Age Discrimination - Can length of service be a fair criterion in a redundancy selection?

25th October 2008 The High Court has just given a decision relating to the use of length of service within a redundancy selection, and the use of such a criterion in view of the Age Discrimination regulations.
The case involved Rolls Royce, who had entered into two collective agreements relating to redundancy. Both agreements provided that redundancy selection would involve a points scoring system, under which employees were assessed in various categories, such as versatility and expertise. Under the points scoring system an employee could score between 4 and 24 points in each category. Each employee would earn one point for each completed year of service with Rolls Royce. A dispute arose over whether this was permissible in light of the Age Discrimination Regulations. Naturally the argument against this system was that greater length of service could only possibly come with greater age, and hence, on initial analysis, this criterion was discriminatory on grounds of age.
The High Court concluded that, while the criterion was discriminatory on grounds of age, it was nevertheless justified. The Age Discrimination regulations permit acts of discrimination on grounds of age if they can be shown to be justified on a non-discriminatory basis. The High Court noted that the collective agreements established a system to operate a redundancy process “peaceably”, and in a way that was perceived by the parties to be fair. The High Court ruled that this was a legitimate aim. In addition the Court noted that the length of service criterion respects loyalty and experience, which are legitimate aims.
One important point that was made by the Court was that its conclusions might have been different had the policy operated on a simple “last in, first out” basis. While the “last in, first out” basis of redundancy selection has been used by many businesses over many years, it does not necessarily result in the retention of the best staff, nor of the retention of the most qualified members of staff.
In any event the Court ruled that the agreement would fall in the exemption provided by regulation 32, which provides that the Age Discrimination regulations do not prevent a worker being placed in a better position than other workers by the award of a “benefit” based on length of service. The Court concluded that the redundancy selection criterion was a “benefit” within the terms of the Regulations. While Regulation 32 still obliges employers to demonstrate that awarding a benefit to employees with over 5 years service reasonably fulfils a business need, this test would be met where the redundancy scheme included length of service only as part of a wider measure of performance. 
This decision highlights the need to have clear, and objectively justified selection criteria when embarking on a redundancy process. The better selection criteria include both objective (such as length of service) as well as subjective criteria (egs flexibility, adaptability etc.). This case makes it clear that length of service remains a legitimate criterion, but that it should be used as one criterion within a larger range of criteria.  If you need any specific advice on the issues raised in this article then please contact us.