Redundancy Scheme Paying Higher Payments to Older Employees was Lawful

A severance scheme under which older employees received higher payments was justified as older employees need more of a financial cushion.

In Lockwood v Department of Work and Pensions, employees received enhanced redundancy payments under the Civil Service Compensation Scheme. L was 26 and received £17,690 less than she would have received had she been over the age of 35. She claimed direct age discrimination. 

The Court of Appeal upheld the tribunal decision that the difference in treatment was objectively justified by the strong social policy objective of providing a financial cushion that reflected the extra problems older workers experience after losing their jobs. The measures adopted were also appropriate and necessary in order to achieve to that aim. The Court of Appeal also accepted that inevitably a banding scheme of this nature will not achieve justice across the board and that it is not practicable to consider severance payments on an individual basis. 

The decision in this case is helpful for employers seeking to justify similar banding schemes. The Court’s acceptance that employers need to justify the scheme as a whole, rather than its application to particular individuals, is particularly useful. Ms Lockwood sought to argue that she had similar financial commitments to older people and that therefore the scheme could not be justified. This argument was rejected by the Court of Appeal.