10/05/2012 12:11 BST | Updated 09/07/2012 06:12 BST

Enforcing Retirement - Is It Still A Grey Area For Employers?

People are living longer, and age need not be a barrier to coping with high pressure and high profile appointments. Think of Roy Hodgson and Harry Redknapp's recent rivalry for the England manager job, or even the choice of Engelbert Humperdinck to sing for Britain in the Eurovision Song Contest.

But what of younger people who did not get a look in? Increasingly, competition for jobs is between people of different generations. This presents a challenge for employers, and also for the legal system.

Workers are protected by the age discrimination regime - so how can one give younger workers a fair opportunity to progress without committing illegal discrimination? Do the legal rules risk reducing natural flexibility in the job market? This is not the intention, of course - but there are countless examples of legislation which has had unintended consequences.

A new ruling by the Supreme Court suggests that a careful and sensible approach to the dilemma will usually be effective. The guidance came in a case involving the compulsory retirement of a partner in a law firm, but the same principles would apply to employees as well as partners.

Leslie Seldon was retired by his firm after reaching the age of 65. This was not because of any poor performance on his part, but it was in line with the partnership agreement he had signed up to. He argued, however, that it amounted to discrimination on the ground of his age. Clearly, that was the case - the key question was whether the discrimination could be legally justified.

Age discrimination is different from other forms of unlawful discrimination, since the European Court has said that it can be justified by factors that are not related to the individual, but concern broader social and economic policy. This makes sense, because we all have an age, and we all get older, so a provision which disadvantages us when we are younger is potentially advantageous in later years.

Achieving fairness between people of different generations is one example of that kind of broader policy. This may, for instance, mean facilitating access to employment by young people; enabling older people to remain in the workforce; sharing limited opportunities to work in a particular profession fairly between the generations; or promoting diversity and the interchange of ideas between younger and older workers.

Another example is maintaining the dignity of people in the workforce. This can be, as the Supreme Court has recognised, more controversial in practice than it sounds. It may involve avoiding the need to dismiss older workers on the grounds of incapacity or underperformance, thus preserving their dignity, or as avoiding the need for costly and divisive disputes about capacity or underperformance.

So the law is trying to strike a tricky balance between making it easier for younger workers to find work - particularly in a time of chronic unemployment - while protecting the rights of older workers whose pensions serve as replacement income, and not requiring employers to sack them on grounds of under-performance, which may humiliate them.

The Supreme Court has now confirmed that it is possible to justify having a compulsory retirement age, while making it clear that mandatory retirement schemes are not necessarily justifiable: "All businesses will now have to give careful consideration to what, if any, mandatory retirement rules can be justified."

This isn't a cop-out. Frankly, it is as pragmatic a judgment as employers could have hoped for in the present legal climate. Managers should avoid making assumptions about older workers based on stereotypes, but a well thought-out and reasoned policy on retirement has a good chance of surviving legal scrutiny. For once the law, as we now understand it, seems to be broadly in line with common sense.