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Legal Updates

Cap on Redundancy Payments - Age Discrimination?

17 September 2010 #Employment

The Employment Equality (Age) Regulations 2006 prohibits employers from discriminating against its employees on the basis of their age. 

However, discrimination can be justified where the employer can show that the act was a proportionate means of achieving a legitimate aim.
The EAT has handed down a decision in the case of Kraft Foods Ltd v Hastie which finally makes it clear that employers are entitled to cap the amount of enhanced redundancy pay awarded to its employees without falling foul of the Age Regulations.  In this case the employer had decided to cap the enhanced redundancy payments to ensure that any redundancy payments received would not exceed the amount the employees would have earned had they remained in employment until retirement age.  
The employee in this case, who was 62, had his voluntary redundancy pay entitlement reduced by £13,600 following application of the cap and subsequently claimed unlawful age discrimination.

The EAT held that the application of the cap was not considered to be an act of age discrimination.  The updated redundancy scheme was a proportionate means of achieving the aim of compensating employees who took voluntary redundancy for lost earnings they would have received had their employment continued.  It was therefore legitimate to place a cap on employees` entitlements to prevent excess compensation. 

The EAT rejected the employee`s argument that, since the calculation of redundancy pay was based on length of service, the application of a cap was inconsistent with the scheme to prevent loss of earnings. 

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
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