As trading conditions remain tough, many employers choose to offer enhanced payments to redundant employees – providing a more comfortable send off and minimising the risk of later receiving Employment Tribunal claims.
But what happens if one employee gleans greater benefit from an enhanced package than another? Is that discriminatory? How should these enhanced packages be calculated? These were some of the issues dealt with recently by the Employment Appeals Tribunal (EAT).
Ms Lockwood, aged 26, was an administrator for the Department of Work and Pensions (DWP), having joined at the age of 18. Her role became surplus to requirements and she was placed at risk of redundancy. As a consequence, Ms Lockwood took advantage of a voluntary redundancy scheme offered by the DWP and received around £10,900 after almost 8 years’ continuous service. She would, however, have received a further £17,700 had she been over the age of 35 according to the scheme rules.
Unhappy with the disparity, Ms Lockwood complained to the Employment Tribunal that the DWP had directly discriminated against her on the grounds of age. Under the Equality Act 2010, Ms Lockwood had to prove that she had suffered less favourable treatment than an employee aged over 35. When her claim failed, she appealed to the EAT.
At the appeal, the DWP argued that there were material differences between Ms Lockwood’s age group and those aged over 35, which meant that the two groups were not comparable. To support this point, the DWP referred the EAT to statistics showing that older employees typically find it harder to secure new employment after being made redundant in comparison to people in younger age groups. The EAT accepted this rationale.
The DWP also argued that, even if the two age groups were comparable and even if Ms Lockwood had been treated less favourably, such treatment was objectively justified. Enhancing voluntary redundancy pay for older employees was a proportionate means of achieving a legitimate aim. In doing so, the DWP was providing an appropriate financial cushion to employees over the age of 35 in light of the difficulties that age group typically face in finding new employment. Again the EAT agreed.
In reaching its decision, the EAT emphasised a recent judgment from the Supreme Court which confirms that it is possible to treat someone unfavourably on the grounds of age if there are legitimate objectives for it and that these are in the public interest. In light of this, the EAT considered that there was in fact a public interest in providing older workers with a financial cushion to assist them with finding new employment after being made redundant.
Employers and HR managers can learn some important lessons from this case – especially before rolling out redundancy schemes. Firstly, careful consideration should be given to the way in which payouts are calculated and the rationale behind any enhancements. If employees are to be paid differently depending on their age or length of service, such variations must be objectively justified.
In addition, as the courts are now keen to assess age discrimination cases against a ‘public interest’ test, employers should consider any social policy aims which may support disparate treatment of employees in terms of enhanced redundancy pay. Beware not to implement anything which cannot be objectively justified, or you could face direct age discrimination claims.
Establishing a clear and well-communicated redundancy policy will also assist employers and HR managers in minimising the risk of employment claims being brought by redundant employees.
Making sure that all dismissals for redundancy reasons are as a direct result of a genuine redundancy situation, and that they follow on from a fair consultation process remains absolutely paramount.
Source: People Management
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