Indirect age discrimination justifiable, rules Court of Appeal

The Court of Appeal has held that indirect age discrimination can potentially be justified on the basis of saving costs to balance company books.

Previously, a number of cases have addressed whether a discriminatory policy can be justified on the basis of saving costs. Generally, such a reason is not held to be legitimate, however the Employment Appeal Tribunal (EAT) held in Cross and others v British Airways plc that whilst cost saving cannot on its own amount to a legitimate aim, it may be taken into account alongside other factors. This is known as the ‘cost-plus’ rule.

In this case, the employee had worked in the public sector for some time as a probation officer. Due to pay rise limitations implemented by the Treasury in 2010, the organisation he worked for introduced a new pay progression policy. Whilst in the past probation officers could progress three points up the pay scale per year, the new policy meant that they could only progress one pay point per year.

From the employee’s perspective, this meant that it would take him 23 years to progress to the top of his pay band. Meanwhile, colleagues that had already attained this, or were nearer to the top than he was, started to earn significantly more than those below them. As individuals in this position tended to be over the age of 50, the employee claimed indirect age discrimination, arguing that employees under age 50, in his position, were being placed at a disadvantage by the new policy.  

In the first instance, the Employment Tribunal (ET) agreed that the policy had served to indirectly discriminate against the claimant on the basis of his age. However, they dismissed the claim because the organisation’s actions had amounted to a proportionate means of achieving a legitimate aim.

The ET explained that although the respondent’s aim had been to cut costs, there were also other factors to consider. The policy had been designed to enable them to ‘live within their means’ and was only intended to be temporary. Whilst it could not be justified on a long-term basis, it was a proportionate short-term response to the financial situation the respondent was facing.

The claimant appealed to the Employment Appeal Tribunal (EAT) who dismissed the appeal. In forming their decision, the EAT held that it was legitimate for an organisation, such as the respondent’s, to seek to break even.

The employee appealed again to the Court of Appeal (CA), arguing that the respondent’s defence was purely based on saving costs, contrary to the law, and that there was no evidence that this policy was short-term, meaning the ET had erred by relying on this in their judgement. The CA also dismissed the appeal. Considering previous case law on the ‘cost-plus’ principle, they agreed that a respondent cannot justify discrimination in pay purely on cost saving grounds. Therefore, what needed to be determined was if their actions were simply to save money, or if they had other aims that they wished to achieve. The Court held that the ‘cost-plus’ label, whilst not incorrect, could serve to turn attention from this key question.

Agreeing with the EAT, the CA held that the need to balance company books could be considered a legitimate aim, so the ET had been correct to place weight upon the situation facing the organisation. They also rejected the idea that there was no evidence that the policy would be temporary, as it had come about as a direct result of the financial situation of the Treasury which was not expected to be a permanent issue.

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