The Court of Appeal considered whether an aim of reducing costs could be enough to justify actions which would otherwise amount to indirect age discrimination. The Court concluded that costs alone would not be a proportionate means of achieving a legitimate aim, however, if coupled with other issues, then it may be.
The Claimant was a probation officer employed by the Ministry of Justice. In 2010, the Government capped pay increases across the public sector. Previously, probation officers could progress by three pay points each year, however, under the new policy, they could only progress by one pay point per year. As a result, it was going to take the Claimant 23 years to progress from the bottom to the top of his pay band, as opposed to seven or eight years, which is how long it would have taken him under the old policy.
With this new policy in place, employees towards the top of the band (who were, by default, older) would earn significantly more, and therefore accrue greater pension benefits, than those lower down the band.
The Employment Tribunal (‘ET’) found that the progression policy was discriminatory, but that it was justified. The Government’s aim in issuing the cap had been a cost-cutting exercise. Further, as the Ministry of Justice had issued the policy as a temporary measure, the ET relied on the fact that the Ministry of Justice was giving active consideration to changing the system to reduce the age discrimination.
The Employment Appeal Tribunal (‘EAT’) upheld the ET’s decision, and the Claimant appealed to the Court of Appeal.
The Equality Act 2010 sets out that an act of discrimination may be justified if it is found to be a proportionate means of achieving a legitimate aim.
This requires an objective approach to be taken as to whether a balance has been struck between the discrimination and the needs of the act complained of. As such, the more serious the impact of the discrimination, the more cogent the justification has to be for it. It is for the Tribunals to enforce this objective test.
The Court of Appeal applied the “cost plus” principle in Hill v Revenue Commissioners , which held that “an employer cannot justify discrimination solely on the ground that avoidance of such discrimination would involve increased costs”.
The Court of Appeal held that the need to reduce expenditure in order to balance the books could constitute a legitimate aim for the purpose of a justification defence. The action complained of in this case was in response to real financial pressures (following on from the financial crisis). The measures used and complained of also represented a proportionate means of achieving that aim. As such, the appeal was dismissed and the EAT’s decision upheld.
Employers should try and reduce discrimination arising from their policies and strategies. However, where discrimination is likely to occur following from a necessary policy or business strategy, then it must be shown to be a proportionate means of achieving this aim. Employers should consider the likely impact of any potential discrimination and assess whether or not this will be proportionate to the aim of the policy or strategy they are implementing.
This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact Valerie Bond to discuss any issues you are facing.