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What’s the answer? Redundancy selection – Is LIFO legal?

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Pat Gray gets legal guidance this week from Helen Badger, employment law expert at Browne Jacobson and Martin Brewer, a Partner with the employment team of Mills & Reeve on whether the use of LIFO as a redundancy selection tool can be classed as discrimination under the new age regulations.



The question:
I’m interested in any rulings/cases where redundancy selection involving LIFO is concerned. It has been suggested that using LIFO as a selection procedure may be discriminatory under the new age discrimination legislation. I would welcome all viewpoints, especially specific legal cases.

Pat Gray

The answers:
Helen Badger, employment law expert, Browne Jacobson
Contract being signed
There are cases which deal with discriminatory redundancy selection criteria, such as part time working and sickness records. It is now well established that it is discriminatory to select part time workers for redundancy, purely on the basis of their part time status, or using sickness absence as a selection criteria where the absence is caused by a disability.

Unfortunately, there is very little case law dealing specifically with the use of ‘last in first out’ as a redundancy selection criterion. However using LIFO as a single selection criterion for redundancy could prove problematic for the organisation.

Whilst it is not yet known how tribunals will interpret the new regulations on age discrimination, there could be an argument that those with less service are likely to be younger and using LIFO on its own as a selection criterion could be indirectly discriminatory. Using this as a sole criterion could also discriminate indirectly against women, who are more likely to take a career break and therefore are less likely to build up years of service with one employer. On a practical basis you could also lose out on good quality staff, purely because they have not been with the organisation for very long.

The best approach is to establish a range of selection criteria. If length of service is included in this range then, even if there is an argument that it is indirectly discriminatory, the other factors used should balance out the selection process. This will also enable you to keep those employees with the level of knowledge and experience that will be valuable to the business going forward.

Helen can be contacted at: [email protected]

Martin Brewer, is a Partner with the employment team of Mills & Reeve
Filing
Pat, there are no cases on age discrimination yet as it’s not law until October. However, existing anti-discrimination legislation makes it quite clear that it is discriminatory to apply a ‘provision, criterion or practice’ which has a disproportionate and detrimental impact on protected groups (gender groups, religious groups, the disabled etc.). This will shortly also apply to age.

LIFO, by definition, picks out those with shortest service. Depending on the workforce profile that may discriminate against younger workers who are likely to have less service. Having said that I can think of circumstances where actually it could discriminate against older workers. Say for example a DIY chain has a policy of recruiting older workers. The workforce profile may show that applying LIFO impacts, in a discriminatory way, on that group.

You should also bear in mind that a basic principle of a fair selection process is that some account must be taken of individual employees’ personal characteristics (see Bristol Channel Ship Repairers v O’Keefe (1977)) but arguably that could include length of service since that is individual to each employee and certainly the inclusion of some credit for length of service is a long established criterion. What most employers want to be left with following a redundancy programme is a balanced workforce and simply applying LIFO is unlikely to achieve that. This is the main reason for LIFO falling into disuse over the years.

Martin can be contacted at: [email protected]

See more What’s the answer? items here.

One Response

  1. LIFO – Legal or Illegal
    Thanks for the feedback which I appreciate.
    I’ve since discoverd Turck Banner v Cassidy EATS/0098/03 where the tribunal ruled that LIFO selection for redundancy is not unfair. However, this was before the issue of age discrimination and there were other mitigating circumstances. I concur that LIFO should not be the only method of selection. There is an interesting byline, whereas the employer must establish a pool of employees for redundancy, the selection pool can consist of just one employee. (Alvis Vickers v Lloyd UKEAT/0785/04.

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