The Court of Appeal has confirmed that length of service, as a criterion for redundancy selection, can be lawful even though it potentially discriminates against younger workers on the grounds of age (Rolls Royce plc v Unite the Union).
The majority of the Court of Appeal agreed with the earlier High Court decision and held that the employers could potentially justify the discrimination as a proportionate way of achieving a legitimate aim. The legitimate aims were the reward of loyalty and the overall desirability of achieving a stable workforce in context of a fair process of redundancy selection. In addition, rewarding long service in a redundancy selection process would amount to a legitimate employment policy. Rolls Royce's belief that the criterion no longer fulfilled a business need did not prevent there being a legitimate aim.
It was proportionate to use length of service as a criterion, because it was only one of many criteria used and was not determinative or definitive of selection. The criterion was, moreover, consistent with the overall concept of fairness that the collective agreements sought to achieve. It was significant that the criteria had been collectively agreed and not imposed by the employer.
The Court was unanimous in agreeing with the High Court that the length of service criterion would, in any event, be covered by the exemption in Regulation 32 of the Age Discrimination Regulations, which allows employers to award benefits based on length of service to employees with more than five years' service, provided that it fulfils a business need. The majority considered that, viewed objectively, the length of service criterion met that test even though Rolls Royce itself considered that it no longer fulfilled a business need.
Impact on employers
- The Court of Appeal judges were uncomfortable making the declaration in the absence of the employees who would be affected by the decision. They were at pains to point out that their judgement would not prevent any potential claims before an employment tribunal from raising the issue that Rolls Royce's redundancy process was unfair. However, in reality, Rolls Royce will be able to rely on the declaration that length of service is a lawful criterion in defence to any claim, as will other employers. The Court of Appeal's views on justification and fulfilling a business need will also be relevant in any tribunal claim.
- It was important in this case that length of service was only one of a number of criteria and was not given undue weight. It is clear from the judgement that using "last in first out" as a sole or main selection criterion would not be justifiable. Employers should take care to ensure that any selection criteria applied in a redundancy exercise are objective and transparent.
- The decision related only to the meaning of the Age Discrimination Regulations and not to the facts of any particular redundancy exercise. The dissenting judge's position that a tribunal should assess the lawfulness of the length of service criterion at the time it was applied by the employer (as opposed to the time the collective agreement was made) is persuasive and employers should consider the justification for such criteria each time they are applied.