18 September 2006

With the Employment Equality (Age) Regulations 2006 coming into force on 1st October 2006, employers do not have very long to smooth out the wrinkles in their employment practices. Recruitment, pay and benefits, and equal opportunity policies are amongst those that will need to be audited, and you could even find that your redundancy policy is in need of a face lift!

Any criteria which you use to select for redundancy must not be tainted by age discrimination. Selecting an employee purely because of their age will be direct discrimination and is potentially unlawful. Similarly, using length of service as the basis of your decision is more than likely to fall foul of the new law. Last in first out (LIFO) as a selection criteria may constitute indirect discrimination against younger employees, who can be put at a disadvantage compared to older workers who have more experience with the organisation. Incorporating health assessments into the process may indirectly discriminate against older employees.

Compensation awards for age discrimination will be uncapped but you can limit the risk by reviewing your current practice. Undertake an impact assessment to identify any adverse impact on employees of a particular age or age group. Both direct and indirect discrimination may be objectively justified, but only if you can show that your actions are a proportionate means of achieving a legitimate aim. For example, it may be justified to put a maximum age limit on applicants for suitable alternative employment to reflect the training requirements of the jobs in question or the need for a reasonable period in employment before retirement. If you cannot show objective justification, or if you can achieve the same aim by less discriminatory means, you will need to change your practice or risk being found in breach of the Regulations.

The government has said there is an "objective justification" on the grounds of employment policy for continuing to use age as a factor for calculating statutory redundancy pay. Although the present under and upper age limits, and the tapering of payments at age 64, will be removed as unjustified. This means that if you make a redundancy payment in accordance with the statutory scheme, you can rely on a statutory authority exemption, and will not be acting unlawfully.

The legality of enhanced redundancy payments is however slightly more complex. The Regulations do contain a specific exemption to allow employers to pay different amounts to employees of different ages provided both are calculated in the same way, and the calculation used mirrors that of the statutory scheme. This means that you must only use the statutory age bands (under 22, between 22 and 40, over 41) but you are permitted to enhance the pay by using one or more of the following:

• Removing or increasing the statutory cap on a week’s pay, currently £310
• Multiplying the number of weeks pay for each year of service by a factor of more than one, and the same for all age bands
• Multiplying the total amount produced under the statutory or enhanced calculation by a factor of more than one

The restrictions on calculating enhanced redundancy payments will probably mean that any existing arrangements you have will need to be amended to comply or be objectively justified.

Enhanced redundancy schemes are often expressly contractual or can become so through custom and practice. Unilaterally changing the terms in these circumstances could give rise to a breach of contract claim, if under the new arrangements the employee is financially worse off if he is made redundant in the future. You will need to consult with staff, employee representatives or trade unions to agree the changes.

Make sure too that your redundancy procedure has not passed its use by date. Was it overlooked when the statutory discipline and dismissal procedure came into force in October 2004? In addition to individual consultation, the statutory procedure will apply to non-collective redundancy exercises where you are making less than 20 staff redundant. Your procedure must therefore, as a minimum, incorporate the following steps:

• Step 1 - you must write to the employee informing them that they have been provisionally selected for redundancy
• Step 2 - hold a meeting to discuss their proposed redundancy, where they have a right to be accompanied
• Step 3 - notify the employee of the decision and advise them of their right of appeal. If the employee wishes to appeal, hold an appeal meeting and inform the employee of the final decision

Make sure you communicate any changes and train managers in the implementation of your policy. Don’t make the mistake of thinking you can change things overnight, after all old habits are hard to break!