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Voluntary early retirement and age discrimination

When making redundancies, it is always worth considering offering voluntary redundancy to avoid the need to make compulsory redundancies. In some circumstances, it may also be possible to offer voluntary early retirement. But what happens if an employee wants to retract their election for voluntary redundancy in the hope that they will subsequently qualify for voluntary early retirement? Will a refusal to allow this result in an employer falling foul of age discrimination laws?

Not according to the Employment Appeal Tribunal (EAT) in Palmer v RBS.

Redundancy and redeployment

In these circumstances, the claimant and other employees were placed at risk of redundancy with the options of taking voluntary redundancy or redeployment. Those employees who were over 55 were also offered the additional option of voluntary early retirement. Voluntary early retirement was later offered to those aged over 50 but under 55.

At age 49, the claimant had initially opted for voluntary redundancy but wanted to change her selection to redeployment, in the hope that this would take her up to the age 50, at which point she could choose the more favourable option of voluntary early retirement. The respondent refused and the claimant submitted a claim to the Employment Tribunal that this refusal amounted to age discrimination.

Employment Tribunal and EAT judgments

Both the Employment Tribunal and the Employment Appeals Tribunal found that the claimant had failed to show less-favourable treatment. The claimant was comparing herself to a group who were already eligible to claim early retirement at the date of dismissal, whereas she was not.

The Lockwood v DWP principle – that material circumstances relating to the age of the claimant or her comparators should not be taken into account – did not apply in this case, because of the fact that the material difference was due to statute; employees below the age of 50 are prevented from taking early retirement by reason of the Finance Act 2004.

The claimant’s treatment was therefore found to be lawful discrimination in these circumstances. Without the statute preventing early retirement for those under 50, the decision may well have been different.

Guidance for employers

While this situation resulted in a finding of lawful discrimination, employers are best to continue using objective criteria and selection pools when carrying out redundancy exercises, avoiding those that result in discriminatory selection whenever possible. Employers also need to tread carefully when applying a blanket exclusion to a benefit to employees above or below a certain age. In each case, careful consideration should be given to whether the employer’s aim can be justified and whether it could be achieved by a potentially less drastic approach.

For more information on this or any other employment issue please contact Jennifer Clark-Lewis on jclark-lewis@lyonsdavidson.co.uk

Posted on Oct 7th, 2014 by Lyons Davidson