Redundancy Payment Caps not Age Discrimination
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In Kraft Foods v Hastie, the Employment Tribunal had to consider whether a
cap on redundancy payments was age discrimination or a proportionate means of
achieving a legitimate aim.
The employer had a generous contractual redundancy payment scheme which was
capped so that employees did not receive a redundancy payment in excess of their
wages up until retirement, i.e. prevented employees being better off receiving
redundancy pay than working until normal retirement age. The contractual
redundancy payment scheme allowed employees to be paid 3½ x 8 weeks’ pay for
each year of service. The employee had opted for voluntary redundancy and was
entitled to a payment of just over £90,000 as he had 40 years’ service. However,
the scheme had a provision that the maximum amount payable under the scheme
should not exceed the amount they would have earned, at their current rate of
pay, if they had remained in employment until normal retirement age. At the date
of redundancy, the employee was 2¼ years from normal retirement age so his
redundancy payment was reduced to just over £76,500. The employee made an age
discrimination claim at an Employment Tribunal.
The Employment Tribunal found that the cap disproportionately applied to those
approaching retirement age was unjustifiable and therefore was age
discrimination. The employer appealed.
The Employment Appeal Tribunal held it had to consider the fairness of the
contractual redundancy payment scheme as a whole and the aim of the scheme was
to protect employees’ incomes after redundancy so the rule to cap payments was
there to prevent giving a windfall to a redundant employee. If the scheme did
not have a cap, it would result in payments that exceeded the compensation for
loss of employment. Therefore the Employment Appeal Tribunal overturned the
original decision and found that a cap on contractual redundancy payments was
not age discrimination.
If you have a query regarding redundancy or feel you have been unfairly selected
for redundancy, please contact either Ashley Hunt, Vaishali Thakerar or
Carrie-Ann Randall now on 0116 212 1000 or complete one of the on-line forms on
About the Author
Lawson-West specialise in commercial, business and employment law. Our team
of dedicated commercial solicitors can help with buying or selling a business,
business law and disputes, landlord and tenant issues and commercial property.
Our expert employment team can offer practical advice and guidance on all
aspects of employment law including redundancy, compromise agreements and
dismissal procedures. Visit
www.lawson-west.co.uk for more information.
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Article Published/Sorted/Amended on Scopulus 2010-09-11 14:04:51 in Legal Articles