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Refusing voluntary redundancy applications from older employees is justifiable

The Employment Appeal Tribunal (“EAT”) has held in the case of HM Land Registry v Benson & Ors that refusing voluntary redundancy applications from older employees because they were more expensive to make redundant is permissible.

In this case, staff at HM Land Registry (the “Registry”) were invited to apply for voluntary redundancy in a bid to reduce overstaffing. It was made clear to staff that the available budget was finite (£12 million) and that applications would not automatically be accepted. One of the criteria for the selection process which was applied was how much it would cost to release any given applicant: that is, subject to certain qualifications, the Registry selected those applicants who would be the cheapest to release (“the Cheapness Criterion”).

Five applicants all aged between 50 and 54 applied for voluntary redundancy but their applications were refused. The applicants claimed that the application of the Cheapness Criterion involved unlawful discrimination against applicants in their age group because the benefits payable (particularly their pension) were higher for them than for employees in other age groups and they were accordingly more expensive to release.

The Registry accepted that it had applied a provision, criterion or practice (PCP) which put applicants in the age group 50-54 at a particular disadvantage compared with other applicants. This was based on statistics that the Registry had gathered. Only 26% of applications from this age group (who represented about a quarter of all applicants) were successful, as against 69% for those aged 40-44, 48% for those aged 45-49 and 75% for those aged 55-59 (those groups between them representing the great majority of the applicants). The only issue therefore for the EAT was whether the Registry`s use of a PCP was justified as a proportionate means of achieving a legitimate aim.

The applicants claimed that the application of the Cheapness Criterion involved unlawful discrimination against applicants in their age group because the benefits payable (particularly their pension) were higher for them than for employees in other age groups and they were accordingly more expensive to release.

The EAT held that the Cheapness Criterion was a proportionate means of achieving the Registry’s legitimate aim of achieving the greatest number of voluntary redundancies within its financial limit of £12 million. The EAT held that it was the Registry’s decision as to what resources to allocate to the exercise, i.e. £12m and that it was not relevant that it could in an absolute sense have “afforded” to allocate a larger amount. The EAT went on to say that “the task of the employment tribunal is to accept the employer’s legitimate decision as to the allocation of his resources as representing a genuine “need” but to balance it against the impact complained of.”

This is a welcome decision for employers however employers should remain careful not to implement a discriminatory PCP when selecting employees for voluntary redundancy. The EAT highlighted that the Registry had no real alternative to using the Cheapness Criterion if it was to select the maximum number of applicants for voluntary redundancy and remain within their £12 million budget. The EAT stressed therefore that “it does not follow from this decision that the use of a similarly discriminatory criterion will necessarily be justified in other cases”. While the indirect discrimination was justifiable in this case it may not be in other situations with different facts so care should taken when using cost as a justification.

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This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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