The Employment Appeal Tribunal (EAT) has given further guidance on justifying age discrimination in an appeal against a tribunal decision that a contractual redundancy scheme was not discriminatory on the grounds of age (Loxley v BAE Systems). This case involved similar issues to those rising in the ICI case reported in our 11 August E-Bulletin. 

BAE's voluntary redundancy scheme calculated payments on the basis of age and length of service. The amount payable was reduced for every month of service after age 57 and employees over 60 were excluded because the company's pension scheme allowed the employees to take their pension at age 60 without any reduction in benefits. Mr Loxley, who was 61, complained that the scheme discriminated against him on the grounds of age.

Age discrimination can be justified if it amounts to a proportionate means of achieving a legitimate aim. The EAT held that preventing employees nearing retirement from enjoying a windfall from their redundancy could be a legitimate aim and therefore was potentially justifiable. However, the tribunal had failed properly to consider whether it was proportionate to exclude an employee entirely from any redundancy payment because of his or her entitlement to a pension. The case was sent back to a fresh tribunal to consider this question.

Impact on employers

As this case and the ICI case demonstrate, the scope for employers to show a legitimate aim in justifying age discrimination is fairly wide. However, establishing proportionality will be more difficult. In order to do so, an employer will have had to conduct a proper analysis of the effects of the provision in question and examine alternatives to show that its legitimate aim cannot be achieved by less discriminatory means.

Note that the EAT also said that the fact that the scheme had been agreed with recognised trade unions supported the employer's contention that it was justified. Employers should therefore involve employee representatives wherever possible when establishing or modifying any enhanced redundancy scheme or other benefit schemes in order to give some protection against allegations of discrimination.