Rolls Royce had entered into collective agreements with trade union Unite that set out the agreed approach to be taken in a redundancy situation. In a redundancy selection process, employees would be assessed against five criteria: achievement of objectives; self-motivation; expertise/knowledge; versatility/application of knowledge; and wider personal contribution to the team. An individual could score between four and 24 points against each criterion. As part of the process, each employee would also receive one point per year of continuous service. Those with the least points overall were selected for redundancy.
When the Employment Equality (Age) Regulations 2006 came into force, however, the company considered that the long service award amounted to unlawful age discrimination as it benefited older workers. The union wanted the agreed redundancy selection process to continue. It argued that if the long service award did amount to indirect age discrimination, it could be objectively justified. The union also maintained that the award fell within the exception available under the regulations, which allows use of a length of service criterion of more than five years where using that criterion fulfils a business need – ie the length of service exception.
Rolls Royce brought proceedings in the High Court seeking a determination on whether the inclusion of length of service in a selection matrix for redundancy was in breach of the regulations. The High Court found, in November 2008, that the long service award was not discriminatory. The court also decided that the award fell squarely within the length of service exception. The company then appealed to the Court of Appeal.
The Court of Appeal held that the long service award did fall within the length of service exception. This meant that the award would be lawful provided that it reasonably appeared to Rolls Royce that the criterion fulfilled a business need of the undertaking.
The court went on to consider whether the long service award was indirectly discriminatory on grounds of age. It concluded that even if it was indirectly discriminatory, it could be objectively justified. The legitimate aim was the reward of loyalty and the overall desirability of achieving a stable workforce in the context of a fair process of redundancy selection. Proportionality was demonstrated by the fact that the length of service criterion was only one of a substantial number of criteria for measuring employee suitability for redundancy.
This decision will be good news for employers who wish to retain a length of service criterion as part of a redundancy selection matrix. However, employers must still be aware that employees can challenge their selection on grounds of length of service on the basis that it is discriminatory under the age regulations. Employment tribunals will have to consider whether the employer has established that the use of that criterion is justified in the particular circumstances of the case.
The case lends little support to those employers, such as Rolls Royce, that are faced with a potentially discriminatory collectively agreed or contractual redundancy scheme that they wish to change. Employees who benefit from length of service provisions are unlikely to agree to any changes, while those who are disadvantaged will inevitably challenge the application of the scheme, leading to tribunal claims.
Louise Hendry, employment director, DLA Piper