Legal dilemmas… age discrimination

We have a policy of loaning a sum of money to staff in certain circumstances, but it is only available to those with 10 years’ service. Originally, loans were available to all staff, but we found that those with less than 10 years’ service tended to default on the loan more regularly, so we changed the policy six years ago. Will this lead to claims of age discrimination?

Under the Employment Equality (Age) Regulations 2006, your policy of only allowing staff with a particular length of service to benefit from the payments is potentially indirectly discriminatory. However, you may be able to objectively justify this discrimination by showing that you are pursuing a legitimate aim, namely, avoiding the risk of defaulters.

Hopefully, you will have kept the evidence that informed your decision-making process when the policy was changed to back up your assertion that staff with a shorter length of service (and therefore potentially younger employees) default more often.

In addition, you would have to show that your policy is a proportionate means of achieving your legitimate aim. A tribunal might be prepared to accept the argument that a less discriminatory means of achieving your aim of avoiding defaulters would be to limit the amount loaned to the equivalent of a month’s salary, and have a contractual provision allowing you to deduct from salary upon default/when staff leave.

What might the regulations’ impact be on our management training programme?

The first thing to think about is who has access to the programme. Consider whether you are directly or indirectly discriminating against any category of worker by assuming they aren’t experienced enough or wouldn’t be interested in such training. Instead, you could adopt a competency-based approach to selecting those who are put forward, so it is genuinely based on merit.

In terms of the content of the programme, you should ensure that it equips managers with the skills necessary to manage a diverse workforce and, in particular, team members who are older or younger than them. Training will need to address age stereotypes and equip managers to conduct appraisals and manage performance and absence without bringing those prejudices into play.

For delivery of the programme, you should ensure it is offered in a format that is accessible to all. For example, a heavily IT-based or classroom-style course might not get the best from everyone.

I know I should be removing the date of birth request from our job application form, but can I still ask candidates how old they are? There seems to be little point in recruiting someone nearing our normal retirement age of 65 as they are likely to only work for a few years.

Going forward, it might become harder to assume that staff are going to retire at a particular age. As they begin to use the new right to request to stay in work beyond the ‘normal retirement age’ (NRA) of 65, your age profile could change so it would be wrong to assume anything regarding retirement plans for individuals. Besides, younger workers may not stay with you for any longer than older employees do.

However, because the government is aware of concerns in this area, regulation 7(4) allows you to refuse to employ someone over the normal retirement age or who would reach the NRA within six months. This NRA will be 65 – or older if you so choose. For example, Nationwide Building Society has opted for an NRA of 75. The NRA can only be below 65 if you can objectively justify a lower age than 65 for a contractual end date, which seems unlikely.

It might be harder to objectively justify a refusal to employ someone who is, for example, one year away from retirement on the basis of recouping your investment in training, when the government has signalled a cut-off point of six months away from the normal retirement age as a justified limit.

On your application forms, consider asking candidates to indicate, eg, by tick box, whether they are over the normal retirement age, or within six months of reaching it. You could then reject those who were. Alternatively, make it clear on advertisements and on applications that candidates within six months of reaching the normal retirement age would be rejected. You would of course have to take care with any wording used to make sure that you were acting legally within regulation 7(4).

Our enhanced redundancy pay scheme allows staff to take the multiplier used for statutory redundancy pay purposes and multiply it by one week’s actual basic pay. The formula then multiplies the resultant figure by two, with an overall limit of a year’s salary as the maximum. Will we be allowed to retain this system?

Regulation 33 allows you to retain enhanced redundancy pay schemes, but this is subject to some provisos.

The first is that the entitlement is provided to the same employees who would qualify under the statutory scheme – namely, those with two years’ service who you make ‘redundant’ within the meaning of the term used in the Employment Rights Act 1996. The second is that the payments should be calculated in a way that mirrors the statutory scheme.

In your case, the first element of your scheme mirrors the way the multiplier is calculated. Under regulation 33(4)(b) (i), you are permitted to increase a week’s pay (currently £290) to actual pay. Regulation 33(4)(b) (ii) then allows you to multiply the resulting figure, as you do. However, the maximum cap you then apply does not mirror the statutory position, so you would need to remove this or face the objective justification test.

If an employee requests to stay on beyond our normal retirement age, can I use a fixed-term contract?

Under the duty to consider procedure, the employee can request to stay on indefinitely or for a fixed period. Clearly, if you agree to a fixed period this will not be a problem. However, if you want to impose a fixed-term contract where the employee wanted to stay on indefinitely, you may need to consider the risks of doing so. Once the employee is on a fixed-term contract they will have the right, under the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, not to be treated less favourably than staff on indefinite contracts. For example, you shouldn’t offer them a different benefits package. Furthermore, regulation 30 of the age regulations, which creates protection for an employer from age discrimination claims regarding retirement, only relates to “dismissals”. Potentially the employee could, therefore, still bring a complaint of age discrimination while still in employment, arguing that you have imposed differential terms on them (a fixed-term contract rather than an indefinite one) on grounds of their age, and that this is direct discrimination.

No fear from age rules if you deny requests to stay on

See the next issue of Employers’ Law (out on 12 July) for further advice on the retirement aspects of the new age regulations.

Comments are closed.