Member Article

Last in first out and age discrimination?

With Watson Burton LLP Law Firm

Historically last-in-first-out (“LIFO”) was seen as an acceptable criteria for redundancy. The use of this criterion on its own may not be justifiable. However, it may still be acceptable when used as part of a larger selection criterion. These principles can be seen in the recent case of Rolls Royce v UNITE (a recognised trade union) [2008] EWHC 2420 in the High Court (rather than the Employment Tribunal). Rolls Royce entered into a collective agreement with UNITE and adopted a points system for redundancy selection, based on factors such as motivation, objectives, expertise, versatility and team contribution. A point was also to be awarded to each worker for each year of continued service.

UNITE wanted the application of the agreed redundancy selection process to continue despite Rolls-Royce’s view that the award of points for length of service amounted to unlawful indirect discrimination to young workers as it was to the benefit of older workers.

The Employment Equality (Age) Regulations 2006 contains specific exceptions to age discrimination. For example regulation 32 in certain circumstances allows employers to treat employees differently regarding the provision of benefits where favour is given for length of service. This exemption is available where an employer uses the selection criteria in which consideration is given for a period of service in excess of 5 years and in doing so fulfils a business need. In contrast, claims of direct and indirect discrimination under regulation 3(1) can only be defended if there is an objective justification for the treatment complained of. The High Court found in this case that awarding points for length of service clearly granted a “benefit” to employees within regulation 32 by giving them the chance to remain in employment while others lost their job.

The redundancy scheme handled under the collective agreement had been negotiated and agreed between the parties and could be regarded as fulfilling a business need. The Court held that although the selection criterion was discriminatory it was objectively justified as a proportionate means of achieving a legitimate aim. The court held that it was covered by regulation 3(1) and could be objectively justified and thus lawful.

The court also noted that the length of service criteria respected the loyalty and experience of the older work force and protected older employees from being put on the labour market at a time when it could be particularly difficult to find alternative employment. However, it must be remembered that a scheme based solely on the length of service could be objectionable.

Further to this decision it does seem that, where there is an agreed redundancy scheme negotiated with a recognised Trade Union which uses a length of service criterion as part of a wider scheme of measured performance, then it may be regarded as reasonably fulfilling a business need and may not result in successful age discrimination claims being made against the organisation. However, the court’s finding was specific to the facts of this case and Employers will need to act carefully when considering applying appropriate redundancy criteria. If in doubt, employers should seek legal advice.

If you have any queries relating to this article, please contact Victoria Ferguson at Watson Burton LLP by emailing victoria.ferguson@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .