Facts

Mr McDowell was employed by BAE Systems on 1 February 1988. In February 2014, he was working in the Defence Information business as a Design Lead. At this time, BAE Systems commenced a restructuring programme and, as a result of this, Mr McDowell’s job was relocated to Christchurch. Mr McDowell decided that he did not wish to relocate and therefore, he was made redundant with effect from 31 January 2015 at the age of 65.

BAE Systems operated an enhanced redundancy scheme by which enhanced redundancy pay was applied, subject to a cap and taper which provided that no employee would receive more than 78 weeks’ pay and would receive no more by way of severance than they would have earned in pay if they had stayed at work until the age of 65. This meant that the enhancement would taper from aged 63.5 onwards and reduce to nothing when an employee reached the age of 65.

When Mr McDowell was made redundant he received his statutory redundancy entitlements only. He received nothing under the enhanced contractual redundancy scheme.

Mr McDowell brought a claim direct age discrimination. He alleged that those over 63.5 years old and over are disadvantaged compared to those aged below 63.5 years old.

Decision

BAE Systems conceded that the facts support a prima facie case of direct age discrimination. The main issue for the Employment Tribunal was justification.

BAE Systems said the scheme has legitimate aims. Specifically, BAE Systems said it is aimed at:

‘ensuring that finite funds available for redundancy payments are allocated across the workforce in a fair and equitable manner taking account of the availability of pension income that would not be available to younger employees and seeking to avoid certain employees receiving what could legitimately be regarded as a “windfall” payment.’

The Employment Tribunal accepted that BAE Systems had legitimate aims for the scheme.

However, the Employment Tribunal was not satisfied that the measures corresponded to a real need, that they were appropriate with a view to achieving the objectives pursued, or that they were reasonably necessary.

The measures were not a proportionate means of achieving the aim sought.

In considering the aim to allocate finite funds fairly, the Employment Tribunal recognised that BAE Systems’ finances are not unlimited. However because BAE Systems did not bring any useful evidence as to what the bounds might be, the Employment Tribunal could not understand to what extent, if at all, this aim impacts on the decision to maintain the cap.  

In relation to avoiding a windfall, the tribunal noted this can be a legitimate aim when operating a redundancy scheme but BAE Systems was assuming that most employees will retire at age 65. There was no tangible evidence that people did retire at 65; Mr McDowell himself already had decided he wished to work for longer.  

The Employment Tribunal admitted that the changed landscape, namely the abolition of the Default Retirement Age in 2011, influenced their approach to the windfall argument. Whilst BAE Systems had edited their framework to reflect the 2011 changes, the Employment Tribunal found it was only a cosmetic change in language – first describing 65 as the ‘normal retirement date’ and then as the ‘pension retirement date’.  

In conclusion, the Employment Tribunal held that the BAE Systems had not established that the discriminatory effect upon Mr McDowell was balanced by the needs of BAE Systems. This was, in particular, due to the fact that the argument was based on generalisations and without any tangible basis.

Mr McDowell succeeded in his claim for direct age discrimination.

The judgment is available here.

McDowell v BAE Systems (Operations) Ltd ET case no. 1401127/2015