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In the line of fire

The controversial issue of ageism has reared its ugly head again, following a recent class-action lawsuit in the US against electronics retailer Best Buy.

The lawsuit was filed in November 2004 by 44 former staff who lost their jobs in two rounds of cuts, both in the run-up to and after Best Buy had outsourced its IT department to Accenture the previous April.

According to the filing, 82 of the 126 employees made redundant as a result of the move were over 40 – the starting point at which age discrimination legislation in the US applies. Best Buy is defending the action, however, and attests that the claims are without merit.

While finance directors currently do not need to fear falling foul of similar regulations in the UK because none exist, this situation is set to change as of December 2006, when the European Union’s Framework Directive on the subject, introduced in 2000, becomes law.

Although staff can now sue under unfair dismissal legislation and potentially receive recompense of up to £55,000 for loss of future earnings and pension contributions, by the end of next year, employees of all ages will be entitled to file age discrimination suits and put forward claims for unlimited compensation.

This means that UK ageism law will be much broader in remit than its US equivalent as both older and younger staff, rather than simply those over 40, will be covered. Moreover, the burden of proof will be on employers to justify their actions, not on employees to establish guilt.

But Julian Hemming, head of employment law at Osborne Clarke, says: “Financial directors don’t need to rush off and come up with a policy just yet, as we don’t know what final form the legislation will take. But they should get into the habit of thinking about the implications in relation to employment policies.” For example, if FDs currently put age restrictions into job adverts, they will in future have to justify them “so it may be useful to reflect and make adjustments now”.

Hemming believes the new law will make itself felt most in the sphere of selecting staff for redundancy, as in the Best Buy case. “Organisations will have to demonstrate they’ve used objective criteria in their decision-making processes. It will also throw the last-in first-out premise into doubt as that often applies to younger recruits,” he says.

As to how prevalent ageism is in organisations today, Hugh Morris, chief executive of outsourcing and consultancy firm Xchanging HR Services, says it is difficult to measure because it is often unconscious on the part of management.

In addition, the situation varies from industry to industry based on “whether it’s going through a phase of discontinuous change which militates in favour of younger workers, or whether it’s relatively stable and requires experience, which will probably see a bias towards an older workforce”.

An example of the former might be the IT sector, whereas the latter would include clearing banks. But such prejudices do have negative repercussions. “Over time, ageist policies can reduce the experience profile of the organisation, which means there can be a propensity to repeat mistakes,” Morris says. By the same token, employing only older staff can stifle the innovation that comes with introducing new blood.

But Steve Weaver, FD at Servocell, which provides low-power lock technology, points out: “It’s about finding a balance. You need a mix of ages and experience to optimise any organisation’s potential.”

As an FD, however, he adds that it is crucial to lead by example, whether in terms of recruitment or cutting costs. “You can’t tell others what to do and then not do it yourself. It’s about being fair,” he says.

According to Morris, it is important not just to be fair, but also to be seen to be fair by ensuring the existence of transparent processes around personnel appointments, promotions and eventual release. This acts as both a “legally defensive measure” and serves to promote staff loyalty and retention. “If people don’t believe that someone has received a promotion through a fair, open and equal process, it can knock the morale and commitment out of an organisation very quickly,” he explains.

Morris believes that ageism will cease to become an issue in future because of changing demographics. As the Baby Boomers age, people live longer, the birth rate continues to decline and retirement ages become more fluid, the workforce will reflect the ageing of the population and lead to “a decline in the cult of youth”.

But no matter what demographic time bomb awaits, Weaver concludes: “To be successful, you have to promote quality and ability rather than sticking to set ideas around age, gender or race.”

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