I am the HR Manager of a medium sized brokerage based in the City. The company is undergoing a restructuring, as a result of which we will need to reduce headcount and make redundancies. In the first instance, we will be inviting members of staff over the age of 50 to take early retirement, and we will also be offering enhanced voluntary redundancy packages to all members of staff who volunteer for redundancy. However, if a sufficient number of staff do not volunteer for early retirement or voluntary redundancy, we will be forced to make compulsory redundancies. A number of the board directors want to shake off their conservative, old fashioned image and are keen that the people who are selected for redundancy are older members of staff, which will free the way for younger employees to work their way up the ranks. My understanding is that people over the age of 65 are not eligible to bring unfair dismissal claims or claims for statutory redundancy payments. I assume that we can notify our older members of staff who are over 65 of their impending redundancies safely without any exposure. Please can you confirm whether this is the case.
Agonising about ageism
Dear Agonising about Ageism,
I think that you need to take a slightly more cautious approach as there are other issues that may come into play in this scenario, namely, indirect sex discrimination and age discrimination. You also need to take into account the impact of the statutory dismissal procedures.
Taking age discrimination first, age discrimination legislation will come into force in October 2006 which will outlaw less favourable treatment of employees on the grounds of their age in the workplace, unless that treatment can be objectively justified. This will also affect mandatory retirement ages. A default retirement age will be set at 65, but employees will have the right to request to work beyond their compulsory retirement age and employers will have to consider such requests properly.
Provided that the redundancies take effect before October 2006, you can select people for redundancy on the basis of their age. However, they may be able to bring unfair dismissal proceedings if you do not follow a proper redundancy selection and consultation process. Following the recent landmark case of Rutherford, people over the age of 65 are excluded from bringing claims of unfair dismissal, and cannot claim a statutory redundancy payment. However, this case is now being appealed to the House of Lords, so the position may change. The Rutherford case also considered whether the upper age limit of 65 for bringing claims of unfair dismissal or statutory redundancy payments constituted indirect sex discrimination against men, on the basis that more men than women aged 65 and over remain at work. The Court of Appeal upheld the EAT decision that the upper age limit does not discriminate against men.
Pending the House of Lord’s decision, it is likely that if people over the age of 65 bring claims of unfair dismissal or for statutory enhanced redundancy payments, their claims will be stayed until the House of Lords has made its decision in Rutherford. Older male members of staff who are made redundant are likely to bring claims of indirect sex discrimination against the Company (on the same grounds as in Rutherford), if the Company has significantly more male members of staff than female members of staff who are 65 or over and are selected for redundancy.
From a commercial point of view, if employees who are 65 or over are selected for redundancy, then you may wish to pay them the same enhanced redundancy package as you offer to other employees. If they issue proceedings against your Company for unfair dismissal or sex discrimination, you may wish to enter into without prejudice settlement negotiations with them to try to resolve claims. A negotiated settlement is nearly always preferable to the uncertainties of litigation. A sweetener may be to offer to pay some or all of the settlement payment directly into their pension fund (if Inland Revenue limits allow this in their case), as this will give them a tax break.