Employers who do not handle redundancy processes in a fair and non-discriminatory way can face disgruntled staff and tribunal claims. This article discusses how age discrimination can arise when making redundancies and gives examples of age discrimination during the redundancy process.
Employers risk age discrimination at several stages in the redundancy process: such as when selecting for redundancy, carrying out redundancy consultation, during the search for alternative employment and in the calculation of redundancy payments.
Unfair dismissal, redundancy and age discrimination
Employees generally need two years’ service to bring an unfair dismissal claim. But all employees are protected against age discrimination. Employers must therefore take care to ensure they follow a fair and non-discriminatory redundancy process.
A fair redundancy process usually starts with the employer warning individuals that they are at risk of redundancy and then holding at least one meeting with each provisionally selected individual to discuss the redundancy situation. An employer should devise a fair procedure and should explain it to the individual, setting out:
Their selection criteria
Why the individual was provisionally selected for redundancy
How long the decision will take
What meetings they will have and when
Ways of avoiding the redundancy, mitigating the consequences
Any available alternative employment
How to appeal if selected for redundancy
An employer should normally follow the process they have set out, although they can deviate from it if they have good reason. A failure to follow a fair process carries a risk that it might lead a tribunal to infer that the employer was discriminating. In particular, if a claimant proves facts from which a tribunal could decide, in the absence of another explanation, that an employer committed age discrimination, the burden of proof shifts to the employer to prove a non-discriminatory explanation for their actions. If the employer acts in an arbitrary or capricious fashion, and does not have a good, non-discriminatory explanation for its actions, it could lead to the burden of proof shifting and a tribunal concluding that the employer has discriminated.
But just because a process is less than fair, this doesn’t automatically mean that the employer is guilty of age discrimination. For example, in Osoba v Chief Constable Hertfordshire Constabulary, the tribunal found that the employer’s implementation of its selection procedure was “at all stages shambolic and to some degree incompetent” but that the employer had acted honestly. There was nothing to suggest age discrimination and so the claims failed.
Age discrimination and sham redundancy
Sometimes employers give redundancy as the reason for dismissal, where no legitimate redundancy situation exists. This may be because the employee is underperforming, and the employer wants to avoid a performance management situation. Or because the employer simply wishes to remove an employee from their current role and replace them with someone else. But employers should be careful that the reason for the dismissal is not tainted with age discrimination.
This happened in the case of Perrin v Fred Christophers Ltd. The employer dismissed Ms Perrin on grounds of redundancy having ended her role and created a new role, for which they said she wasn’t suitable. They made various comments to and about Ms Perrin, including that they wanted to replace her with a “young, fit blonde”. The tribunal found that she had been directly discriminated against and harassed on grounds of her age. There was no substantial difference between the old and the new role, so no legitimate redundancy situation.
On occasion, what can appear to be a sham redundancy, may not be what it seems. In Bogdanoviene v (1) Fusion Funkymen Ltd & (2) Ms Muna Meah, the dismissal of a hairdresser for redundancy was not age discrimination, despite the fact that two younger staff members who were also made redundant had carried on working in the salon in a different capacity. Ms Bogdanoviene, aged 53, was one of three employees dismissed by reason of redundancy. The two other employees were younger than Ms Bogdanoviene (aged 45 and 31) and continued to work in the salon. Despite this, the Employment Tribunal held that this was a genuine redundancy situation. The two employees were working in the salon, but not for the salon. They were renting a chair and working for another hairdressing company. They weren’t receiving any salary, so they were indeed made redundant along with Ms Bogdanoviene.
Age discrimination and voluntary redundancy
Age discrimination can occur during a voluntary redundancy process, although may be justified.
In Palmer v The Royal Bank of Scotland PLC [2014], Ms Palmer was aged 49 and was selected for redundancy. Two options were offered, either voluntary redundancy or redeployment. Those who would be 50 or over at their projected dismissal date were subsequently offered a chance to change their minds and take early retirement instead. As Ms Palmer would not be 50 at her projected dismissal date, this was not offered to her. Ms Palmer tried to change her choice from voluntary redundancy to redeployment in the hope that this would extend the process until she had reached 50 years of age, meaning that she could then elect to take early retirement. RBS would not allow her to change her choice. Ms Palmer argued that refusing to allow her to change her option was direct age discrimination. Ultimately, the claim was dismissed for failing to identify an appropriate comparator (it was stated that in any event, the discrimination would have been justified).
Stopping someone taking voluntary redundancy may also lead to age discrimination risks, as in the case of Donkor v Royal Bank of Scotland. Mr Donkor and three other Regional Directors were selected for redundancy in 2012 and originally not interviewed for a new role. But upon calculating how much the severance would cost, RBS decided to allow the two Regional Directors under 50 to take voluntary redundancy but not the two over 50 and Mr Donkor and another were offered new roles. In 2013 the opportunity arose for voluntary redundancy and this time Mr Donkor was successful, however due to a rule change he was no longer entitled to early retirement benefits. Mr Donkor argued that RBS’ refusal to allow him to take voluntary redundancy back in 2012 amounted to direct age discrimination. The Employment Appeal Tribunal agreed and stated that Mr Donkor’s age was the reason he was found an alternative role and refused voluntary redundancy, although they sent the case back to the Tribunal to determine if this was justified.
Age discrimination and redundancy selection
If employers are selecting from a group of employees doing the same job, they need to identify the “pool” of employees who are potentially at risk from which they will select. They should then use fair and reasonable selection criteria. Subjective criteria such as “attitude” or “fit” will increase the risk of a dismissal being unfair.
In Nolan v CD Bramall Dealership Ltd t/a Evans Halshaw Motorhouse Workshop, Mr Nolan was made redundant when the decision was made to close his place of work and remove his position. He argued that there was age discrimination and cited age-related comments, such as being referred to as “Yoda”. Although the Tribunal ruled that his reason for dismissal was redundancy, it found that he was selected for redundancy to preserve the employment of younger employees. This amounted to age discrimination. The age discriminatory comments fostered a discriminatory work environment.
Some selection criteria may indirectly discriminate on grounds of age.
Length of service
Because it is so linked to age, including length of service as a criterion for redundancy selection is risky for employers. This issue was discussed in Rolls Royce plc v United the Union. The High Court ruled that length of service could be indirectly discriminatory, but that the use of this criterion could be objectively justified as one part of a wider selection matrix.
“Last in first out”
As a redundancy selection criterion, “last in first out” does what it says on the tin. Employees who were the last into the employer, and therefore have the shortest service, are selected for redundancy first.
This process can be problematic because younger employees tend to have shorter service and so are more likely to be the “last in”. Using it as the only criteria for redundancy selection, can be risky for employers as it can lead to indirect age discrimination claims.
Although risky, use of last in first out as a redundancy criterion is not always discriminatory. In Allan v Oakley Builders and Groundwork Contractors Ltd, the Employment Tribunal said that whilst last in first out is not everyone’s first choice, it is not an irrational method to use to select individuals for redundancy. And in this case, the Ms Allan was older than the others in her pool and so it did not result in age discrimination.
Age discrimination and redundancy consultation
Individual consultation with employees provisionally selected for redundancy is part of a fair redundancy procedure. Employers should consult with individuals about ways of avoiding the redundancy, mitigating its effects or opportunities for alternative employment.
If an employer is less open to considering employees’ representations during consultation because of their age, this could result in age discrimination. For example, an employer may be more dismissive about younger employees’ suggestions, believing them to lack experience or insight.
There is also the potential for age discriminatory comments during consultation meetings. In Ramus v Fleur C Douetil a meeting took place in late 2016 where Mr Ramus’s future was discussed. The employer said that early retirement was “a lovely option” and mentioned Mr Ramus’s health. However, Mr Ramus responded by stating he planned to work until his “official retirement age”. In June 2017, the employer decided to make Mr Ramus redundant. Mr Ramus brought a claim of age discrimination based on the earlier conversation. The Employment Tribunal held that the conduct or content of the 2016 meeting did not amount to age discrimination, however it did not amount to a proper redundancy consultation meeting either. Mr Ramus lost his age discrimination claim but succeeded in unfair dismissal.
Age discrimination and suitable alternative employment
In Magoulas v Queen Mary University of London (Age Discrimination) Dr Magoulas was placed at risk of redundancy at the same time a new job of ‘Early Career Researcher’ was being advertised by the University with the proviso that the applicant had not been an independent researcher before 1 August 2009. Due to this criterion, Mr Magoulas was unable to apply and was dismissed by reason of redundancy. Mr Magoulas brought a claim for age discrimination claiming he was put at a disadvantage compared with younger researchers. The Employment Tribunal held that the cut-off date did favour younger applicants, but that it was a proportionate means of achieving a legitimate aim because the new positions would be state funded and would therefore save costs.
Age was also a significant reason behind a failure to find suitable alternative employment in Constandinou and Kakkoufa v Supadance International Ltd and Others, although not the principal reason. The Employment Tribunal accepted that comments, such as those made by the General Manager about the workforce that “old workers like old football players need to leave so that it could bring in new blood otherwise the team would not be efficient” reflected an ongoing belief that the Claimants would be made redundant in part because of their age. It concluded that if they had been younger there would have been more consideration of ways in which they could have been retained. The dismissals were found to be discriminatory and unfair.
Age discrimination and redundancy payments
There is an exception in the Equality Act allowing the payment of enhanced redundancy pay in certain circumstances where it is a specific variation of the statutory redundancy pay scheme calculation method. This allows employers to:
Base payments on an uncapped week’s pay
Apply a multiple (0.5, 1 or 1.5) for the relevant number of weeks’ pay per year of service during particular age bands;
Apply a multiple to the total payment; and/or
Include employees with less than two years’ service.
However, very few enhanced redundancy pay schemes come within this exception. Most schemes do not incorporate the statutory scheme’s age bands.
As an enhanced redundancy payment does not fall within the service-related benefit exception, calculating redundancy pay using length of service will require objective justification. An employer might seek to use “rewarding loyalty” as its legitimate aim (the Court of Appeal held that this could be a legitimate aim in Rolls Royce plc v United the Union). The key issue will be deciding whether the measures that were carried out in pursuit of this aim were proportionate.
An employer cannot justify discrimination solely because it saves them some cost. There needs to be some additional aim (this is known as the “cost plus” rule). It is important to remember that age discrimination claims can arise from enhanced redundancy payments whether they are made under a contractual scheme, or a scheme which is described as discretionary, or even one that has never been published to employees.
Enhanced redundancy payments
In Galt & Others v National Starch & Chemical Limited the Employment Tribunal found enhanced redundancy payments which gave a higher payment for service over the age of 40 to be unlawful as the employer could not identify a legitimate aim to justify the less favourable treatment of its younger employees. The Tribunal refused to accept the assertation that older workers would find it more difficult to find new employment without any evidence.
However, in MacCulloch v Imperial Chemical Industries plc the Employment Tribunal found that ICI could potentially justify both age and service elements in their enhanced redundancy pay scheme. It accepted the aims of paying more to older redundant workers because they face greater difficulty in the job market; encouraging older workers to leave thereby relieving recruitment ‘blockages’; and rewarding loyalty.
In Lockwood v Department for Work and Pensions and The Cabinet Office, an employee opted for voluntary redundancy and her application was accepted. She was entitled to compensation under the Civil Service compensation scheme of £10,849.04, but had she been over 35 when she left, she would have received a further sum of £17,690.58 for the same length of service. She argued that this was direct age discrimination. The Court of Appeal agreed but held that the difference in redundancy amounts was a proportionate means of achieving the legitimate aim of ensuring a financial cushion until alternative employment could be found. The employee therefore lost her claim.
There was a different outcome in McDowell v BAE Systems (Operations) Ltd. Mr McDowall was aged 65 and took redundancy over relocation. BAE had an enhanced redundancy pay scheme which was capped at a maximum of 78 weeks’ pay. The redundancy pay was also tapered to ensure employees would receive no more in severance than they would have earned in pay if they stayed at work until age 65. This meant that Mr McDowall received nothing under the enhanced redundancy scheme, and he brought an age discrimination claim. As this was a prima facie case of direct age discrimination (less favourable treatment on grounds of age) the arguments were about whether the employer’s actions were justified. Although the Tribunal found there was a legitimate aim (ensuring finite funds were distributed fairly) they were not satisfied that the measures were appropriate or reasonably necessary, especially as BAE’s scheme assumed employees would retire aged 65 but there was no evidence that they did. Mr McDowall succeeded in his claim
Proximity to pension and windfall payments
One of the first age discrimination cases relating to redundancy dealt with the impact that pensions may have on any redundancy payments. In Loxley v BAE Systems Land Systems it was decided that a pension cushioning the blow of redundancy could justify a reduced or nil redundancy payment, but it was emphasised that this would not inevitably be the case and that the justification “must depend upon the nature of both schemes”. Although this case was remitted to a fresh tribunal, it was stated that tapering provisions, which were designed to prevent a windfall are likely to be justified.
The ECJ agreed that tapering redundancy compensation as workers got closer to state pension age was justified in the case of Odar v Baxter Deutschland GmbH. Redundancy compensation for workers covered by the scheme was calculated based on their age, length of service and gross monthly pay. But a special provision was applied to workers over 54 years old, which effectively reduced compensation on an increasing basis as workers got closer to state pension age. It was ruled that the special formula did amount to age discrimination, however that this difference was justified by a legitimate aim and the means of achieving it were appropriate and necessary.
In Singh v Bradford College and Inprint and Design Limited Mr Singh was made redundant 12 weeks before being able to access his pension. He brought a claim of age discrimination. The Employment Tribunal held that there was a genuine redundancy situation and that Mr Singh was not individually targeted. It concluded that there was no age discrimination as the timing of his dismissal had “everything to do with making costs savings the respondent had to make” especially as the consultation process had begun more than 6 months earlier.
It might be age discrimination for an employer to decide not to make an employee redundant, because to do so would mean the employer has to enhance the employee’s pension. In Lees v Imperial College, Ms Lees’ employment became at risk of redundancy and she was offered alternative employment. She refused and claimed that the alternative role was unsuitable. In the absence of formal notice of redundancy under her contract, she resigned. Had she been made formally redundant she would have been entitled to draw an enhanced pension funded by the employer.
Comment
Employers make redundancies during difficult times and processes must be carried out quickly and fairly. But if employees believe the process to be affected by age discrimination, precious time and resources must be diverted to deal with their grievances and Tribunal litigation. Employers should be mindful of this and critical of their processes at the outset. These examples of age discrimination during the redundancy process can help employers reduce their risk.
This article discusses age discrimination during recruitment and gives examples of age discrimination during the recruitment process.