Rolls-Royce Plc v Unite the Union

A length-of-service criterion in a redundancy matrix may potentially cause indirect age discrimination under the Employment Equality (Age) Regulations 2006. It is lawful where it is objectively justified as a proportionate means of achieving a legitimate aim.

Rewarding loyalty and experience, maintaining a stable workforce and implementing a fair, collectively agreed redundancy process are legitimate aims. Proportionality is supported where length of service is only one of numerous criteria, is not determinative and does not operate as a last-in-first-out rule.

Points awarded for length of service are capable of being a “benefit” because they confer an advantage in the selection process. A court may exceptionally determine such a test case before redundancies occur where a live dispute, public importance and practical utility justify doing so.

Rolls-Royce Plc v Unite the Union concerned two collective redundancy agreements under which employees received points for each year of service. Length of service was one criterion among several in the redundancy selection matrices.

The company commenced Part 8 proceedings seeking a determination whether the criterion was unlawful under regulations 3 and 32 of the Employment Equality (Age) Regulations 2006. Sir Thomas Morison, sitting as a deputy High Court judge, held that the criterion was lawful and dismissed the claim: [2008] EWHC 2420 (QB).

The appeal raised whether the Court of Appeal should determine the dispute before any employee had been selected for redundancy; whether the criterion was indirectly discriminatory but objectively justified; and whether points based on service constituted a “benefit” fulfilling a business need under regulation 32.

1. Appeal dismissed by a majority. Wall LJ and Arden LJ held that the court should entertain the appeal and that the length-of-service criterion was objectively justified under regulation 3 of the Employment Equality (Age) Regulations 2006. Aikens LJ would have replaced the order below with a declaration limited to the meaning of “benefit” in regulation 32(1).

2. The court could determine the dispute notwithstanding the absence of an immediate claim by an employee. The parties had a genuine disagreement about the lawfulness of contractual redundancy arrangements. Construction of legislation transposing an EU directive was publicly important, the issue affected many employees, and the matter had been fully argued. The court nevertheless approached the issues narrowly because employees most directly affected were not parties.

3. Wall LJ and Arden LJ proceeded on the basis that the criterion potentially caused indirect age discrimination. It was nevertheless objectively justified. Rewarding loyalty, preserving a stable workforce and implementing a fair redundancy procedure agreed with the recognised union were legitimate employment aims. A legitimate aim need not be identical to the employer’s immediate commercial preference.

   The means were proportionate because length of service was only one of numerous criteria and was neither dominant nor necessarily determinative. The agreements were a negotiated compromise for mutual benefit, permitted younger workers to compete equally under the other criteria and did not operate as a last-in-first-out system.

4. On regulation 32(1), Wall LJ and Aikens LJ concluded that points based on length of service constituted a “benefit”. They gave an employee an advantage by increasing the prospect of retention. Arden LJ provisionally agreed, but regarded regulation 32 as unnecessary to the majority’s decision.

   Wall LJ also held that a service criterion extending beyond five years could reasonably fulfil the business need for a loyal and stable workforce. Arden LJ provisionally considered that the employer’s assertion of its current business need was not conclusive and remained subject to judicial scrutiny. Aikens LJ considered that regulation 32(2) required a factual inquiry into the employer’s state of mind and objective reasonableness when the criterion was used, and would not have decided that issue in advance.

5. The judgments did not prevent an employee subsequently selected for redundancy from challenging the fairness or lawfulness of the process before an employment tribunal. The majority considered a formal declaration unnecessary and potentially misleading to non-parties. The appeal was therefore simply dismissed.

• Court of Appeal (Civil Division): By a majority, dismissed the company’s appeal in Rolls-Royce Plc v Unite the Union, [2009] EWCA Civ 387. Aikens LJ would have substituted a declaration confined to the meaning of “benefit” in regulation 32(1).
• High Court, Queen’s Bench Division: Sir Thomas Morison, sitting as a deputy judge, held that the collectively agreed length-of-service criterion was lawful under regulations 3 and 32 and dismissed the company’s claim: [2008] EWHC 2420 (QB).