Court rulings clarify when age-related enhanced redundancy pay can be justified

Recent court decisions will help employers decide whether they can justify age-related redundancy pay as a proportionate means of achieving a legitimate business aim and therefore avoid age discrimination claims.

In the first case, an employee brought a claim against her employer, who operated a scheme that made higher payments to older employees with longer service. The employer justified the scheme on the basis that it rewarded loyalty, gave greater financial security to older workers who were more vulnerable in the job market, and encouraged older workers to leave, thereby making available space for more junior employees.

The Employment Appeal Tribunal (EAT) found that, whilst the tribunal had identified certain legitimate aims which the scheme was designed to achieve, there had been no proper attempt to determine whether the means adopted were proportionate to those aims, having regard to the detriment suffered by the employee.

In the second case, the claimant was excluded by the terms of a voluntary redundancy scheme because he had reached the age of 60, as there were tapering provisions in place for employees aged between 57 and 60. Under the original scheme, it had been compulsory to retire at 60, but the retirement age had been changed to 65, without any amendment to the scheme. The claimant submitted that the scheme directly discriminated against him on grounds of age discrimination, but the employment tribunal rejected his claim.

The EAT upheld his appeal, however, and held that there had been no adequate analysis of the aims of the scheme nor the issue of proportionality.

Recommendations

Employers should review any redundancy schemes that they have in place, and change them if potentially discriminatory measures are not proportionate to the intended aims of the scheme.