A United approach to length of service?
Rebecca Ekundayo considers the implications of the Court of Appeal’s ruling in Rolls Royce v Unite the Union  EWCA Civ 387, in which it was decided that use of a length of service criterion in a redundancy selection process did not amount to indirect age discrimination.
The employer and the trade union entered into collective agreements that provided for a redundancy selection procedure designed “to ensure that the selection process is fair in general terms and fair to the individual”. The agreement stated that “the company and its employees need to be able to restructure flexibly and peaceably”. The process provided for points to be awarded for certain criteria, including length of service, with those employees with the least points being selected for redundancy.
Unusually, in this case it was the employer who brought proceedings before the High Court seeking determination as to whether the length of service criterion constituted unlawful indirect age discrimination contrary to the Age Discrimination Regulations (“ADR”). Indirect discrimination occurs when a person applies a provision, criterion or practice to all persons but, it has the effect of putting a particular group at a disadvantage. Indirect discrimination can however be justified under Reg.3 of the ADR if it is a proportionate means of achieving a legitimate aim.
Regulation 32(1) of the ADR provides an exception to indirect age discrimination when awarding benefits on the basis of length of service, an example of such a benefit would be extra holiday days. However, Reg.32(2) of the ADR states that if a worker with more than 5 years service is disadvantaged by the length of service criterion, the employer must show that the award of that benefit fulfils a legitimate business need.
In this case the two questions before the court were essentially: (i) whether the length of service criterion was justifiable as a proportionate means of achieving a legitimate aim and (ii) whether the awarding of points based on the criterion was a “benefit” within reg. 32(1) and if so, whether it was justifiable as fulfilling “a business need” within the meaning of reg. 32(2).
The employer’s arguments
The employer argued that the criterion discriminated against younger workers in particular who would have shorter length of service than older workers, the criterion was not necessary to achieve a legitimate aim and that awarding points for length of service did not amount to a benefit.
The union’s arguments
The union submitted that the benefit to a worker awarded points for long service was their protection from dismissal. They also argued that encouraging loyalty is an example of a criterion which fulfils a business need and that the criterion was a proportionate means of achieving the legitimate aim of ensuring that the redundancy scheme was fair.
The High Court held that the length of service criterion in the redundancy selection procedure did not amount to age discrimination. The criterion was justifiable under reg. 3 as a proportionate means of achieving a legitimate aim, which was ensuring that there was a fair policy that was agreed with a recognised union. Further, the High Court agreed that award of points based on length of service was a benefit within the meaning of reg. 32, specifically the employees with the greater number of points would keep their jobs whilst others lost theirs. The High Court determined that as the scheme was negotiated with a recognised trade union, and length of service was one of many criteria, it was probable that such a scheme would reasonably be regarded as fulfilling a business need. Rolls Royce appealed.
The Court of Appeal
The Court dismissed the appeal and found that whilst the length of service criterion could amount to age discrimination it was justified. The court also found that the High Court had failed to consider the issue of proportionality, but went on to determine that the criterion was a proportionate means of achieving a legitimate business aim. In this instance the legitimate aim was rewarding loyalty and maintaining a stable workforce. The means were found to be proportionate on the basis that the length of service criterion was one of many and that it was not of itself determinative. The Court also placed weight on the fact that, as put forward by the union, the younger workers themselves did not feel that the policy was discriminatory.
The Court agreed that awarding points for length of service could amount to a benefit and agreed that there was nothing in the legislation that justified a narrow reading of the word.
At a time when redundancies are increasingly common, a successful appeal might have resulted in thousands of employers with length of service related benefits having to rework their redundancy policies. This decision now makes it clear that uses of length of service as a selection criterion can be justified in certain circumstances.
Of course there may be employers with pre-existing contractual redundancy schemes which contain a length of service criterion, which would have embraced the requirement to remove the criterion in order to benefit from the flexibility and to ensure that they retain the best employees.
However, it must be borne in mind that this was a Court of Appeal decision which only looked at the construction of the law. Had it been a tribunal claim, the tribunal would have looked at the criterion as it applied to a particular individual alleging age discrimination. The tribunal would have examined the circumstances surrounding a redundancy selection and it is wholly possible that a tribunal could still make a finding of age discrimination.
What is crucial for employers to bear in mind is that use of any such criteria must meet a legitimate business need such as in this case the need for loyalty. In addition it must be proportionate, the fact there were other criteria under consideration was of particular importance. A blanket “last in first out” policy, for example would have been found to be discriminatory if there was no other selection criteria or if it was given particular weight.
Rebecca Ekundayo is a Trainee Solicitor in the Employment law department at City law firm Fox Williams LLP. For more information, Rebecca can be contacted on 020 7614 2589 or firstname.lastname@example.org.