The Employment Appeal Tribunal (EAT) has handed down a decision on the question of whether it is unlawful age discrimination to cap contractual redundancy payments in order to prevent employees recovering more than they would have earned if they had remained in employment until retirement age.
In Kraft Foods vs Hastie an employee alleged that the operation of the contractual redundancy payment scheme discriminated unfairly against him in imposing a cap so that the maximum amount payable should not exceed what he would have earned, at his current rate of pay, if he had remained in employment until normal retirement age of 65.
Rachel Dineley, employment partner and head of the diversity and discrimination unit at Beachcroft, said: “This decision is particularly welcome in the current economic climate. Employers need to ensure fairness in their treatment of employees who are compensated for the loss of their employment, and strike a balance in economic terms, given the need to protect the jobs of those who remain employed.†
The scheme in this case awarded three weeks’ pay for each year of service which, in the current climate, is very generous. The outcome in this case should, no doubt, be taken into account by employers when they consider their approach to a combination of measures including redundancies and retirements, necessary to meet the economic challenges which they face.”
The president of the EAT emphasised the importance of considering the fairness of the scheme as a whole, which was to protect employees’ incomes after redundancy. He relied upon observations made by the EAT in the case of Loxley vs BAE Systems, in 2008, to uphold the company’s argument that redundant employees should not receive an undue windfall payment.
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