Legal advice: Do old hands deserve more?

Length of service has been an important measure for employers since Adam and Eve first took on a bit of extra help around the garden.

As a measure of performance it may not mean too much by itself, but in terms of loyalty and experience it can mean a great deal. It is for this reason that when selecting staff for redundancy many employers would adopt a 'LIFO' (last in, first out) approach - although one of my ex-bosses preferred to use 'FIFO' (fit in or f--- off).

It has also long been used as a measure for deciding pay levels or when employees should qualify for certain benefits (for example pensions or life insurance) and is usually considered relatively objective.

Employment law has made use of this in deciding who can bring an unfair dismissal claim at a tribunal, setting first a six-month, then a two-year (under Mrs Thatcher) and now a one-year qualifying period of service for bringing such a claim.

From a practical perspective this does give the employer a chance to get to know the employee before being stuck with having to follow a lengthy procedure to be able to remove them.

Is this discrimination?

Length of service has, however, always suffered from allegations that it discriminates against women, who statistically are less able than men to remain in a particular job for many years due to the burden of childcare. It has by and large survived such challenges where its use could be justified objectively on grounds other than gender.

A further question-mark arose last year, however, with the introduction of the Age Discrimination Regulations, which suggest that such criteria have an unfair impact upon the young.

So is it now taboo to focus too much on length of service as a key factor in awarding benefits or selecting for redundancy? Well, as usual, it depends!

On the one hand, there are some serious concerns about the use of LIFO in selecting for redundancy, and while its use may still be justifiable, few employers would choose to use that factor alone (or too predominantly) now that the Age Regulations are in force.

But there is some relatively good news in the area of the award of benefits. Oddly, this came from the European Court of Justice (ECJ), which has clarified the lawfulness of the use of the factor of length of service/seniority when calculating pay.

The case is that of Cadman v HSE (ECJ Case C-17/05) in which the Court technically considered the question of equal pay but gave a decision that has significance in other areas of discrimination law - including age discrimination.

The case related to pay bandings that governed annual pay increases. These were apparently influenced not only by personal performance but, in effect, by length of service.

This worked to Mrs Cadman's disadvantage in that certain men in her band received higher pay than her and she brought a claim under the Equal Pay Act 1970.

Earlier cases had already suggested that employers' use of length of service criteria did not need to be justified, even where this had a "disparate effect between relevant male and female employees". This was hotly debated, though, as not everyone agreed that longer service necessarily meant greater experience or ability to do a job.

The position was confusing and the argument remained that to be safe in using such criteria you would have to make sure you could 'justify' this decision.

Appropriate and legitimate

The ECJ, thankfully, decided that as a general rule, employers are entitled to use length of service as an appropriate and legitimate way to reward experience that allows an employee to do a better job. Accordingly, employers do not ordinarily have to justify this by establishing that a particular employee's experience really does allow them to do a better job.

As always, there were a couple of 'buts'. First the ECJ stated that the general rule will prevail "unless the worker provides evidence capable of raising serious doubts in that regard". Although the burden will be upon the employee, clearly there may be circumstances where such doubt could be shown. Secondly, while age discrimination law specifically smiles upon the use of length of service in assessing benefit levels, it states clearly that rewarding service of longer than five years must be justified.

It seems relatively clear, then, that unless there are serious doubts, in most cases employers can use length of service in making decisions about pay and benefits but after a certain period (five years, perhaps) the employer will need to be prepared to show objectively that the extra service really has an impact and that its use can be justified.

Equally, it remains the case that most people will need to show one year's service before they gain the protection of unfair dismissal laws and that for now, at least, length of service continues to matter.