In Rolls-Royce PLC v Unite the Union ([2009] EWCA Civ 387) the Court of Appeal considered whether the use of length of service as a criterion within a redundancy selection matrix constituted unlawful age discrimination.

In summary, this is a helpful decision which makes clear that employers should be able to objectively justify the use of a length of service selection criterion provided that it forms part of a wider set of criteria and is not the decisive factor in making the redundancy dismissal.

Background

Two collective agreements between Rolls-Royce and Unite contained a redundancy selection matrix which included a length of service criterion. Rolls Royce was concerned that the retention of this criterion within a selection matrix might amount to unlawful age discrimination under the Employment Equality (Age) Regulations 2006 (the Age Regulations). It therefore applied to the High Court for a declaration as to whether the length of service criterion fell foul of the Age Regulations and was unlawful.

Unite argued that the use of the criterion was lawful and should be retained. The High Court determined that the use of the criterion was objectively justified and was therefore lawful. It also held that the award of points for service in a redundancy selection matrix constituted a “benefit” within Regulation 32 and that, in the circumstances, it was probable that this would be regarded as reasonably fulfilling a business need of Rolls-Royce and therefore that the practice was also lawful under Regulation 32. Rolls-Royce appealed to the Court of Appeal.

Indirect discrimination

Under Regulation 3(1)(b) of the Age Regulations, an employer unlawfully discriminates where it applies a provision, criterion or practice to A (i) which it applies equally to persons not of the same age group as A, (ii) which puts or would put persons of the same age group as A at a particular disadvantage, and (iii) A is put at that disadvantage, unless the employer can show that its actions are a proportionate means of achieving a legitimate aim.

The Court of Appeal assumed that the use of the length of service criterion constituted indirect discrimination but held that it was a ‘proportionate means of achieving a legitimate aim’ and was therefore lawful. It decided that (i) the legitimate aim was that of maintaining a stable workforce and rewarding loyalty and (ii) the proportionate means was clearly demonstrated by the fact that the length of service criterion was only one of a substantial number of selection criteria and was by no means determinative. The Court added that the use of a length of service criterion in the present case was entirely consistent with the overarching concept of fairness and that Unite had given evidence that its use was accepted by the younger employees.

Exemption for length of service benefits

Regulation 32 of the Age Regulations permits employers to treat workers differently in relation to the award of benefits if the reason for the difference in treatment is length of service and provided that, if service of over five years is being considered, the employer also shows that it reasonably appears to it that the use of the length of service criterion fulfils a business need.

The Court of Appeal first considered whether the use of a length of service criterion in a redundancy matrix constitutes a “benefit” within Regulation 32(1). It concluded that it did and that counting a point for every year of service in a redundancy selection process was plainly capable of constituting a ‘”benefit”.

It also considered whether it could reasonably appear to an employer that the use of the length of service criterion fulfils a business need so that it falls within Regulation 32(2) and decided that it could. It identified the business need as the need for a loyal and stable workforce. The Court stated that, in its view, this was the case notwithstanding that Rolls-Royce had expressed doubts as to whether the criterion did fulfil a business need. The use of the criterion could therefore also be lawful under Regulation 32.

Proper forum?

The Court of Appeal stressed that the Employment Tribunal is the proper forum for age discrimination claims not the High Court and considered at length whether it should hear the appeal. Ultimately it determined that it should do so as the construction and interpretation of legislation is both a matter of public importance and one of the Court’s proper functions. It decided this notwithstanding its concern that the outcome of the appeal hearing could directly affect a substantial number of people (i.e. any Rolls-Royce employees subsequently made redundant) who would not have had any direct say in the proceedings.

The Court made clear, however, that nothing in its judgment should be read as inhibiting any claimants before the Employment Tribunal from arguing that a redundancy process was unfair or that they have been unfairly dismissed. That said, it acknowledged that Rolls-Royce would seek to rely on its decision in the Tribunal.