[

Mark Shulman, Consultant Solicitor at Keystone Law

](http://www.keystonelaw.co.uk/solicitor.php?search=p_t&id=217)**AGE DISCRIMINATION
Is compulsory retirement of employees at age 65 discriminatory? Not necessarily said the Supreme Court in [Seldon v Clarkson Wright and Jakes (A Partnership)]()** [2012] UKSC 16. But in practice it might be less easy to achieve.

Background
Mr Seldon was a solicitor who had signed up to a partnership Deed which provided for his compulsory retirement from the Partnership following his 65th birthday. As he approached 65, Mr Seldon realised that for financial reasons he would need to go on working in some capacity for several years. He made a series of proposals to his partners with a view to continuing to work but these proposals were rejected. Mr Seldon automatically ceased to be a partner in accordance with the partnership deed and brought a claim of direct age discrimination under the Employment Equality (Age) Regulations 2006 (SI 2006/1031) (now replaced by the Equality Act 2010), based on his compulsory retirement at the age of 65.

The Supreme Court set out the various issues that need to be examined when considering whether direct age discrimination can be justified.

**The justification test in direct age discrimination: what are legitimate aims?
**Unlike other areas of direct discrimination, direct age discrimination can be justified if the discriminatory treatment is "a proportionate means of achieving a legitimate aim". But it is for the Member States, rather than the individual employer, to establish the legitimacy of the aim being pursued.

European case law has recognised various public interest legitimate aims in the context of direct age discrimination claims. Broadly, they fall within two categories: "inter-generational fairness" and "dignity". So from a practical perspective, it will be important for employers to ensure that as a starting point, any policy which is potentially discriminatory (such as a compulsory retirement age) falls within one of the categories of judicially accepted public interest aims.

In Mr Seldon's case, the Supreme Court agreed that the aims of staff retention and workforce planning were directly related to the legitimate social policy aim of sharing out professional employment opportunities fairly between the generations. Likewise, the aim of limiting the need to expel partners by way of performance management was directly related to the "dignity" aims accepted in European case law.

**Proportionality
**Even where a policy aim can be established as legitimate, the means used to achieve it must also be "proportionate" i.e. both appropriate to the aim and reasonably necessary to achieve it. For example, improving the recruitment of young people in order to achieve a balanced and diverse workforce is, in principle, a legitimate aim. But if there is in fact no problem in recruiting the young and the problem is in retaining the older and more experienced workers, then it may not be a legitimate aim for the particular organisation concerned.

A useful point for employers is that the Supreme Court stated that an ex post facto rationalisation is permissible. So the employer's aim need not have been articulated or even realised at the time when the measure was first adopted. Whilst Tribunals will probably look carefully at aims which in the course of subsequent proceedings are stated to be justified, there can still be a rule which an employer was justified in imposing. Provided there is some proper justification, employers can still evidence their aims retrospectively to establish a defence to an age discrimination claim.

It also has to be asked whether there are other, less discriminatory, measures which could be put in place. It is one thing for an employer to say that they have an aim to achieve a balanced and diverse workforce. It is another thing to say that a mandatory retirement age of 65 (or for that matter any other age) is both appropriate and necessary to achieving this end. It might be possible to achieve the desired outcome with a different age of compulsory retirement.

On that basis, Mr Seldon's case was sent back to the ET because it had not been shown that the choice of 65 was in fact an appropriate means of achieving a legitimate aim.

However, the Supreme Court pointed out that the question was whether the treatment which Mr Seldon received was discriminatory at the time when he was subjected to it. The fact that it was lawful for others to be subjected to a designated retirement age (i.e. at a time when employees could be compulsorily retired at age 65) may help to show that what was agreed between him and the partnership about retirement was, at the relevant time, an acceptable way of achieving the legitimate aim.

In the words of Lady Hale: "All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified."

**What is needed to justify indirect discrimination?
In [Homer v Chief Constable of West Yorkshire Police)]()** [2012] UKSC 15 the Supreme Court considered the scope of justification in the context of indirect age discrimination.

**Background
**Mr Homer began working for the Police National Legal Database (PNLD) as a legal advisor in 1995 at the age of 51. When he was appointed the role did not require a law degree. PNLD began to experience problems in attracting suitable people for the role of legal advisor and introduced a new grading structure which had three promotion "thresholds" above the starting grade, the highest of which required a law degree.

In order to reach the highest grade under the new structure Mr Homer would have been required to study for a law degree part-time alongside his work. This would take four years to complete. At this time Mr Homer was 62 years old and, being due to retire at 65, would have been unable to reach or benefit from being at the third threshold before leaving the employment. His various internal appeals and grievances were dismissed and, in April 2007, he issued proceedings under the Employment Equality (Age) Regulations 2006, SI 2006/1031.

The Supreme Court unanimously allowed Mr Homer's appeal, finding that he was indirectly discriminated against on the grounds of age. The Chief Constable argued that Mr Homer should be compared with those employees leaving the workplace for reasons other than compulsory retirement e.g. family reasons or voluntary early retirement. However, the Supreme Court disagreed: it was not valid to compare those who had a choice with those who were subject to a mandatory retirement age. Therefore, there had been indirect age discrimination.

**The justification test in indirect age discrimination: what are legitimate aims?
But this still left the issue as to whether the discrimination could be justified. In practical terms, the range of aims capable of justifying indirect discrimination is much greater than those available in the context of direct discrimination (see Seldon v Clarkson Wright and Jakes . In cases of indirect age discrimination, a "real business need" on the part of the employer can be sufficient justification. This is likely to prove much less onerous for employers.

However, the treatment must still be proportionate. In Homer the ET found that the aim of requiring a law degree was to facilitate the recruitment and retention of appropriate calibre staff within the PNLD. It was not disputed that this was a legitimate aim. But when it came to proportionality it was necessary to ask whether, in the context of the aim of staff retention, Mr Homer was justifiably being denied the additional benefits associated with the highest grade. The policy was likely to impact upon his final salary and thus upon the retirement pension to which he became entitled. So it had to be asked whether it was reasonably necessary in order to achieve the legitimate aims of the scheme, to deny those benefits to people in Mr Homer's position. The ET had not addressed these questions, the answer to which depended to some extent upon whether there were less (or non)-discriminatory alternatives available.

As the ET did not approach the question of justification in a suitable way, the case was remitted on the issue of justification. As Lady Hale observed in her judgment, "We all have a lot of learning to do".

**EMPLOYMENT STATUS
In [Quashie v Stringfellows Restaurants Ltd]()** UKEAT/0289/11/RN the appeal concerned the status of a lap dancer at a night club: was she an employee or self-employed? And if so, did she have sufficient service to claim unfair dismissal? The Club in which Ms Quashie worked conceded that on each night the Claimant was engaged, she had a contract. The question was whether it constituted an employment contract. If so, was there an umbrella arrangement providing sufficient statutory continuity of service to enable her to claim unfair dismissal? The EAT's judgment (well worth reading in full) may have a more general application both in relation to the entertainment industry and in other sectors.

The claimant was a lap dancer and was dismissed following allegations or drug taking and supplying drugs. Her claim of unfair dismissal was rejected at the ET because the Employment Judge declared that she was not an employee.

**Employment essentials
In determining employment status, the ET had been satisfied that personal service was required (as there was no right to substitute) and the level of control exercised by the Club did fall within that envisaged in Readymixed Concrete v Minister for Pensions and National Insurance** [1968] 2 QB 497.

Was there sufficient mutuality of obligation? Yes said the EAT because there was an obligation to pay the Claimant and on each night she attended she was obliged to work as directed by the management. If she did not provide the agreed free dances or other duties, she could be fined. All of these conclusions pointed towards a finding that on the night the Claimant was an employee.

The EAT therefore accepted the Claimant's contention that that there was a contract of employment in existence prior to each nightly engagement. The contract covered the period from the date of acceptance (once the Club's rota was published and agreed) through to the night when the Claimant was obliged to work.

**Continuity of service
**Whilst employment status could be in place for each contract for one night at a time, that still left the question of whether there was an overarching or umbrella contract covering the whole of the period of 80 weeks of the relationship between the Claimant and the Club. Standing back and looking at all of the circumstances in the 80 weeks of the relationship, the EAT considered that:

* there were probably no gaps between the contracts (or no gaps of a week or more for continuity purposes under section 212 of the Employment Rights Act 1996); * alternatively, even if there were gaps:

• the Employment Judge would have found there was a temporary absence which did not break continuity (section 212(3)(c) of the Employment Rights Act 1996); or

• applying Nethermere (St Neots) Ltd v Gardiner [1984] ICR 612 (a case where home workers provided regular work but could refuse it and were held to be employees under an umbrella contract), an employment contract could arise over time and so by the regular performance of work and/or by the Claimant's expectation of work, the relationship had "enured" over time into an employment relationship under the one umbrella contract covering the whole period.

Accordingly, as in those circumstances the Claimant would have had sufficient qualifying service, the case was remitted to a Tribunal to decide whether there had been an unfair dismissal.

**PRACTICE AND PROCEDURE
Costs
**Under Rule 41(2) of the Employment Tribunal Rules:

"The tribunal … may have regard to the paying party's ability to pay when considering whether it … shall make a costs order or how much that order should be."

Does a Tribunal always have to consider the ability to pay when making a costs order? Not necessarily said the EAT in [Doyle v North West London Hospitals Trust]() UKEAT/0271/11/RN. So far as "ability to pay" is concerned, [Arrowsmith v Nottingham Trent University]() [2011] EWCA Civ 797 confirmed that a Tribunal is not obliged to take that factor into account in deciding the amount of any costs order. However, as a decision is required one way or the other, a Tribunal must still act judicially in deciding whether to do so. In Doyle, the EAT concurred with the judgment of HH Judge David Richardson in Jilley v Birmingham and Solihull Mental Health NHS Trust (21 November 2007) when he stated:

"Rule 41(2) gives to the Tribunal discretion whether to take into account the paying party's ability to pay. If a Tribunal decides not to do so, it should say why. If it decides to take into account ability to pay, it should set out its findings about ability to pay, say what impact this has had on its decision whether to award costs or on the amount of costs, and explain why."

The ET in Doyle made a costs order against the Appellant for almost £100,000 without giving any consideration at all to the Appellant's means. In the present case the EAT decided that the proper exercise of discretion would have meant that the Tribunal did have an obligation to consider ability to pay because:

(a) the order for costs was a very large amount and such an order will often be well beyond means of the paying party and have very serious potential consequences;

(b) there was nothing to indicate that the Appellant was clearly going to be able to pay such an amount (e.g. she was not an employer with very large resources);

(c) the Tribunal must have thought that the ability to pay point might have been overlooked.

Taking into account all the circumstances the EAT was firmly of the view that the question of means should have been raised by the Tribunal in the case before making a decision on the costs application. Whilst the EAT emphasised that they were not seeking to lay down any general guidelines as to what is a good reason for deciding not to have regard to ability to pay, there are in fact useful pointers as to how Tribunals should approach the matter of costs when large amounts are at stake.

But once a decision has been made to consider ability to pay a costs order, a Tribunal must take all relevant facts into account. In [Andorful v London Borough of Hammersmith & Fulham]() UKEAT/0410/11/SM the Claimant brought a claim of race discrimination which was struck out. The Judge ordered the Claimant to pay costs of £10,000 as she was still working and earning £25,000 a year. The claimant appealed. The EAT pointed out that once the Judge had decided to look at issues of ability to pay, he should have taken into account that the Claimant was on maternity leave at the relevant time and receiving only some of her normal pay and also that the Claimant and her husband rented, rather than owned, their home. The costs order of £10,000 was therefore reduced to £5,000.

Changes to costs rules
Practitioners should note the recent amendments to the costs rules for cases issued on or after 6 April 2012, under which Tribunals :

* are subject to an increased upper limit of £20,000 for cases where a summary costs order is made; * may make a costs order requiring payment to a witness in respect of their expenses incurred in attending the Tribunal. There is currently no guidance on how discretion should be exercised under this new power.

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator.