The practical implications of age discrimination claims for LLPs and partnerships

Last year’s decision of the Employment Tribunal in Scott v Walker Morris LLP sheds light on steps that LLPs and partnerships ought to be taking in relation to their retirement provisions and how they deal with partners or LLP members who do not wish to retire. In practice, the decision also underpins or strengthens the position of some partners who would prefer not to retire at the normal retirement age designated in their partnership or LLP members agreement.

In this case, the Tribunal accepted that Walker Morris LLP had legitimate aims in maintaining a collegiate atmosphere by maintaining the dignity of older members, by sparing them from performance management, and in seeking to ensure inter-generational fairness. But the LLP did not establish that its treatment of Mr Scott was an appropriate and reasonably necessary/proportionate way of achieving those aims.

The law

Partners and members who may be victims of age discrimination are affected, not only by statutory discrimination law, and the contractual terms of any partnership or LLP agreement, but also by the statutes and/or regulations relating to partnerships or LLPs. Partnership case law is expressly disapplied in relation to LLPs, however, it is often persuasive and instructive and is frequently relied upon on that basis. In any dispute or difference arising from a partnership or LLP, and irrespective of any apparent narrowness of the issues, these sources should be considered together. Discrimination law may also provide a route to a claim or settlement.

Sections 44 (relating to partnerships) and 45 (relating to LLPs) of the Equality Act 2010 separately provide that:

A partnership/an LLP (A) must not discriminate against a partner/member (B) –

1. as to the terms on which B is a partner/member;
2. in the way A affords B access, or by not affording B access, to opportunities for promotion, transfer or training or for receiving any other benefit, facility or service;
3. by expelling B;
4. by subjecting B to any other detriment.

To be actionable, the discrimination has to be in relation to one of the protected characteristics, of which one is age.

Section 13 of the Equality Act 2010 (Direct discrimination) provides:

(1)  a person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others. 

(2)  If the protected characteristic is age, A does not discriminate against B if A can show A’s treatment of B to be a proportionate means of achieving a legitimate aim.

Whether the partnership/LLP can establish a legitimate aim is a question of fact for a Tribunal to decide. The partnership/LLP must demonstrate a real business need to retire members at a particular age, which is in the public interest and satisfies social policy objectives. For example, it might be necessary for older partners to retire to make it possible for younger partners to have career progression (without the prospect of which they might go elsewhere).

Or a partnership or LLP might wish to avoid the indignity for older partners of being taken to task on their failure to perform at the required level, as they (allegedly) lose the ability to put in the required hours or to maintain the mental focus or energy required to achieve in other areas such as practice development.

Take aways for partnerships and LLPs

The Scott v Walker Morris case should be a wake-up call for many partnerships and LLPs.

A partnership or LLP should:

• Review how they should approach age-based retirements in the future.
• Review whether there is any evidence that would support a defence of age-based retirement in the case of their particular business.
• Consider what alternatives there may be to a straightforward “You must retire at age X” provision.
• Consider what advantages might be derived from such alternatives, such as retaining and encouraging older partners/members with a view to increasing growth and benefiting partners/members of all ages, rather than letting older partners/members go, only to see them re-emerge as competitors elsewhere and/or (after the expiry of any restrictive covenant period) take clients and turnover away.
• Consult with members and seek to build a consensus as to the best way to go, and record the process and the resultant resolution (which would not provide a complete defence in itself in the event of a future claim, but might be persuasive and lead to a better outcome).
• Do the above regularly, for example annually, and amend the partnership or LLP members agreement accordingly.
• Carefully consider requests by partners to defer their retirement, and avoid “digging a deeper hole” in response.

What can partners do when faced with the prospect of retirement before they are ready to retire?

While individually tailored advice is essential, the following should be considered:

• Keep tabs on all developments in the business that are relevant to retirement – both generally and in relation to yourself. What debates have there been, what conclusions have been reached, and how have they been justified? Also, what has happened in relation to other partners reaching any agreed retirement age? The better you are prepared, the easier it will be to take advice should circumstances so require, which often needs to be done in a short timescale.
• Ensure that your performance does not dip with increasing age.
• Keep records in relation to your own performance assessments and respond appropriately to correct any identified shortcomings.
• Avoid conduct that might justify retirement/expulsion for reasons other than age.
• Identify arguments that can be advanced in support of your continuing to be a partner, so that you can articulate them as and when appropriate, in particular the advantages of keeping you on and the lack of disadvantages for the business. This will assist in achieving a consensual outcome.
• Be open to alternatives that may be presented to you. For some, a reduction in stress and working hours may be just what they are looking for.
• Consider and be able to articulate what incentives/payoff you would be happy to receive in return for “going quietly”.
• Take advice promptly at the first sign of potential difficulty. Your partnership or LLP may be willing to contribute to the cost.
• Do not agree to anything without taking advice.
• Do not give notice in a huff (or for any other reason). It is far easier to pursue a claim if you have been pushed as opposed to having jumped of your own accord.
• Remember the short limitation period in which to bring claims. Currently a partner only has three months from the date of suffering a detriment in which to take steps towards making a claim (specifically, commencing early conciliation with ACAS, which temporarily stops time running, but which requires careful consideration as to content and who to name as the potential respondents). While there are other factors that might extend the limitation period before such steps have to be taken, many a good claim has been lost to limitation, and you can’t be too careful.

If you have questions or concerns about age discrimination, please contact Peter Garry.