Kraft Foods UK Ltd v Hastie

Factual and Procedural Background

This is an appeal against the decision of an Employment Tribunal sitting at Reading, chaired by Employment Judge Hill, which upheld a claim by the Claimant (the Respondent before the appellate court) of age discrimination. The claims were heard on 30 September and 1 October 2009, with the reserved judgment and reasons sent to the parties on 26 October. The Appellant was represented by Attorney Genn and the Claimant by Attorney Burne, both of whom also appeared before the Tribunal.

The Claimant, born on 17 March 1946, was employed by the Appellant from 14 April 1969 as a process operator. In 2008, the Appellant conducted a redundancy exercise under an established scheme ("the Scheme") agreed with recognised trade unions. The Claimant's voluntary redundancy application was accepted, and he was dismissed effective 12 December 2008, having nearly forty years of service.

The Scheme provided employees with 3 weeks' pay for each year of service, described by the Tribunal as exceptionally generous. The Claimant’s entitlement prima facie was approximately £90,100.98. However, a "cap" provision limited the maximum payment to the amount the employee would have earned if employed until normal retirement age (65). Since the Claimant was about two years from 65, his entitlement was reduced to £76,560, a reduction of about £13,600.

The Claimant alleged that the cap constituted unlawful age discrimination contrary to the Employment Equality (Age) Regulations 2006. The Tribunal found in his favour, leading to this appeal.

Legal Issues Presented

1. Whether the imposition of the cap in the redundancy Scheme constitutes unlawful age discrimination under the Employment Equality (Age) Regulations 2006.
2. If so, whether the cap can be justified as a proportionate means of achieving a legitimate aim.
3. Whether the Employment Tribunal erred in law by treating the cap as divisible from the Scheme as a whole in assessing justification.
4. Whether there was bias on the part of the Employment Tribunal Judge during the hearing.

Arguments of the Parties

Appellant's Arguments

• The cap was a provision, criterion or practice (PCP) that was justified as a proportionate means of achieving legitimate aims.
• The principal legitimate aim was to prevent employees from receiving a "windfall" payment exceeding the amount they would have earned if employed until retirement age.
• Other aims included compensating employees for loss of earnings, encouraging voluntary redundancies among older workers, rewarding loyalty, managing workforce diversity, avoiding compulsory redundancies, and facilitating business restructuring with minimal disruption.
• The cap also served to limit redundancy costs to the Company.
• Reliance was placed on the decision in Loxley v BAE Systems where preventing a windfall was recognized as a potentially legitimate aim.
• The Tribunal's rejection of the windfall justification and proportionality was challenged as legally erroneous.
• Allegations of bias against the Employment Tribunal Judge were raised based on conduct during the hearing.

Claimant's Arguments

• The cap constituted unlawful age discrimination under the 2006 Regulations.
• The redundancy payment was based on length of service rather than actual loss of earnings, undermining the Appellant’s compensatory justification.
• The repeal of statutory taper provisions implied that tapering or caps could not be justified.
• Employees could work beyond age 65, so the cap did not accurately reflect loss of earnings.
• The Tribunal's finding that the cap was disproportionate was a factual determination that should not be disturbed on appeal.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by affirming that the purpose of the redundancy Scheme was to compensate employees for loss of earnings they would have expected had employment continued. This compensatory nature justified a cap preventing payments exceeding such loss, thus avoiding a "windfall".

The Tribunal had rejected the windfall justification primarily because employees affected by the cap and those not affected both received pensions, which the Court found irrelevant to the windfall issue. The Court also rejected the Tribunal’s reliance on negligible cost savings and unrelated aims such as rewarding loyalty or managing change, as these did not justify the cap specifically.

The Court held that the cap was a legitimate aim and a proportionate means of achieving it, precisely targeting the prevention of overcompensation. The Tribunal's failure to appreciate this was an error of law.

The Court addressed the Claimant’s arguments, acknowledging that redundancy payments are based on length of service rather than actual loss but maintained that this does not undermine the compensatory purpose of the Scheme. The repeal of statutory taper provisions was noted but deemed insufficient to conclude that tapering or caps are unjustifiable. The possibility of working beyond 65 was immaterial absent a legal right to do so.

Regarding the allegation of bias, the Court found that although the Employment Judge’s approach was robust and at times firm, it did not amount to bias or prejudice affecting the fairness of the hearing.

Holding and Implications

The appeal is allowed and the Claimant's age discrimination claim is dismissed.

The Court’s decision directly overturns the Employment Tribunal’s finding that the cap was unjustified age discrimination. It establishes that a redundancy Scheme cap preventing payments exceeding an employee’s expected earnings up to retirement age is a legitimate and proportionate means of avoiding windfall payments. No new precedent beyond the application of established proportionality principles was set. The matter of bias was found unsubstantiated and did not affect the outcome.