Awarding points for long service, when selecting employees for redundancy, is not discriminatory under the age discrimination regulations, the Court of Appeal ruled today in Rolls Royce v Unite.
The High Court said: “The criterion of length of service respects the loyalty and experience of the older workforce and protects the older employees from being put onto the labour market at a time when they are particularly likely to find employment hard to find.”
Rolls Royce had argued that taking long service into account when selecting workers for redundancy amounted to indirect age discrimination and wanted to ignore length of service when making redundancies.
Unite general secretary Derek Simpson said: “We are delighted with this decision. The ruling sets a precedent, where other factors are equal, for protecting older workers from the effects of redundancy. It has always been clear to Unite that loyalty seen in length of service should be recognised when an employer takes the drastic step of making redundancy dismissals.
“We look forward to using this decision to help defend our members’ rights in many other companies as well as Rolls Royce.
At time of writing, Personnel Today was unable to get comment from Rolls Royce.
Commenting on the Court of Appeal’s ruling, Rachel Dineley, head of diversity and discrimination at Beachcroft, said: “This case is a win for many older employees. In difficult times, most employers wish to have maximum flexibility in deciding who to retain and who to let go, but collective agreements may govern this matter.
“The relevant regulation – number 32 of the 2006 Age Discrimination Regulations – allows employers to use length of service as a criterion for awarding benefits, provided that where more than five years’ service is taken into account, it reasonably appears to the employer to fulfil a business need. The scope of the regulation is not limited to more tangible benefits, such as health insurance, annual leave and pay increments.”
She added: “In the light of this decision, employers who historically have included points for length of service in their redundancy selection process may encounter difficulty in abandoning the practice to allow a wider pool for redundancies.”
James Baker, solicitor at City law firm Macfarlanes, said: “Had the appeal been successful, it could have opened the door to many more employers that might be regretting historic agreements with unions or staff to give generous enhanced terms on severance, pension or even overtime and bonuses. This seems to close that particular door, and leaves employers stuck with their own policies and procedures even if they do not suit current business priorities. Employers will have to resort to more traditional methods of negotiating changes to collectively agreed terms.”
Rolls Royce had entered into a collective agreement with 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.
But City law firm Lovells said: “The decision should be treated with considerable caution.”
It added: “The proceedings were started in the High Court rather than the employment tribunal under a little used rule that allows the parties to ask the court a question on the basis of agreed facts and with no oral evidence.
“There was a good deal of anxiety on the part of the Court of Appeal as to whether the High Court should have accepted the case, given the lack of analysis of the facts. As a result, the High Court confined itself to answering narrow questions on the construction of the specific age regulations. There was no detailed analysis of objective justification, such as we would normally expect in an age discrimination case, weighing up the business needs of the company against the discriminatory impact on younger employees.
“It was the employer who argued that the scheme was discriminatory as it was concerned about unfair dismissal claims from employees made redundant. This made such arguments as there were in the Court somewhat artificial, since in effect the employers had to argue that the objective justification test, intended to be used by employers as a defence, had not been met.
“The fact that the scheme was set up by collective agreement made both the objective justification and the service-related benefit tests easier to satisfy; more rigorous examination would probably apply to redundancy schemes not negotiated by employees.
“Although the case has left plenty of battles for another court on another day, it should be seen as welcome news for employers, as a successful appeal would have meant reworking many commonly used selection matrices to exclude references to length of service.”