Redundancy: an age old issue?

The basics of redundancy laws have remained fairly static since the UK was last in a recession, so it would be easy for practitioners to be lulled into a false sense of familiarity when faced with redundancy issues in the months ahead. Several recent cases have cast the spotlight on the Employment Equality (Age) Regulations 2006 (the “Age Regs”) and their impact in the redundancy arena.

Objective justification

Many of the problems which have arisen appear to have sprung from redundancy agreements drafted years ago and now being dusted down for use. In MacCulloch v Imperial

Chemical Industries (UKEAT/0119/08, unreported) the redundancy scheme depended on age and length of service in what the EAT describes as a “relatively complex way”. The 36-year-old claimant with seven years’ service was entitled to just over 55% of her annual salary as redundancy pay. Generous you might think, until compared with a 50-year-old with 10 years’ service who was entitled to 175%. The respondent was unable to rely on the specific exemption for enhanced redundancy payments (Age Regs, reg 33) as their scheme did not mirror the method for calculating statutory redundancy payments. Reliance therefore had to be placed on an objective justification argument.

While the employment tribunal rejected the argument that honouring contractual promises to workers via a scheme in existence since 1971 was a legitimate aim, it accepted a number of others. These included the wish to encourage and reward loyalty, the desire to financially assist older workers who might be more vulnerable in the job market, and that the scheme aided succession planning. On appeal by the

claimant, the EAT determined that the tribunal had not properly considered whether the redundancy scheme was a proportionate means of achieving any of these legitimate aims, and remitted to the tribunal to apply the proportionality test.

In a similar case, Galt v National Starch and Chemical Ltd (ET/2101804/07, unreported), the employer’s scheme provided for three weeks’ gross pay per year of service for an employee under the age of 40, and four weeks’ when over 40. Again, this did not fall within the reg 33 exemption and the employer sought to objectively justify the scheme, arguing that the difference reflected the fact that older workers would have more difficulty finding new employment. This was the argument used by the Government to justify retaining the age bands in the statutory scheme. However, crucially, the employer did not produce any evidence to support their assertion about older workers and the justification defence failed.

Open to review

Another area open to attack by employees is the selection criteria. In a very unusual case in the High Court, Rolls Royce plc v UNITE the Union [2008] EWHC 2420 (QB), Rolls Royce tried to challenge its own selection criteria, arguing that the length of service criterion in a redundancy-related collective agreement with the union was unlawful age discrimination which could not be justified. The union contended the criterion was lawful. As the presiding judge stated: “One might have expected the arguments to be the other way round.” While making it clear that he considered the issues with “considerable misgivings”, given that he did so outwith the realms of an employment tribunal, he found in favour of UNITE, stating: “where there is an agreed redundancy scheme, negotiated with a recognised trade union, which uses a length of service requirement as part of a wider scheme of measured performance, it is probable in my judgment that such would be regarded as reasonably fulfilling a business need”. Permission to appeal has been granted.

Court v Dennis Publishing Ltd (ET/2200327/07, unreported) provides an “And finally” window on the type of evidence you hope not to be faced with if defending a claim from a 55-year-old made redundant from a team in which he was considerably older than his colleagues. A book called “How to get rich”, written by the company’s owners, contained the following words of wisdom: “Youth is a further factor. By the time talent is in its mid to late forties or early fifties, it will have become very, very expensive… That is when you part company with it.” The tribunal took this into account when determining whether an inference could be drawn which shifted the burden of proof from claimant to respondent. It did, the respondent was unable to rebut the inference of discrimination, and a direct discrimination claim was successful.

Those acting for claimants will recognise the potential for the Age Regs to bolster a claim centred on unfair redundancy processes, and therefore the compensation available. Those acting for employers should be advising a review of redundancy agreements before they need to be utilised. And those who act for trade unions may need to brace themselves for being on the wrong end of the type of challenge mounted by Rolls Royce.