partnerships will need to carefully analyse the age at which the performance of partners will fall away and to fix an age which links to that analysis. That decision may be based on previous experience within the partnership or from outside, but will require “evidence of a considered and reasoned explanation as to why a particular age had been chosen.”
The advice to partnerships with fixed retirement ages is that the chosen age will need to be carefully considered to ensure that the partnership has clear reasons for having a fixed retirement age.
If one of the reasons is to preserve collegiality and avoid the introduction of a performance regime, then the partnership will have to carefully analyse the age at which performance will fall away when fixing the retirement age.
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