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Enhanced Redundancy Payments and Age Discrimination.
The effect of the credit crunch has been wide-reaching and some of you may be dusting-off your redundancy policies.
In a couple of recent decisions (MacCulloch v Imperial Chemical Industries plc, & Loxley v BAE Systems Land Systems (Munitions & Ordnance) Ltd 2008), employees have claimed that their employers enhanced redundancy policies are indirectly discriminatory on the grounds of age. The reasoning goes that such policies generally reward long service, which inevitably puts older employees at an advantage over younger ones.
In a nutshell, the Employment Equality (Age) Regulations in 2006 state that enhanced service related redundancy policies are fine if they can be ‘justified’. The EAT in MacCulloch held that justifiable scheme aims could include encouraging and rewarding loyalty & making larger payments to older workers given their greater vulnerability in the job market. However the next hurdle to overcome is whether the policy was ‘proportionate’ to achieve a ‘legitimate’ aim. As the case was remitted to the original tribunal to decide whether it was in fact proportionate, we are still left scratching our heads.
In the second case, Mr Loxley was excluded from the enhanced redundancy scheme because he was aged 60 and could therefore draw his pension from that age. The employer did not want him to get a windfall on redundancy. The EAT held that preventing a windfall could be a legitimate aim. It also said that consultation with the unions on such a policy was influential, but not conclusive. Again the question of proportionality was kicked back to the original tribunal to decide.
Comment:
The safest bet is to operate enhanced redundancy schemes that mirror statutory redundancy payments, for example by removing the statutory cap of £330 on a weeks pay. Otherwise you will have to not only justify your policy as achieving a legitimate aim, but show that it is proportionate. This could prove a problem though and will require careful analysis. For further advice or in-house training on redundancy, drop me a line.
James Carmody.
RECULVER SOLICITORS
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