Background
Length of service has traditionally been used almost as a matter of course by employers when faced with a redundancy situation and selecting employees for redundancy.  Invariably, the view was taken that few criteria could be more objective than one's length of service.  "Last in, first out" (LIFO) was often the preferred selection approach advocated by employee representatives. 

The practice of using length of service as a criterion in a redundancy selection matrix was, however, called into question following the advent of age discrimination legislation.  The argument was that, to favour employees with longer service, would discriminate indirectly against younger staff.

Age Discrimination?
In a decision released on Friday 17 October 2008, it has now been held by the High Court that giving credit for length of service in a redundancy selection policy will not fall foul of principles on age discrimination.

The case involved an employer, Rolls Royce plc, against the trade union Unite, who between them had entered into collective agreements relating to redundancy.

The redundancy policy stated that employees were to be assessed on a points system based on selection categories. Each employee would also receive one point per year of continuous service.  The question arose as to whether this constituted age discrimination.

Objective Justification
The High Court decided that the criterion was age discriminatory but could be objectively justified as pursuing a legitimate aim, namely fair and ‘peaceable' redundancies as part of a collective agreement.  The court noted that respect was given to the loyalty and experience of the longer serving workforce and protection given to older workers who may find it harder to find alternative employment.  This, it held, was justified.

The Court also considered that the credit given to longer serving employees could also be considered a ‘benefit', and thus would attract the exemption for service-related benefits in any event.  The court held that, to give points for long service to spare redundancy could be viewed as a ‘benefit'.  While the absolute exemption for service-related benefits only applies with length of service up to five years; the Court also held that the employer met the ‘business need' test where the redundancy scheme was agreed with a trade union, and length of service was only used as part of a wider measure of performance.

Practical Considerations
When framing a redundancy selection matrix and applying this to a pool of employees at risk of redundancy, it will be appropriate to include length of service as a criterion along with other objective selection criteria. 

Importantly, the Court held that its decision may have been different had a strict LIFO approach been followed without regard to other criteria and therefore LIFO remains a practice which we would not recommend in the modern employment relationship.