07 Apr 2022

Rage, rage against the dying of the light: it's time to rethink mandatory retirement for partners

Law firms need a more positive and inclusive culture for older partners, write Clare Murray, Pooja Dasgupta and Andrew Pavlovic

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We are all getting old. In the UK especially so, due to declining fertility rates and people living longer. But are law firm demographics keeping up? There has been a concerted push for diversity and inclusion in gender, ethnicity and other underrepresented groups across the professional services sector, but have we done enough to include older workers and partners – so that we, and our clients, can see the full breadth of modern society reflected in our profession? 

The pressure on older law firm partners is higher than ever before. They have borne the brunt of the multiple waves of severe economic disruption and uncertainty over recent decades, with direct impact on their ability to plan for retirement. With extended periods of caring and financial responsibility both for children and ageing parents, and the rising costs of living, older partners now face more challenges than arguably any of their post-war predecessors. 

We are seeing partners scrutinising the fairness of the mandatory retirement age (MRA) for partners in their firm’s LLP Agreement, primarily because they feel it no longer reflects their personal and professional responsibilities and aspirations, or those of their generation. Some partners challenge the MRA and reach some form of compromise with their firm; others transition to de-equitised or consultant status, or a portfolio career. 

An increasing number of older partners are moving to firms who have either dispensed with an MRA or, in the case of US firms in London, never had one in the first place. These experienced, older partners (and their long-standing client and referrer relationships and market profile) can be an incredible catch for those acquiring firms and provide a brilliant learning and development opportunity for their up and coming generations. The move can also be a rejuvenating and rewarding experience for those partners, especially if it is to a firm with a more flexible partner remuneration structure which can accommodate overperformers of any age. Win-win, surely?

So, if it is evidently in UK law firms’ interests to reflect our diverse society, yet they are losing valuable and experienced older talent, why do they retain MRA provisions, and – bonus question – why do a minority who have removed their MRA, nevertheless perceive the need to discreetly sweep out partners in their mid to late-50s before the issue of retirement can raise its head? 

Age discrimination – the legal backdrop

Some legal context explains the approach some firms have taken to date, and also why they now need to revisit their assumptions. Age discrimination is prohibited by the Equality Act 2010 (EqA). That protection extends to partners and LLP members in England and Wales, and also potentially to those working in overseas offices of UK law firms if they can show strong connections to the UK. The EqA prohibits direct and indirect age discrimination, age-related harassment and victimisation.

Exceptionally for discrimination claims, direct age discrimination (such as the application of a partner MRA) can be justified if the firm can show that the treatment is a proportionate means of achieving a legitimate aim. Whether or not a court will find that an MRA is proportionate will depend on the firm being able to establish (with evidence) in the particular circumstances of the case: 

  • legitimate, social policy-based, aim(s) which the firm is pursuing and which the MRA progresses (such as workforce planning, staff retention, intergenerational fairness and dignity);
  • that those legitimate aims are relevant to the firm’s particular circumstances and supported by evidence to show it achieving those aims; 
  • that the MRA is a proportionate (i.e. an appropriate and necessary) means of achieving those aims, having regard to the severity of the discriminatory impact on older partners and the reasonable needs, working practices and business considerations of the firm at the relevant time; 
  • that the firm balances its own needs against those of both the older partners and the younger members of the workforce; and
  • that there is no less discriminatory means of achieving the firm’s legitimate aims.

The leading case in this area is Seldon v Clarkson Wright and Jakes (CWJ), brought by an equity partner who was compulsorily retired at 65 under the partnership deed in circumstances where there was no power to expel for underperformance or for a performance management procedure. The firm sought to justify the MRA and the age of 65 on the basis of three legitimate aims: associate retention; workforce planning; and collegiality/dignity by limiting the need to expel partners for underperformance. Mr Seldon lost at pretty much every stage of litigation – all the way up to the Supreme Court and back to the employment tribunal, and his case had, for a long time, a chilling effect on other law firm and professional services partners considering challenging their firm’s MRA. 

But, in our view, it was a decision that was of its time and based on its facts, including the inheritance-based nature of that practice. How many partners have the luxury of that these days? Unless their firm can persuade older partners to gift client relationships to them as “good citizens” (which can then leave the older partners themselves vulnerable), nowadays, most partners have to build and consistently maintain their own client relationships and practice, or face potential performance management and exit. 

More recently, there have been cases where an MRA has been determined to be lawful in one case, and unlawful in another. Again, it’s all about the particular facts of the case and the underlying evidence. 

Interestingly, a recent high-profile case in Australia saw a partner bring an age discrimination case against Deloitte, in which he sought more than AUS$3m in damages against the firm for seeking to force him into mandatory retirement at 62 (as part of a “voluntary” early retirement expectation/policy for partners). Whilst Deloitte maintained that there was no breach of Australian age discrimination laws, as the departure was seen to be voluntary, partners had apparently been brought in for retirement discussions in the months leading up to their 62nd birthday. A confidential settlement – understood to be for a multi-million dollar amount - was reached between the parties to avoid a potential landmark legal challenge to Deloitte’s partnership agreements. 

The financial, regulatory and reputational costs of a partner age discrimination claim can be significant. If a partner is successful with an age discrimination claim, the remedy is primarily uncapped, loss-based compensation. For a partner forced out at, say, 62, who would otherwise have retired at 67, they may seek to recover five years’ full losses, and argue they have limited opportunity to mitigate their losses due to their age, seniority and level of remuneration at the point of retirement. 

Potential regulatory implications 

There are potential regulatory consequences for law firms and key individuals held by the tribunal to have discriminated against a partner on the grounds of age (or indeed other protected characteristics). The SRA Principles require firms and individuals to act in a way which upholds the rule of law and encourages equality, diversity and inclusion. In addition, there are obligations in the Code of Conduct for both firms and individuals to treat others fairly. The SRA has previously made clear that an adverse employment tribunal finding would not in itself be a sufficient reason to trigger a regulatory investigation, and much would depend on the facts of the case, however there is clearly the prospect of the above Principles/Rules being engaged in an age discrimination case.

Practical tips

  • Review your firm’s MRA regularly to ensure it is still proportionate to the firm’s legitimate needs and can be clearly evidenced as such.; 
  • Ensure that the MRA is still supported by partners, both in terms of the need for an MRA itself, and also for the age at which it is set – partner surveys, consultation programmes and statistics can be key in this respect.
  • Adopt clear and consistent partner performance management expectations, and rigorous performance review and feedback systems across all partner ages. 
  • Have regular and consistent discussions with all partners, regardless of their age, about their short, medium and long term career plans. 
  • Maintain clear, well-documented processes when dealing with the above issues.

Firms need to look carefully at their MRA provisions for partners, and their wider partner retirement policies, to ensure they are not unwittingly perpetuating historic and outdated practices, which not only fail to reflect the personal and professional needs of current and future generations of partners, but which also damage the firm, reputationally and financially, by causing an exodus of older talent to firms waiting with open arms and wallets. 

Clare Murray (managing partner) and Pooja Dasgupta (senior associate) specialise in partnership and employment law and Andrew Pavlovic (partner) specialises in professional discipline and regulation at CM Murray

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