The Court of Appeal recently held, in the case of Lockwood v Department of Work and Pensions, that severance payments which had been calculated bearing in mind a person’s age discriminated against younger workers but the difference in payments that resulted could be justified by the employer.

What does this ruling mean?
Here, lesser payments to younger workers were justifiable for various reasons, including:

  • the aim of the compensation scheme was to provide a proportionate financial cushion until alternative employment was found, or as a bridge to retirement;
  • the staged scheme was an appropriate and transparent one;
  • to pay everyone the sum paid to older employees would be a substantial burden on the public purse;
  • statistics supported the view that younger employees suffer unemployment for a shorter time and have fewer family and financial responsibilities;
  • the scheme facilitated workforce recruitment and planning;
  • the employer had established cogent business aims, and a proportionate means of implementing them, which outweighed the discriminatory effect of the measures; and
  • because the unions had not argued that the scheme was discriminatory, or sought to challenge it.

What action should employers take?
Employers would be well advised to ensure that, when considering the introduction of an enhanced redundancy scheme, the risk of a discrimination challenge is borne in mind.