Case law update: Can cost alone justify age discrimination?

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The Court of Appeal has recently looked at the important issue of whether discrimination can ever be justified on cost alone. It confirmed the established ‘cost-plus’ principle, which means that while an employer cannot rely on cost alone to justify a discriminatory act, it can put cost into the balance together with other justifications, if there are any.

Facts

Mr Woodcock was made redundant from his Chief Executive post by the Cumbria Primary Care Trust following a reorganisation. He was almost 49 years old and contractually entitled to one year’s notice. If made redundant at the age of 50, he would have been entitled to enhanced pension benefits of between around £500,000 and £1m. In order to avoid this extra cost, the Trust served notice on him prior to starting the redundancy consultation process. Mr Woodcock brought a complaint of age discrimination, alleging that notice should not have been served before the start of consultation.

Employment tribunal’s and EAT’s findings

The employment tribunal found that the Trust treated Mr Woodcock less favourably on the grounds of age by serving notice at that point in time. Legislation provides that what would otherwise be discriminatory treatment may be justified where it is a ‘proportionate means of achieving a legitimate aim’. The Tribunal identified the Trust's legitimate aims of achieving Mr Woodcock’s dismissal in a cost effective manner and to prevent him from benefiting from a windfall.

On proportionality, the employment tribunal was influenced by the particular facts here. But for a 'chapter of accidents', the initial consultation meeting would have been held long before Mr Woodcock's 49th birthday, meaning that he would ordinarily have been given notice long before any prospect of the enhanced pension arose. Even if consultation had been started before notice was given, it would have made no difference to Mr Woodcock’s redundancy as he was only interested in chief executive roles and there were no such posts available following the reorganisation.

The employment tribunal found that the less favourable treatment was justified and so Mr Woodcock’s age discrimination claim failed.

Mr Woodcock appealed, unsuccessfully, to the employment appeal tribunal (EAT). It agreed that the Trust’s legitimate aims identified by the employment tribunal went beyond the mere wish to reduce costs. It did, however, question the accepted view that the consideration of cost can never by itself constitute sufficient justification. In its view, the ‘cost plus’ approach can result in artificial game-playing (‘find the other factor’). Mr Woodcock appealed to the Court of Appeal.

Court of Appeal’s judgment

The Court of Appeal dismissed Mr Woodcock's appeal. The Court agreed that dismissing a redundant employee was a legitimate aim. It was also a legitimate part of that aim for the Trust to ensure that the dismissal saved the Trust the additional element of cost it would otherwise have incurred and to prevent a windfall for Mr Woodcock.

The Court also took the opportunity to review both UK and European case law on justification and ruled that the saving of increased costs, alone, cannot amount to a legitimate aim.

As to proportionality, the Court reiterated that the lower courts had correctly ruled that depriving Mr Woodcock of his right to consultation in advance of giving him notice of dismissal had not undermined the proportionality of the Trust's treatment given that consultation would not have achieved anything.

Implications

The ‘costs plus’ approach to justification survives. So, when attempting to justify discriminatory treatment or practices, employers should exercise caution and continue to identify other legitimate aims other than cost or financial factors alone. Sometimes, as the EAT pointed out, these distinctions may seem artificial. In practice, employers will always need to turn their minds to proportionality too when seeking to justify discriminatory treatment and undertake an impact assessment of the discriminatory effect of the treatment on the individual versus the needs of the employer.

Read a copy of the judgement

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