Rolls Royce plc v Unite the Union – High Court

In Rolls Royce Plc v Unite the Union, the High Court was invited to determine two important issues relating to the validity of using "length of service" as a redundancy selection criterion, in light of the prohibition on age discrimination set out in Employment Equality (Age) Regulations 2006 (the "Age Regulations").

By way of background, the parties entered into two collective agreements dealing with redundancy. A redundancy selection matrix was agreed, in which individuals would receive scores of between 4 and 24 points in five different categories, together with one point for every year of continuous service with the company. Those employees with the least points were selected for redundancy.

The law

The Age Regulations contain a number of specific exceptions to discrimination. One of which, set out in Regulation 32, allows employers to treat employees differently regarding the provision of benefits (with the exception of benefits awarded on termination of employment) where the difference in treatment is length of service. This exemption is qualified however, as where a benefit can be earned by an employee by reference to periods of service in excess of 5 years, the employer must demonstrate that using length of service as a criterion in this respect fulfils a business need.

This test of justification set out in Regulation 32 appears to be easier for employers to satisfy than the general test of "objective justification" that applies to cases of direct and indirect age discrimination, under Regulation 3.

Decision

Firstly, the High Court decided that awarding points for length of service clearly conferred a "benefit" on employees within the meaning of Regulation 32. In support of this view, it recognised that the possibility of remaining in employment whilst others lost their jobs could be properly regarded as a benefit. The arguably less stringent test for justification set out in Regulation 32 of the Age Regulations therefore applied.

The Court held that this test was satisfied. That the redundancy scheme was contained within a collective agreement that had been negotiated and agreed between the parties, with a view to securing a "fair" redundancy process, could, in its view, be regarded as reasonably fulfilling a business need.

Secondly, the Court held that whilst the criterion was discriminatory, it was objectively justified as a proportionate means of achieving a legitimate aim, pursuant to Regulation 3 of the Age Regulations. It recognised that it was a legitimate aim of the employer to advance a policy whereby the selection of employees for redundancy could be carried out peaceably.

The Court added that the use of length of service as a selection criterion in this case respected the loyalty and experience of the older workforce, and protected older employees from being placed on the labour market at a time when they would find it difficult to obtain alternative employment. It commented that a scheme that allowed decisions to be based solely on the principle of "last in, first out" however, could be objectionable.

Comment

Employers should be aware that, whilst "length of service" may legitimately be used as a valid redundancy selection criterion, its application still requires justification on a case by case basis, to avoid falling foul of the Age Regulations.