As a recap, statutory redundancy payments which are directly calculated by reference to age do not constitute unlawful age discrimination, and nor do enhanced redundancy schemes which "mirror" the statutory scheme. However, many enhanced redundancy schemes, often agreed with trade unions, provide a different basis for calculating payments which is dependent on employee age. These will be unlawful unless the scheme can be objectively justified.
The Court of Appeal has confirmed that schemes which provide greater benefits to older employees may be justified where there is evidence that older people are less easily able to react to loss of employment and to find alternative employment. However, while case law has adopted an approach which is open to accepting that such schemes may be justified, the decisions also emphasise the uncertainty and difficulties that arise in practice when applying age-linked rules, particularly for those employees who are about to move from one age band to another.
In one case, refusing to extend a redundant employee's notice period in order to prevent him acquiring early retirement rights was held discriminatory when there was genuine work available for him to perform at that time, albeit of a temporary nature. By way of contrast, in separate proceedings it was held to be a legitimate employer aim to seek to dismiss early without proper redundancy consultation in order to avoid an employee qualifying for enhanced pension payments.
Mrs Palmer was a 49 year old employee placed at risk of redundancy who took up an offer of voluntary redundancy, rather than being placed in a redeployment pool. RBS had previously indicated that only employees aged 55 or over would be eligible for early retirement, but then adjusted its policy to allow at risk employees aged between 50 and 55 an opportunity to reconsider their position, offering voluntary early retirement to them also. However, Mrs Palmer was not offered any opportunity to reconsider her position, which she argued was unfair. Although she was not yet 50, she felt sure that if she applied for redeployment she would then face a potential redundancy dismissal when she was aged 50 (therefore qualifying for early retirement).
The Employment Appeal Tribunal was not sympathetic to her argument, pointing to the statutory rule providing a cut-off age for offering early retirement of 50. On this basis Mrs Palmer could not legitimately suggest that those aged 50 or over were appropriate comparators for a discrimination claim. There seems some possible unfairness in this approach, as employees in Mrs Palmer's position may well have been persuaded to take a different approach to the redundancy situation once aware that there was the possibility they might later qualify for early retirement. Having said that, the Bank's policy adjustment was a temporary change limited to the particular redundancy exercise, so it was much more able to argue that its change in position had a very narrow impact, confined to those already aged 50 or over.
Recognising the potential for appeal, the Employment Appeal Tribunal went on to examine the question of whether or not preventing Mrs Palmer from reconsidering her position was justified as a proportionate means of achieving a legitimate aim – if, in fact, it was age discriminatory. It indicated that Mrs Palmer would have succeeded on this point, albeit that would simply mean that an Employment Tribunal would have to reassess whether such justification in fact existed.
While RBS has been successful in defending Mrs Palmer's claim to this point, the costs and risks arising when operating enhanced redundancy schemes connected to early retirement terms are amply demonstrated. The Courts have recognised that such schemes have a place and many employers support them. However, the utmost care and caution is needed to avoid claims of unlawful age discrimination.
Please contact a member of our team should you wish to discuss these issues in more detail or if indeed you are operating a non-statutory enhanced redundancy scheme which has age or service linked benefits.