Redundancies on ‘last in, first out’ basis risk age discrimination claims

Policies mainly affecting younger or older workers could be illegal - Tips for employers

Employers looking to cut costs in the wake of the credit crunch could face claims for indirect age discrimination if they implement ?last in, first out? redundancy policies that mean that younger workers are more likely to lose their jobs, says emw law the commercial law firm.

Jon Taylor, Head of Employment at emw law says,

“Redundancy is the number one employment law issue for employers right now. Companies right across the board, not just in those sectors hardest hit by the credit crunch, like financial services, are looking for ways to trim the fat.?

Before age discrimination legislation came into force in 2006, uncompromising ?last in, first out? redundancy regimes were legally perfectly acceptable. In fact, they were often seen as the easiest way to avoid unfair dismissal claims arising out of the implementation of complex selection matrices, often including criteria such as attendance records which could discriminate against women and the disabled.”

However, it is now no longer that simple. Where the age profile of the workforce means that the majority of those selected for redundancy on this basis are younger workers, employers could expose themselves to the risk of claims.?

Taylor explains that employers seeking to cut costs may feel that minimising redundancy payouts by selecting those who have been in the job the shortest time is sufficient justification for choosing a ?last in, first out? policy, even if it affects a disproportionate number of younger staff.

But he warns that while the legislation does allow employers to implement a policy with an age bias in order to pursue a legitimate aim, they have to be able to objectively justify it and show that their means are proportionate.

Says Jon Taylor,

“It is questionable whether such a policy would stand up in a Tribunal. Economic factors alone may not be strong enough grounds to justify it and such a broad-brush approach may not be seen as proportionate.

Claimants and their lawyers could just as easily take the opposite line of argument: that it is actually more cost-effective in the long run to retain younger staff as they are generally lower paid, and potentially more productive pound for pound, than long-serving older workers.”

Adds Jon Taylor,

“Conversely, if employers were to decide on a redundancy policy that affected mainly older workers, they could similarly put themselves in the firing line for claims.

Last in, first out policies have always been a bit of a blunt tool, as they mean that employers may lose some of their best staff, or they may miss a good strategic opportunity to re-structure the company.”

Tips for Employers

emw law advises companies to keep paperwork detailing the rationale behind their redundancy policies, in order to defend themselves against claims should they arise.

Says Jon Taylor,

“Employers should also consider consulting staff on alternative options to redundancy, such as modified hours or job sharing. Where suitable alternative options can be identified, they should then consider their feasibility from a business perspective.

Where feasible alternatives cannot be found, employers should be able to justify their reasoning for rejecting the other options, and for selecting certain staff for redundancy, before making any job cuts.

If they have considered the issues thoroughly and have a paper trail to show their reasoning, they should be in a far stronger position to defend themselves against an age discrimination claim.”

About emw law
emw law has 23-principals and 66 fee-earners and is based in Milton Keynes. Its practice covers corporate; banking and finance; property, planning and construction; employment; technology and commerce (including IP and IT) and dispute resolution.

Clients include Barclays, Electrolux, Nationwide, Travis Perkins, Fossil UK Ltd, Gresham Trust, Abbey and HBOS.

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