Last in, first out on its last legs: legal opinion

Length of service has long been a central feature of any redundancy selection exercise. However, following the introduction of the Employment Equality (Age) Regulations in October 2006, use of last in, first out, which clearly relates to length of service, has been challenged in the courts. Should employers continue to use length of service as a selection criterion? Although there has been a trend for employers to shy away from length of service, it can be valuable tool when selecting for redundancy if used as part of a balanced and measured selection criteria.

Under the age regulations, selection policies based on length of service can be indirectly discriminatory. Younger employees who naturally have shorter period of service, will be more likely to be selected, although in practice this will depend on the age profile of the particular employer’s workforce. Therefore, employers have to now justify using length of service as a criterion to select employees for redundancy.

To succeed, the selection policy must have a legitimate business aim, for example, to reward loyalty or to retain experienced workers. Furthermore, the operation of the policy must be an “appropriate and necessary” means of achieving those aims. Given the availability of other ‘age neutral’ criteria, such as disciplinary or attendance records, an employer that bases its selection mainly on length of service will have difficulty establishing that the policy was “appropriate and necessary”. This will especially be the case where the policy results in the selection of predominately young employees, as one age group is disproportionately affected.

In Rolls-Royce plc v Unite the Union (2008), Rolls-Royce claimed that its redundancy selection policy, which awarded points for length of service, was contrary to the age regulations. However, length of service was only one of a number of different criteria used by Rolls-Royce to select employees and was not given a disproportionate weighting. Unite argued that it was a “sophisticated and measured” selection policy and not the “blunt tool” of last in, first out.

The High Court agreed with the union and held that the policy was justified under the regulations. The court then went on to decide that the selection policy also fell within the length-of-service exemption that allows employers to award benefits to its workforce based on their length of service. In its view, the possibility of retaining a job was a ‘benefit’ under the regulations. However, the court did comment that had it been asked to judge a redundancy selection policy based on last in, first out alone, such a procedure may have been “objectionable”.

Last in, first out’s days as a selection criterion are clearly numbered and it is likely that only in exceptional cases will its use be justified, for example, where there are no other distinguishing factors between the employees apart from their length of service, or as a ‘tie-breaker’ where a selection process has already been conducted based on other criteria.

However, using length of service as just one of a balanced selection criteria is unlikely to breach the age regulations, as the Rolls-Royce case has shown that it is a criterion which is capable of justification. Furthermore, unions are generally keen on using length of service – possibly because longer serving employees are more likely to be union members – and, therefore, including length of service as a criterion may well also help facilitate the consultation process in a redundancy exercise.

Key points

  • Employers should use a variety of different criteria to select employees to be made redundant.
  • Selection criteria should not disproportionately affect one particular age group.
  • Length of service should not be the sole or main criterion.
  • Using length of service as one criterion in a balanced selection policy is unlikely to breach the age regulations.

Paula Bailey, partner, Howes Percival

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