Using length of service as one of the criteria for redundancy selection can in principle be lawful, at least where this is pursuant to the terms of a collective agreement.
Entitlements that vary with length of service will be indirect age discrimination, unless the scheme is justified (ie, a proportionate means of achieving a legitimate aim) or falls within the benefits exemption. This automatically exempts schemes where the maximum entitlement is at 5 years' service or less; other schemes are exempted if the employer reasonably concludes that they fulfil a business need such as rewarding loyalty or experience.
The Court of Appeal has ruled that a scheme giving points for length of service as part of a redundancy selection matrix was objectively justified.
Its legitimate aim was to reward loyalty and maintain a stable workforce during a fair redundancy process.
The means were proportionate because (i) service was only one of number of criteria and was not determinative and (ii) the scheme had been collectively agreed with a union and seemed to be accepted by the workforce as fair.
The Court also ruled that such schemes could theoretically come within the benefits exemption (although this was obiter). It is not just the employer's view of its business needs at the time of applying the scheme that may be relevant: a reasonable employer would take into account the fact that it previously agreed the scheme with the union and might also consider the interests of the employees in addition to its own narrow self-interest.
This case was brought before the selection process had started and the decision was made on principle rather than by considering the actual facts of an employee claim. The position for other employers will always depend on the facts, but in general the ruling means that:
- use of length of service as the sole criterion or as a tie-breaker for redundancy selection is very likely to be unlawful
- use of length of service as one criterion may be lawful, particularly if pursuant to the terms of a collective agreement with a union
- employers subject to a collective agreement which includes service as one selection criterion face the risk of employee claims whatever they do, but applying the criterion is likely to give rise to a lower risk of successful claims than abandoning it (in the absence of an agreed variation to the collective agreement).
(Rolls Royce v Unite the Union, CA)