Redundancy Selection and Age Discrimination

The Court of Appeal has declared that it is not discriminatory to use length of service as a criterion for selection for redundancy as a result of their recent decision in the case of Rolls Royce v Unite the Union.

The Law
Although it has been unlawful for employers to discriminate on grounds of age since 2006, both direct and indirect discrimination may be justified if the act complained of is a “proportionate means of achieving a legitimate aim”. In essence, the employer’s aim must be weighed up against the discriminatory impact.

Furthermore, in relation to awarding benefits, an employer may treat workers differently, depending on their length of service (Regulation 32 of the Employment Equality (Age)Regulations 2006). However, the awarding of benefits beyond 5 years will only be lawful if it can be justified on the basis that it reasonably appears to the employer that this fulfils a business need of the company (for example, by encouraging loyalty or rewarding experience).

The Facts
Rolls Royce and the Trade Union Unite had entered into collective agreements setting out the approach to be taken in the event of redundancies being required. The agreements contained a selection matrix which set out five criteria which employees would be assessed against. Each employee could score between 4 and 24 points under each measured criterion. In addition however, it had been agreed that an employee identified in the pool for selection would receive one point for each year of continuous service. The employees with the least number of points would be selected for redundancy.

Concerned that the use of the criterion of length of service might be discriminatory in that it clearly favoured older workers over younger workers, Rolls Royce decided they wanted to remove this criterion from the matrix. However, this was resisted by Unite who argued that the criterion was not unlawful. Requiring clarification, Rolls Royce applied to the High Court to determine whether the inclusion of the length of service criterion within the selection matrix was in breach of the Age Discrimination Regulations .

The High Court Decision
The High Court decided in favour of Unite on the basis that giving points for length of service did confer a “benefit” under Regulation 32 as it might lead to the retention of employment which might otherwise be lost and that in any event, even if the Scheme was discriminatory it could be justified. The Court held that the legitimate aim of the scheme was the advancement of employment policy that achieved a peaceable process of selection as agreed with the union. The Court went on to find that length of service respected the loyalty and experience of older workers and protected them from being put on to the labour market when they were particularly likely to find alternative employment difficult to find. The Court also observed that length of service was just one of the assessment criteria but had it been the single criterion then this might have been objectionable. Unhappy with the decision, Rolls Royce appealed to the Court of Appeal.

The Court of Appeal Decision
The Court of Appeal dismissed the appeal and again found in favour of Unite. It was held that whilst the use of the length of service criterion did amount to indirect age discrimination, it could nevertheless be justified as a proportionate means of achieving a legitimate aim. The legitimate aim was held to be “the reward of loyalty and the overall desirability of achieving a stable workforce in the context of a fair process of redundancy selection". The Court found that it could also be deemed a legitimate aim not least because it had been freely agreed upon between the union and the employer. It was proportionate, the Court ruled, because the length of service criterion was only one of a “substantial number of criterion for measuring employee suitability for redundancy” and it was “consistent with the overarching concept of fairness” and there was nothing to contradict the Union’s statements that the younger employees accepted it. Again however it was stressed that length of service was only one of the criteria to be used.

The Court found it unnecessary to reach a view on the interpretation of Regulation 32. However, its provisional view was that an award of points based on length of service constituted the award of a “benefit” but one judge stated that in order for the length of service criterion to reasonably fulfil a business need, an investigation into the state of mind of the employer at the time of awarding points to that criteria would be required.

Comment
Whilst length of service as the sole criteria for redundancy selection will almost definitely amount to age discrimination, this decision is welcome news for any employer wishing to use length of service as one of a number of criteria when selecting employees for redundancy. However, the reality of the situation is that in the current economic climate, employers will want to have maximum flexibility as to which staff members are retained and there are some instances where a length of service criteria may not be beneficial in this regard. However an employer who might want to abandon this criterion in their redundancy scheme by claiming it to be discriminatory may find it more difficult to do so as a result of this case.

Of course, the Court of Appeal did not declare that length of service as a selection criterion would be justified in all cases. Rather, it will continue to be for Employment Tribunals to adjudicate on any claims made to it in the future and assess whether or not the employer has justified its use in the specific circumstances. Nonetheless, this decision seems to infer that the employer is likely to succeed in defending such a claim on the grounds that it is objectively justified in circumstances where the redundancy scheme will ultimately benefit all its employees and especially if it was drawn up following negotiation with a Union.

Further information
For further information on this or any discrimination issue, please contact Jill Bell.  

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