Age discrimination - length of service criterion in redundancy selection

The High Court has confirmed that using length of service as a criterion in a redundancy selection policy contained within a collective agreement does not constitute unlawful age discrimination under the Employment Equality (Age) Regulations 2006 (the Regulations). This decision is one of the first to focus on length of service as a criterion in redundancy selection.

In Rolls Royce plc v Unite the Union, two collective agreements existed relating to redundancy; one for staff and the other for works employees. Redundancy selection involved a point-scoring process. As part of this process, each employee was to receive one point per year of continuous service.

The High Court confirmed, first, that the collective agreements represented a compromise negotiated between the employer and the union and it was in both parties’ interests that a redundancy exercise was carried out peaceably and in a way which was perceived to be fair.  The High Court considered this to be a legitimate business aim. The length of service criterion was considered to be a fair indicator of both loyalty and experience, protecting the older employees from being put onto the labour market at a time when they are particularly likely to find it hard to find alternative employment. The High Court did note that if the case had instead concerned the “last in, first out” principle, that might be objectionable.

In any event, the High Court confirmed that this case fell within the exemption under the Regulations which provides that an employer may treat workers differently by reference to length of service in relation to the “award of any benefit”. In a redundancy selection matrix, giving points for length of service does confer a benefit on an employee, as it might lead to the retention of employment which would otherwise be lost. Remaining in employment whilst others lose their jobs would properly be described as a benefit.

The exemption does require employers to justify an age-related award to those employees whose length of service exceeds five years (e.g. it should reasonably fulfil a business need). The High Court commented that where there is an agreed redundancy scheme negotiated with a trade union, which uses length of service as a criterion as part of a wider scheme of measuring performance, it is probable that this would be regarded as reasonably fulfilling a business need. Including length of service as a criterion in the collective agreement was therefore not unlawful under the Regulations.

Commercial lease does not automatically transfer under Acquired Rights Directive 

The European Court of Justice (ECJ) has provided useful clarification of the rights and obligations that automatically transfer from the seller to the buyer of an undertaking or business under the Acquired Rights Directive (ARD), which is implemented in the UK by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

In Kirtruna SL and another v Red Elite de Electrodomésticos SA and others, the ECJ confirmed that the automatic transfer principle does not cover contracts between the seller and third parties which do not relate to the contract of employment or employment relationship, such as the lease of commercial premises, even if the termination of such a contract is likely to entail the termination of contracts of employment transferred to the buyer. 

The ECJ acknowledged that the objective of the ARD is to protect employees in the event of a change of employer and to safeguard their rights and that, in this case, if there was no automatic transfer of the lease, there was a risk that the buyer may have to quit the premises, cease business and terminate the contracts of the employees concerned.

However, the need to protect employees could not override the wording of the ARD, which states that it is the seller’s rights and obligations which arise from a “contract of employment or from an employment relationship” which transfer to the buyer. A lease defines the legal relationship of a landlord and tenant and regulates the conditions of the lease, rather than the conditions of employment. The rights of third parties who are not connected with the transfer cannot be adversely affected by imposing an obligation on them which is not clearly provided for in the ARD (i.e. to accept an automatic transfer of a lease).

European Parliament passes Agency Workers Directive