Length of service criterion in redundancy selection is lawful 

The Court of Appeal has confirmed, by a majority, that using length of service in redundancy selection criteria is lawful.

In Rolls Royce plc v Unite the Union, Rolls Royce had two collective agreements with the union which set out its approach to redundancy situations. Both agreements outlined a redundancy selection matrix where points were awarded based on a number of factors, including achievement of objectives; self motivation and expertise/knowledge. Each employee would also receive one point per year of continuous service. Rolls Royce and the union asked the High Court to determine whether the length of service criterion complied with the Employment Equality (Age) Regulations 2006.

The High Court, as reported in our earlier Employment Update, held that although the criterion was discriminatory on the grounds of age, it was objectively justified. The High Court confirmed that the collective agreements represented a compromise negotiated between the employer and the union and it was in both parties' interests that a redundancy exercise was carried out peaceably and in a way which was perceived to be fair. This was considered to be a legitimate business aim. The length of service criterion was considered to be a fair indicator of both loyalty and experience, protecting the older employees from being put onto the labour market at a time when they are particularly likely to find it hard to find alternative employment. Rolls Royce appealed.

The Court of Appeal agreed with the High Court and dismissed the appeal. It made a declaration that the use of length of service as a criterion in a redundancy selection process was indirectly discriminatory but it was justified as it was a proportionate means of achieving a legitimate aim. The legitimate aim was the reward of loyalty and the overall desirability of achieving a stable workforce in the context of a fair redundancy selection process. It considered it proportionate to use length of service as it was only one of a substantial number of criteria used to measure employee suitability for redundancy and was not determinative. The length of service criterion was entirely consistent with the overarching concept of fairness.

The Court of Appeal also expressed the provisional view that awarding points for length of service was capable of constituting a "benefit" within the meaning of regulation 32. This regulation broadly provides that an employer may treat workers differently by reference to length of service in relation to the "award of any benefit" and, where length of service exceeds five years, requires that it must reasonably appear to the employer that the way in which it uses the criterion of length of service fulfils a business need. The Court noted that length of service could objectively be seen to reasonably fulfil a business need of the company, of having a loyal and stable workforce.

This decision, together with its implications for employers, will be examined in further detail in our forthcoming edition of People, the Employment and Pensions Newsletter. Click here if you would like to subscribe to People.

Date scheduled for Heyday

It has been reported that the Heyday case is due to be heard in the High Court on 16 and 17 July 2009. The long awaited hearing should determine whether the compulsory retirement of workers at age 65 in the UK is justified.

Back in December 2006, Age Concern, operating as Heyday, challenged the provisions in the Employment Equality (Age) Regulations 2006 allowing for the compulsory retirement of employees at 65. The High Court referred a series of questions to the European Court of Justice (ECJ), which delivered its judgment earlier this year, confirming that legislation which provides for compulsory retirement at 65 is permitted under the Equal Treatment Framework Directive if it can be justified by reference to a legitimate aim.

The High Court will now decide how the ECJ's ruling applies to the Regulations. We will report on its decision in a future Employment Update.

NMW on the up

The national minimum wage is on the up from 1 October 2009.

The adult rate is due to rise from £5.73 to £5.80 an hour, the rate for 18 to 21 year olds should rise from £4.77 to £4.83 an hour and the rate for 16 and 17 year-olds is due to rise from £3.53 to £3.57.

Consultation on Agency Workers Directive

The Department for Business, Enterprise and Regulatory Reform has published a consultation paper on the implementation of the Agency Workers Directive.

The consultation, which closes on 31 July 2009, seeks views on:

• who should be covered by the Directive
  
  
• the implementation of the 12-week qualifying period previously agreed by the CBI and TUC
  
  
• the definition of pay
  
  
• how equal treatment should be established
  
  
• who should be liable for compliance with obligations under the Directive
  
  
• the means of dispute resolution
  

New measures to improve payment of employment tribunal awards

The Ministry of Justice has announced new measures to improve the payment of employment tribunal awards and reduce the costs of enforcing unpaid ones.

• 26% of claimants awarded less than £500 did not receive any payment
  
  
• 40% of claimants awarded between £500 and £4,999 did not receive any payment 
  
  
• 44% of claimants awarded more than £5,000 did not receive any payment

The new measures propose that High Court Enforcement Officers will take on recovery of awards granted by employment tribunals or in out-of-court settlements. The measures support a public information drive including new leaflets that are intended to make the enforcement process clearer for claimants and a new extended telephone enquiries line. We will report on how the new measures are intended to operate in practice once further details are published.