It's not just inflation and banking crises that are making a comeback. Selection for redundancy on the basis of length of service – 'last in, first out' or 'LIFO' - might still be alive and well, albeit in a rather diluted form.

That appears to be the surprising view of the High Court, which held that matrix selection criteria at Rolls-Royce, which included points for length of service as well as performance, did not contravene the age discrimination legislation. That result suited the union, but we understand the employer is appealing the decision.

Since the age legislation came in, employers have been wary of using length of service to select for redundancy. However, unions have been very reluctant to abandon what are often long-standing agreements that usually have the support of the workforce. The Court has given a great deal of support to the unions' view.

The claimant employer and the defendant trade union entered into a collective agreement relating to redundancy before the commencement of the age regulations. The union were opposed to compulsory redundancy, but recognised that there might be circumstances which required a framework 'to enable peaceable restructuring, and fair selection of affected employees without disruption to the Business.'

The notes for guidance on the redundancy matrix showed that there were five measured criteria: the achievement of objectives; self motivation; expertise/knowledge; versatility/application of knowledge and wider personal contribution to the team. Under the assessment, an individual could score between 4 and 24 points per head (service related selection criterion).

As part of the process, each employee was to receive one point per year of continuous service (length of service criterion). If the individual had unauthorised absences, then, on a sliding scale, those absences produced negative points which were deducted from the employee's total.

Those with the least points were selected for redundancy.

The case is unusual in that the parties went to the High Court, rather than the Employment Tribunal, seeking a declaration as to whether the length of service criterion in the collective agreement was unlawful age discrimination pursuant to reg 3 of the Employment Equality (Age) Regulations 2006. The parties invited the judge to consider the following questions:

  • Is the retention of length of service as a criterion within a selection matrix for redundancy as contained in a collective agreement a proportionate means of achieving a legitimate aim within Regulation 3(1) of the Employment Equality (Age) Regulations 2006?
  • Can the service related selection criterion properly be classified as a 'benefit' within Regulation 32(1) of those Regulations? If so, does the service related selection criterion 'fulfil a business need of [the Claimant's] undertaking' within Regulation 32(2) of the Regulations?

The judge decided that the answer to both questions was yes, so the selection criteria were lawful. His reasoning was:

  • In a redundancy selection matrix, to give points for long service would confer a 'benefit' to the employee concerned because he would remain in employment whilst others lost their jobs.
  • The case was within the remit of reg 32 of the Regulations. The collective agreement represented a compromise negotiated between the employer and the union. It was in both parties' interests that a redundancy exercise was carried out in a way which was perceived as fair and could be executed 'peaceably'. That was fulfilling a legitimate business need.
  • The criterion of length of service had respected the loyalty and experience of the older workforce and had protected the older employees from being put onto the labour market at a time when they were particularly likely to find alternative employment hard to find.
  • The 'award of any benefit' was not limited to benefits awarded during employment, e.g. extra holiday, as the employer had suggested. Those words were general.
  • The employer was wrong in its contention that the length of service criterion in the collective agreements was unlawful as a result of the Regulations.

The decision is perhaps surprising in that the Courts have suggested in other cases that the desire for peaceful industrial relations does not justify other types of discrimination. If it did, it would allow unions to entrench discriminatory practices. The Court of Appeal may not support this decision.

Actions to take

Review all redundancy selection criteria that involve length of service. Do not assume that because they are contained in a collective agreement that they comply with the age discrimination laws: each set of criteria has to be considered in its own context.