Caps on Redundancy Payments not Age Discrimination

[Thanks to Richard Hayes of Devon Law Centre for providing this case summary]

Kraft Foods had an "exceptionally generous" contractual redundancy scheme. Because of the high levels of payment under the scheme, it capped redundancy payments at the sum that a redundant employee would have earned if he had remained in employment until normal retirement age.

Mr Hastie, a 62 year old employee, found his redundancy payment was capped at £76,560 - being what he would have earned if he had remained employed until 65. If no cap existed, he would have received about £90,000. He complained the cap amounted to indirect discrimination on grounds of age, as it would only bite against older workers.

The Employment Appeal Tribunal held that the cap was justified. The company's aim of preventing employees receiving a 'windfall' met a legitimate aim, namely giving appropriate payments to employees to compensate them for future loss of earnings. And the cap was a proportionate means of achieving that aim.

Kraft Foods v Hastie