In Loxley v BAE Systems, the Employment Appeal Tribunal ("EAT") considered the features of a voluntary redundancy scheme, under which there was a cut-off point for redundancy payments where the employee was within five years of the pension scheme's normal retirement date (i.e. age 65). Employees who took voluntary redundancy between the ages of 60 and 65 were entitled only to statutory redundancy pay and notice pay and did not receive any enhanced redundancy payments. Mr Loxley challenged the redundancy scheme on the grounds of age discrimination.

For age discrimination to be objectively justified within the meaning of the legislation, it must be a proportionate means of achieving a legitimate aim. The EAT held that preventing employees from gaining a windfall from the redundancy scheme was a legitimate aim of that scheme, given that one of its purposes was to cushion workers from the effect of losing their income (which was not required to the same extent where pensions were paid or due to be paid to the employee).

However, the EAT also held that the discrimination was not justified inevitably and in all situations. The fact that an employee was entitled to immediate pension benefits would always be a highly relevant factor which an employer could properly consider when determining redundancy rights (and it may even justify excluding the employee from a redundancy scheme altogether). However, the original Tribunal had failed to analyse the available financial information about the benefits and had not properly considered the issue of proportionality. Hence, the decision was flawed and the case was directed to be heard again by a fresh Tribunal.

Notwithstanding this conclusion, it is interesting that the EAT was, in principle, prepared to accept that age discrimination was potentially justified by the aim of preventing an employee from benefiting from a double payment (namely, an enhanced redundancy payment and a pension).