Clarkslegal LLP - Solicitors in Reading and London

Legal Updates

Caps on Redundancy Payments

28 July 2010 #Employment

The question of whether it is unlawful age discrimination to cap contractual redundancy payments in order to prevent employees from receiving a windfall (i.e. a redundancy payment together with the ability to draw a pension) was put into the spotlight by the EAT in the recent case of Kraft Foods Ltd v Hastie. 

In this particular case, Kraft employees who volunteered for redundancy were entitled under the scheme to receive 3.5 weeks` pay for each year of service.  However, payments under the voluntary redundancy scheme were subject to a cap which was intended to ensure that employees did not receive more than they could have earned had they remained employed until the normal retirement age.  Unfortunately for Mr Hastie (a long-serving employee close to retirement), imposition of the cap meant that his redundancy payment was reduced by £13,600.  Mr Hastie brought a claim at the employment tribunal for age discrimination.  However, the EAT held that there was no unlawful indirect age discrimination. 

The EAT confirmed that applying such a cap can be justified as a proportionate means of achieving a legitimate aim and was not discriminatory under the Employment Equality (Age) Regulations 2006.  In this particular case, the legitimate aim was ensuring that employees did not receive more than they could have earned had they remained employed until retirement age.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
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