Selection for voluntary redundancy on cost basis justified

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15 February 2012

With cost-cutting exercises continuing to be a priority for many businesses, redundancy programmes remain high on the agenda. Employers in this difficult position may take some solace in a recent decision of the Employment Appeal Tribunal.  In this case, the EAT has held that the Land Registry was entitled to select for voluntary redundancy the employees whom it would cost least to dismiss. This was despite the fact that this selection criterion was indirectly discriminatory on the grounds of age.

Due to the retirement and redundancy terms in place at the Land Registry, it would have cost more to select those aged between 50-54 for voluntary redundancy than others. As a result, some employees in that age bracket who had volunteered were not selected. It was accepted that the Land Registry's selection process was indirectly discriminatory on the grounds of age, but the EAT found that the discrimination was justified (in other words, it was a proportionate means of achieving a legitimate aim).

This decision will be welcomed by employers, who are often faced with the difficult balancing act of weighing up potentially indirectly discriminatory decisions with the potential cost savings to be made. However, despite this decision, employers should exercise caution, not least because each decision will turn on its facts. In this case it was significant that the Land Registry's restructuring programme was such that it had a budget of £12m to spend specifically on reducing headcount by as much as possible. More commonly, restructuring is driven by a need to reduce costs by £X, rather than a requirement to spend £Y in order to dismiss as many employees as possible.

In addition, we await firm guidance as to whether cost alone will ever be sufficient to be a legitimate aim; in this case other factors, such as the need to retain certain specialist expertise, also influenced the Land Registry's selection process.

HM Land Registry v Benson UKEAT/0197/11/RN

The extent to which you can use costs to justify indirect discrimination is one of the thorny issues we'll be looking at at our forthcoming seminar on discrimination.

For further information on what we will be covering and to book a place at one of our seminars, please click on the links below:

Thursday 8 March 2012 - One Glass Wharf, Bristol
Thursday 15 March 2012 - 10 Furnival Street, London

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