Court of Appeal approves redundancy scheme more generous to older workers

Louise Walker
Louise Walker
Legal Director
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Recently, the Court of Appeal ruled that an enhanced voluntary redundancy scheme operated by the Department of Work and Pensions (DWP) which was more beneficial to older employees did not unlawfully discriminate against their younger colleagues.

When age discrimination laws first came into force in the UK in 2006, Parliament did not alter the right to higher statutory redundancy payments based on service accrued at an older age and the well-known age bands of under 22, 22-41 and over 41 were maintained. When the Equality Act came into force in 2010, this position was maintained and the law remains unaltered to this day.

The position is less straightforward in relation to contractual redundancy schemes. Under the Equality Act, a contractual redundancy scheme that is more generous to particular age groups will only be lawful if the age discrimination can be objectively justified, unless the following exception applies. A contractual scheme based solely on a multiplier of statutory redundancy entitlements will automatically not constitute age discrimination. Where such a multiplier is used, it is also possible to disapply or increase the statutory cap on a week’s pay.

To give a very simple example, a contractual scheme that pays double statutory redundancy would be deemed to be lawful, but a scheme that pays £1,000 on top of statutory redundancy would have to be objectively justified.

In this particular case, the employer did not use a simple multiplier of the statutory formula and therefore had to objectively justify the scheme’s discriminatory effect. To pass the legal test for objective justification, an employer must show that the measure it adopts is a proportionate means of achieving a legitimate aim. In this case, the DWP argued that the increased payments their scheme gave to older workers were made in order to ‘provide a proportionate financial cushion until alternative employment is found or as a bridge into retirement’. In support of this justification the DWP presented statistics to show that younger employees find it easier to find new employment than older ones. The DWP also tried to demonstrate that older employees were more likely to have more onerous financial commitments than younger ones.

The Court was prepared to accept these justifications and found the statistics to be ‘highly relevant’ in reaching their decision to accept that the discriminatory effect of the scheme was objectively justified.


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