In Rolls Royce Plc v Unite the Union [2008], the two parties entered into a collective agreement addressing redundancy and redeployment issues.
It was agreed that in terms of any selection process for redundancy, employees would be assessed against five criteria:
- self-motivation;
- expertise/knowledge;
- versatility/application of knowledge;
- wider personal contribution to the team; and
- length of service.
In respect of the 'competency'-based criteria there was a potential maximum score of 24 points. For length of service each employee would receive one point per year. Those with the least points would subsequently be selected for redundancy. Rolls Royce sought to argue that taking long service into account amounted to unlawful indirect age discrimination against younger employees, and was therefore a breach pursuant to Regulation 3 of the Employment Equality (Age) Regulations 2006 (the Age Regulations).
It is not clear from the judgment why Rolls Royce entered into the collective agreement and later argued against the length of service provision, but
it is assumed that the agreement was entered into prior to the Age Regulations coming into force.
It was left to the High Court to determine the following:
- whether the length of service criterion contained within the redundancy matrix was a proportionate means of achieving a legitimate aim in accordance with Regulation 3(1) of the Age Regulations; and
- whether the service-related selection criterion could be classified as a 'benefit' for the purposes of Regulation 32(1) of the Age Regulations, and if so, whether the service-related criterion fulfilled a business need in accordance with Regulation 32(2).
High Court decision
Was length of service objectively justified?
The High Court was of the view that although using length of service as a criteria for selecting employees for redundancy amounted to age discrimination - as younger workers would be more likely to score fewer points on the basis of their length of service and therefore be more likely to be made redundant - it was objectively justified under Regulation 3 of the Age Regulations. The Court held that:
'... the criterion of length of service respects the loyalty and experience of the older workforce and protects the older employees from being put into the labour market at a time when they are particularly likely to find alternative employment hard to find'.
However the High Court commented that a 'last-in, first-out' scheme was likely to be objectionable where the employer failed to take into account other selection criteria.
Was length of service as a selection criterion a 'benefit'?
The second issue the Court had to determine was the question of whether the selection criteria of 'length of service' fell within the express exemption in the Age Regulations for 'service-related benefits'. Under Regulation 32 of the Age Regulations, employers are expressly allowed to provide for benefits that increase during the first five years of service, typically an increase in holiday entitlement.
Sir Thomas Morison held the length of service criterion was a 'benefit' falling within Regulation 32(1) of the Age Regulations, and was therefore lawful for those with less than five years' service. However, the Age Regulations state that any service-related benefit that extends beyond the first five years must fulfil a 'business need' justification (Regulation 32(2)), which requires employers to justify the impact of age-related awards.
The Court held that the test in Regulation 32(2) is likely to be satisfied where a collective agreement is agreed with a recognised trade union and the length of service criterion is used in addition to other categories for determining performance.
Although Rolls Royce was unsuccessful in its arguments, they have permission to appeal to the Court of Appeal.
By Andrea Nicholls, partner, and Nisha Lalji, paralegal, in the employment department at Salans.
E-mail: anicholls@salans.com; nlalji@salans.com.
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