A recent decision in the Employment Appeal Tribunal (EAT) has found that a cap placed on enhanced redundancy scheme payments will not amount to indirect age discrimination if the employer can show that it was a proportionate means of delivering a legitimate aim.
Employment Solicitor Sanjeev Uppal reports.
The claimant had worked for Kraft Foods for nearly 40 years in their coffee processing department. During 2008, the claimant volunteered for redundancy under the company’s generous redundancy scheme which offered 3½ weeks pay for each year of service. Without any cap, the claimant would have been entitled to a redundancy payment of over £90,000. As this would have been more than he would have earned had he remained in employment until the statutory retirement age of 65, under the scheme his entitlement was capped at £76,560.
The claimant contended that the cap resulted in indirect discrimination on the grounds of his age, since employees like him who were close to the retirement age would lose out on the benefits of such a scheme. The Employment Tribunal found in his favour and the company appealed, claiming that the cap was necessary to prevent employees from obtaining a windfall payment.
The EAT focused on a single issue: whether the indirect discrimination resulting from the cap constituted a proportionate means of achieving a legitimate aim. In other words, could the indirect discrimination be justified by the employer? The EAT found that the purpose of any redundancy scheme is to compensate the redundant employee for the loss of earnings it would have been entitled to had they remained in employment. It would therefore be inequitable if the claimant could be awarded a sum that exceeded what he would have earned had he remained in employment to the age of 65. Accordingly, the EAT found that the cap was a legitimate way to prevent employees from receiving a windfall and justified the indirect discrimination.
Comment
This case illustrates that a claim of indirect age discrimination will fail provided an employer can show that it is justified. However, the onus will still be on the employer to show that it has implemented a proportionate means of achieving a legitimate aim. In formulating a redundancy scheme, employers will therefore have to consider whether the implementation of such a scheme will directly or indirectly fall foul of anti-discrimination legislation.
To read a full copy of the judgment, please click here: Kraft Foods v Hastie.
For further information on discrimination, redundancy schemes or on any issues arising in the workplace, please contact Sanjeev Uppal on suppal@steeleslaw.co.uk or 01603 598000.