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Are enhanced redundancy payments discriminatory on the grounds of age?

18 October 2013: When making staff redundant, many employers will give enhanced redundancy payments based on length of service and age. For example the statutory redundancy payment allows staff 1.5 weeks’ pay for each full year worked over the age of 41.  However can such enhanced payments be less favourable on the grounds of age?

 

In Lockwood v Dept Work & Pensions, the Court of Appeal held that a voluntary redundancy scheme, which benefited older employees more than younger ones, was less favourable on the grounds of age, but that that treatment was objectively justified and therefore lawful.

 

Ms Lockwood worked at the DWP from age 18 to age 26 when she was rather quaintly declared surplus. The DWP had a voluntary redundancy programme which used an age banding system, putting thousands of pounds more into the pockets of staff who had reached the ripe old age of 35.

 

There was statistical evidence showing that younger people who had fewer financial and family obligations could react more easily and rapidly to the loss of their jobs than older people. It was necessary to adopt a banding approach that would involve disparate treatment between employees of different ages. The policy was objectively justified as a proportionate financial cushion until alternative employment was found, or to act as a bridge to retirement.

 

Employers who continue to make enhanced redundancy payments mirroring the statutory scheme (enhancing payments for years worked over the age of 41) are likely to be safe. Despite this decision, relying on statistics to justify age discrimination can be risky and it could also be argued that younger workers without a partner may be more vulnerable to losing their home.

 

Click on redundancy for more information. We are solicitors and lawyers based in London providing advise on redundancy, settlement agreements and employment law.

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