Age discrimination and increasing the unfair dismissal qualifying period to two years

April 5, 2011 Tom Heys

Our research casts further doubt on the Coalition’s “workplace equality” credentials and reveals the age discrimination behind their key employment law proposal.

The current legal position is that employees with more than one year’s continuous service have the right not to be unfairly dismissed (section 94-95 Employment Rights Act 1996).

On 10 November 2010, Lord Young stated that the government was considering doubling this qualifying period to two years. This was confirmed on 27 January 2011 when the Department for Business, Innovation and Skills (BIS) launched a consultation on wide-ranging reforms to employment law: Resolving Workplace Disputes: a consultation.

Key findings

Our research shows that although increasing the qualifying period for unfair dismissal would affect all age groups to some degree, younger people would be disproportionately affected.

Key findings are as follows:

3.09 million people will be affected by this change and will lose their unfair dismissal rights.
1.73 million of those affected will be under 35, with 1.36 million of them being under 30.
Chart 1 (below) shows the proportions of each age group that can comply with the current 1 year qualifying period for unfair dismissal (in red), with the impact if the qualifying period is increased (in yellow). The further the red line is away from the yellow, the more an age group will lose out as a result of the changes.

See this chart in the original post

Whereas nearly half of all under 20s currently qualify for unfair dismissal rights, this will reduce to just one in five.
Chart 2 (below) shows the proportion that each age group represents in the workplace and the proportion of that age group which will be affected. If the effect of increasing the qualifying period were borne equally by all age groups, the lines would follow the same path. Instead where the yellow line is above the red line, these age groups will be adversely affected. The higher the yellow line, the more disproportionate the impact. Where the red line is above the yellow one, this shows that these age groups will not suffer as much as could be expected.

See this chart in the original post

The lines cross in the 35-39 age group, showing that those in this age group will be neither more nor less affected relative to other ages.
44.1% of those affected will be under 30, despite making up just 24.3% of the total workforce.
26.9% of those affected will be under 25, despite making up just 13.0% of the total workforce.

Background

Employees with more than one year’s continuous service have the right not tobe unfairly dismissed (section 94-95 Employment Rights Act 1996).

Methodology

We obtained data from the Office for National Statistics (ONS) relating to the length of service and age of the workforce.

We analysed the four most recent quarters of available data from the ONS. This was the fourth quarter of 2009 to the third quarter of 2010. We used four quarters then took an average. We assessed the data in this way in order to iron out any anomalies caused by seasonal changes in the workforce. This ensured an accurate and fair result.

The figures in the tables in the appendices have been rounded, but unrounded data has been used for any calculations. Percentages have been rounded to one decimal place. All other figures have been rounded to the nearest whole unit.

Legal challenge

Any legislation enacted by the Government must comply with the Equal Treatment Framework Directive 200/78/EC (“the Directive”). This would include legislation increasing the unfair dismissal qualifying period. If legislation does not comply with the Directive, a legal challenge can be brought by way of judicial review.

Article 2(2) of the Directive prohibits indirect age discrimination. Indirect age discrimination occurs when an apparently neutral provision, criterion or practice puts people of a particular age at a particular disadvantage compared with other persons unless that provision, criterion or practice is objectively justified. A provision, criterion or practice will be objectively justified if it is a proportionate way of trying to achieve a legitimate aim.

The data and the analysis (see “key findings” above and the appendix below) are clear; raising the qualifying period will affect all, but will disproportionately affect younger members of the workforce and is likely to be indirect age discrimination.

The thrust of any legal challenge would therefore centre upon the Government’s justification for increasing the qualifying period. The Government would need to justify the measure by showing that it:

pursues a legitimate aim; and
is proportionate.

Legitimate aim

Article 6(1) of the Directive sets out a list of potential legitimate aims, including legitimate employment policy, labour market and vocational training objectives. Case law has also helped clarify what these aims might mean in practice and potential legitimate aims include:

encouraging the retirement of older persons (Mangold v. Helm [2006] IRLR 143);
encouraging better access to employment and better distribution of work between the generations (Felix Palacios de la Villa v. Cortefiel Servicios [2008] All ER 249; Petersen v. Berufungsausschuss fur Zahnarzte fur den Bezirk Westfalen-Lippe [2010] IRLR 254);
allowing employers greater flexibility regarding the dismissal of young workers as a greater degree of occupational mobility can be expected from them (Kücükdeveci v. Swedex GmbH [2010] IRLR 346)

Resolving workplace disputes: a consultation gives some help in establishing what the Government’s legitimate aim could be. It states that “the Government wants the UK to be the best place to start and grow a business, and to remove barriers to recruitment so that businesses have the incentive and ability to expand, ensure they provide maximum flexibility and promote competition without compromising fairness.” Specifically in relation to the unfair dismissal qualifying period, the Government wants “businesses to feel more confident about hiring people.”

This could potentially fall within the “employment policy” aim listed in the Directive.

Proportionality

The Government would need to show that the decision to increase the unfair dismissal qualifying period is a proportionate way of achieving its aims.

An assessment of proportionality would include an assessment of:

whether the aim could be achieved by other, less discriminatory, means;
the importance of the aim being pursued; and
whether the measure would actually contribute to the aim.

Conclusion

If the Government continues its plans to increase the unfair dismissal qualifying period, it risks a potential legal challenge.

A challenge would be by way of judicial review and could come from anyone affected by the measures. However, such a legal challenge is usually costly so is more likely to come from a well-funded party with backing from a trade union or NGO. With trade unions becoming increasingly adversarial, a legal challenge is a real possibility.

Questions of legitimate aim and proportionality continue to generate considerable case law. The degree of latitude that courts and tribunals will allow employers in the justification of less favourable treatment is not always clear, though a broad discretion is often given to national Governments when legislating in employment matters.

The data that our analysis is based on is available here.

Update: Government releases their position

Page 123 of the BIS Impact Assessment reveals the Government's position. An extract is below:

Age discrimination is somewhat different to other forms of discrimination. Age is a spectrum and continuum along which we all pass and age and length of service requirements are widespread and well established features of employment law - in the UK, EU and beyond. As Chart A2.3 shows a significantly lower proportion of 25 + year olds have a length of continuous service with their current employer of 12-23 months compared to 18-24 year olds. In 2009 9.9 per cent of 25+ year olds had a length of continuous service with their current employer of 12-23 months compared to 22.9 per cent of 18 – 24 year olds. This suggests a disproportionate number of young workers will be affected by the measure. However, the difference here essentially reflects the fact that younger people have generally had less opportunity to build up length of service - this is simply a fact of life. We consider that the difference here is essentially a factor of time and that an extension of the unfair dismissal qualifying period would not have a considerable disparity of impact on younger workers. We note that other accepted labour market practices have age or length of service requirements. UK law has different age bands for the national minimum wage, age and length of service qualifications for redundancy payments, and length of service requirements are allowed for other benefits (blanket exception up to five years) such as pay scales. In the event that the difference was considered to be a considerable disparate impact, the Government considers that it is justified as a proportionate means of achieving a legitimate aim. Extending the qualifying period of unfair dismissal to two years should be seen in the context of a wider labour market framework which seeks to minimise burdens on the employment of inexperienced workers and facilitate entry to the labour market whilst allowing for greater experience (and loyalty) to be awarded.

BIS appear to suggest that it is not really age discrimination and argue along the lines of the Homer case - note the comment that it is "simply a fact of life". BIS also seem to suggest that even if it was discrimination, it would be justified on labour market grounds.