Enhanced redundancy pay for older workers not discriminatory

Posted on Oct 26, 2014

The Court of Appeal has agreed that a redundancy scheme which paid out on the basis of age banding was not discriminatory because it was objectively justified.

The Department of Work and Pensions (DWP) had a scheme where the level of payments increased according to the employee’s age. Miss Lockwood, age 26 at the time, argued that had she been 35, her redundancy payment would have been substantially more and therefore she had suffered less favourable treatment due to her age.

DWP said that the aims of the scheme were to provide a financial cushion until new employment was found or to be a bridge to retirement.

The Court of Appeal said that whilst she had been treated less favourably than somebody who was 35, the age banding aspect of the scheme was objectively justified. This case is useful as it demonstrates the type of evidence that will be needed to rely on objective justification. In summary, this was the evidence put forward:

  • Consultation at the time of implementing the scheme is key: DWP had consulted both at the time the scheme was implemented, and then again on occasions when it was revisited and at no point had the unions raised any age-related objections.
  • Statistics were relied upon from the Office of National Statistics which showed that:
    • younger people moved more easily between jobs.
    • those over 35 were more likely to be married with greater family and financial commitments particularly when it came to having mortgages.

As a result younger workers could react more easily to redundancy and therefore needed less of a financial cushion.

Our advice however would always be to mirror the statutory scheme where possible as that brings you safely within the exemption from age discrimination. But if you wanted to step away from that, you should consider what evidence you have to justify it as being your proportionate means of achieving a legitimate aim both at the time of implementing the scheme, and also at regular intervals to ensure that your justification still holds true.