In Rolls Royce Plc v Unite the Union, the Court of Appeal has ruled that using length of service as a criterion in a redundancy selection policy can be lawful in some circumstances. Although the use of length of service amounts to indirect age discrimination, it can be objectively justified where it pursues the legitimate aim of maintaining a stable workforce during a redundancy exercise and rewarding loyalty, and is a proportionate means of achieving that aim. In this case, the means of achieving that legitimate aim were proportionate because the criterion was one of many criteria used in the selection process and the means used were consistent with principles of fairness.
The case concerned a collective agreement which Rolls Royce had negotiated with the union Unite before the introduction of the Employment Equality (Age) Regulations 2006 (the “Age Regulations”). The collective agreement contained an agreed method of selection in any redundancy exercise, involving a point scoring system, where those employees awarded the least number of points were selected for redundancy. The selection matrix comprised a number of criteria including: Achievement of Objective; Self Motivation (drive); Expertise/Knowledge; Versatility/Application of Knowledge; Wider personal contributions to team. In addition, an employee would receive one point for each year of service, as part of the selection criteria. Rolls Royce was concerned that the use of length of service in this way could amount to unlawful age discrimination. In particular, Rolls Royce considered that the redundancy selection criteria agreed with Unite no longer fulfilled its business need, which was to retain those employees best able to adapt to the changed business environment. Rolls Royce applied to the High Court for a declaration as to the question of lawfulness. After hearing both sides’ arguments, the High Court declared the use of length of service as a criterion in this way to be lawful. Rolls Royce appealed to the Court of Appeal.
Whilst expressing some concerns about making a declaration on an issue which affected employees who had not been party to the proceedings, the Court of Appeal upheld the High Court’s decision finding that length of service criteria was lawful.
Indirect discrimination on the grounds of age may be justified if the employer can show that the application of the relevant “provision, criterion or practice” is “a proportionate means of achieving a legitimate aim” (Regulation 3(1) of the Age Regulations). The Court said that while length of service was indirectly discriminatory under Regulation 3, its use as a selection criterion could be justified because, viewed objectively, it pursued legitimate aims of rewarding loyalty and achieving a stable workforce in the context of a fair process of redundancy selection. The means of achieving these aims were proportionate because length of service was one of many criteria used and was by no means determinative; it was consistent with the overarching concept of fairness and also because the younger employees accepted it.
In addition, the Court considered the specific exception set out in Regulation 32 which provides that it is not unlawful for an employer to award a worker a “benefit” based on length of service where such service is 5 years or less, or, where it exceeds 5 years, it fulfils a business need. The Court said that length of service was clearly capable of constituting a “benefit” within the meaning of Regulation 32 and that viewed objectively, the length of service criterion reasonably fulfilled a business need (i.e. that of having a loyal and stable workforce). The fact that Rolls Royce doubted whether a business need was fulfilled in this way was, according to the Court, irrelevant.
What this decision means for employers
Although the Court of Appeal has confirmed that the use of length of service criteria in a redundancy selection matrix is not unlawful, it is important to note that the Court’s reasoning for this conclusion is particular to the circumstances of this case. The use of length of service as a criterion was not used as a “blunt tool” on its own to determine who was to be selected for redundancy. Instead, it was just one factor amongst many and, as the Court said, “was by no means determinative or definitive of selection”. It should also be noted that the use of length of service as a criterion for selection was negotiated in the context of a collective agreement with the union. Employers should still be very wary about using criteria such as “first-in, last-out”, or other criteria which make length of service determinative of the selection, as use of length of service in this way may not be a proportionate means of achieving a legitimate aim. The case is therefore not authority for a general proposition that length of service is invariably going to be a lawful criterion for redundancy selection, in the context of age discrimination.