Age-Related Differences in Voluntary Redundancy Scheme Justifiable

February 26, 2014

Age-Related Differences in Voluntary Redundancy Scheme Justifiable

In a ruling which underlines that direct discrimination on the ground of age, unlike any other form of direct discrimination, is capable of being objectively justified, the Court of Appeal has ruled that a voluntary redundancy scheme whereby employees over the age of 35 were paid more than younger employees with identical length of service could be objectively justified as a proportionate means of achieving a legitimate aim (Lockwood v Department for Work and Pensions).

Miss Lockwood began working for the Department for Work and Pensions (DWP) as an Administrative Officer in the Benefits Agency at the age of 18. Eight years later, her job was no longer needed and she applied for voluntary redundancy under the Civil Service Compensation Scheme (CSCS). Her application was accepted and her employment ended in September 2007.

Under the CSCS, Miss Lockwood was entitled to a redundancy payment of £10,849.04. Had she been over 35 and worked for the DWP for an identical period of time, however, she would have been entitled to a further sum of £17,690.58 because the DWP used a ‘banding process’ to calculate the payment due. The disparity in treatment prompted her to lodge a complaint of direct age discrimination.

The Employment Tribunal (ET) rejected her claim on two grounds. Firstly, it held that there were material differences between the two age groups so they were not truly comparable. Statistical evidence had been produced showing that people in their twenties have fewer financial and family obligations and can generally be expected to react more easily and quickly to the loss of their jobs. Secondly, if the over 35 age group were truly comparable with the younger age group, the DWP had objectively justified the less favourable treatment of younger employees. The aim of the CSCS was to produce a proportionate financial cushion until alternative employment was found, or as a bridge to retirement and the receipt of a pension. In the ET’s view, the means of doing so by way of staged payments and a banding process was a legitimate aim. Furthermore, if the age-related element of the calculation of redundancy payments were removed, the increase in the cost to the public purse would be significant. It was necessary, in circumstances where the ‘pot’ of money was limited, to use clear-cut bands that everybody understood. It was not appropriate to take individual circumstances into account. The statistics supported the view that younger employees are unemployed for a shorter time and have fewer financial and family commitments.

Miss Lockwood appealed against the ET’s judgment and lost.

The Employment Appeal Tribunal (EAT) was satisfied that no error of law had been made in relation to the ET’s finding that there was a material difference between the two age groups. Whilst this finding effectively disposed of the appeal, the EAT went on to consider the issue of justification and upheld the ET’s decision on that point also.

Miss Lockwood took her case to the Court of Appeal.

The Court found that the ET’s conclusion on the discrimination issue was ‘self-evidently wrong’. The inference that younger workers were likely to adapt better to losing their jobs did not change the fact that Miss Lockwood had been less favourably treated than her older comparator purely on grounds of her age. The EAT had also been wrong not to correct the ET’s error.

However, in dismissing Miss Lockwood’s appeal, the Court noted that direct age discrimination, unlike direct discrimination on the grounds of race or gender, is capable of being objectively justified. The ET had given careful consideration to the evidence before it and was entitled to find that the DWP had discharged the burden of showing that the disparate treatment of employees in different age groups was a proportionate means of achieving the aim underlying the CSCS.