Hospira v Ropers and Ors

The Labour Court recently issued its recommendation in the case of Hospira v Roper and Others.  This decision has clarified the law relating to redundancy payments paid to employees close to retirement age.  The Labour Court held that differences in the level of redundancy payments paid to the complainants, as compared with their younger comparators, fell within the exception to age discrimination permitted by section 34(3)(d) of the Employment Equality Acts, 1998 – 2011.  This section allows an employer to pay a different rate of severance payment to an employee, which takes into account the period between the employee’s age at termination and his/her compulsory retirement age, provided that that does not constitute gender discrimination.

By way of background, the complainants’ employment was terminated upon the redundancy of their positions when Hospira decided to close its plant in Donegal in 2005/2006.  A redundancy package was agreed with the representative trade unions.  Each of the five complainants were close to retirement age at their termination date and Hospira paid them a package representing the amount of salary which they would have earned had they remained in employment until their normal retirement age of 65.  Given their periods of service, the package paid to them was lower than what they would have received had it been based purely on their periods of continuous service.  The five complainants brought a complaint of age discrimination to the Equality Tribunal, which found in their favour and held that it was necessary for the employer to provide objective justification for its treatment of the redundancy payments.  Hospira appealed the Equality Tribunal’s decision to the Labour Court. 

The Labour Court upheld Hospira’s appeal.  It found that the relevant European Directive provides that Member States, rather than individual employers, may provide for differences in treatment on the grounds of age where such differences are objectively and reasonably justified by a legitimate aim and the means of achieving that aim are appropriate and necessary.  It was held that the Oireachtas had provided for differences in treatment based on age in respect of severance payments in its enactment of section 34(3)(d) of the Employment Equality Acts.  The Court commented that the rationale underlying the legislative provision was that workers close to retirement are in a substantially different position to younger workers who have longer periods during which they could expect to remain in the labour force and that, accordingly, as a matter of social and labour market policy, the difference in treatment could legitimately be reflected in the construction of redundancy packages.  Finally, the Labour Court held that the difference in the treatment of the complainants’ redundancy payments fell within the exception in section 34(3)(d) and overturned the decision of the Equality Tribunal.

It is likely that this recommendation will be relied upon by employers in defending claims of age discrimination where employment is terminated upon an employee reaching normal or compulsory retirement age.  In a number of cases the Equality Tribunal has held that an employer must provide objective justification for the imposition of a compulsory retirement age, notwithstanding that no such requirement is imposed upon employers by the Employment Equality Acts.  It is conceivable that the Labour Court recommendation in the Hospira case may impact on the issue of age discrimination in the imposition of retirement ages.