Age Discrimination - lessons learnt in recent months

18 February 2014

The public sector is an overstretched environment; managers are being asked to find ways of further reducing their workforce, but is using a person's age a legitimate way of cutting staffing levels?

The public sector is an overstretched environment; managers are being asked to find ways of further reducing their workforce, but is using a person's age a legitimate way of cutting staffing levels?

Generally, no: and the growing number of age discrimination cases in the tribunal over the past few months offers a stark reminder to both public and private sector employers to think twice before basing any headcount reduction policies on age, either directly or otherwise.

"Age is but a number", but where that number relates to the compensation that could be payable by an employer who unsuccessfully defends an age discrimination claim, that number could take on a newfound significance. Following a spate of successful age discrimination claims, what lessons can be learned?

Lesson number 1: To successfully rely on objective justification, you not only have to have a legitimate aim, but your mechanism for achieving that aim must be both 'appropriate and necessary'

In Harrod & others v Chief Constable of West Midlands Police and others, around 200 police officers brought claims against five police authorities over the use of "Regulation A19" contained in the Police Pensions Regulations 1987.

Regulation A19 allows police forces to compulsorily retire officers after they have become entitled to a pension of at least two thirds of average pensionable pay (generally achieved after 30 years' service). It has been around for some time but rarely used. However, as the result of wide-ranging austerity measures affecting public services including the police, in 2010 it was decided by some police authorities that all officers potentially within the ambit of Regulation A19 would be required to retire, save for some limited exceptions. This decision led to the claims in question.

Under the Equality Act 2010, direct and indirect age discrimination by an employer is not unlawful if the employer can show that the treatment was "objectively justified" - that is, a proportionate means of achieving a legitimate aim.

The police authorities accepted that the policy has an adverse impact on older officers, but argued that the policy was objectively justified because of the need to make efficiency savings, and because of a substantial financial cushion that existed for the officers being forced to retire.

It is well established that a discriminatory practice cannot be justified by cost alone, and the distinction between 'efficiency' and 'costs' can be a grey area. Here though, improving efficiency was accepted by the tribunal as a legitimate aim.

However, having made it over the 'legitimate aim' hurdle, the police authorities tripped up on being able to demonstrate that the blanket use of Regulation A19 was a 'proportionate means' of achieving that aim.

The affected police officers argued, and the tribunal agreed, that the discriminatory practice was not Regulation A19 itself, but the practice of applying it to the full cohort of officers simply because they happened to qualify under it. While the police authorities had a potential legitimate aim, they did not go on to consider whether the mechanism used to achieve that aim was both 'appropriate and necessary'. On the facts of the case, there were other less discriminatory alternatives available to avoid the enforced retirement of all officers falling under Regulation A19 such as voluntary retirements, part-time working, career breaks etc. These were given little or no consideration.

As a result, the police officers won their indirect age discrimination claims. An appeal is being "actively considered" by the police authorities - no doubt because the decision means that each force will be left with huge compensation bills.

Lesson number 2: Statutory authority defence has its limitations: employers should still consider objective justification

In Heron v Sefton Metropolitan Borough Council, the Employment Appeal Tribunal (EAT) found that a local authority could not rely on the statutory authority defence to a claim of direct age discrimination relating to an enhanced redundancy package.

In this case, Ms Heron originally worked for the Learning and Skills Council and as such, the Civil Service Compensation Scheme (CSCS), which sets out various compensation payments payable to civil servants, formed part of her terms and conditions. She later TUPE transferred to the Council and remained contractually entitled to benefit from the scheme in the event of redundancy.
Ms Heron was made redundant at age 61 and received six months' pay based on her age and the formula set out in the CSCS. She brought a claim for direct age discrimination, as the amount she received was significantly less than her younger colleagues.

Here the Council relied on the fact that the different treatment derived from the CSCS as set out in legislation, and argued that the statutory defence set out in the Equality Act 2010 would apply. Broadly, that defence provides that a provision or practice is not unlawful age discrimination if it is something that must be done as a requirement of an enactment.

The EAT held that the statutory defence did not apply because:

  1. The enactment here did not require different treatment of employees over the age of 60 with regards to enhanced redundancy payments, it merely permitted it; and
  2. While the terms of the scheme transferred from Ms Heron's employment with LSC to her employment with the Council, at the point of the transfer they ceased to be statutory and became contractual. An employer could, therefore, only seek to justify the decision under normal principles and not within the statutory authority exception.

The EAT also held that the Council could not rely on the objective justification defence, as the evidence it provided was "sketchy" and did not identify the legitimate aim required for the justification defence to succeed. Accordingly, Ms Heron was entitled to the balance of the enhanced redundancy payment that she would have received if age had not been in issue, namely £27,500 rather than £16,880.

Lesson number 3: Think carefully about the right comparator

Budgen v Ministry of Justice (MOJ) is another case involving the Civil Service Compensation Scheme (CSCS). In this case, the claimants, who had become eligible to take their pension with no actuarial reduction at the date of termination, were entitled to a lump sum equivalent to six months' salary under the CSCS.

Other employees, who left before becoming eligible to take an unreduced pension, were entitled to a lump sum equivalent to a maximum of 21 months' salary depending on their length of prospective service between termination and their normal pension age/entitlement to full pension (although their pension would be actuarially reduced).

An employee claiming direct age discrimination will need to show that they have been treated less favourably than a real or hypothetical comparator whose circumstances are not 'materially different' to theirs. If the circumstances are 'materially different', a comparator cannot be established and the claimant will not be able to establish less favourable treatment. Identifying an appropriate comparator can be challenging.

In this case, the claimants compared themselves to other employees, who were members of the same pension scheme, who were leaving, who were younger and who were receiving higher compensation sums. The MOJ argued that the claimants were entitled to immediate full pension, whereas the comparators are not, and that as such, the claimants were not comparing like for like. Age was incidental, and the key to the payment of increased compensation was not age, but liability to reduction in pension. The EAT did not accept that age was incidental, finding age was the differentiating factor.

Conclusion: Do your homework before making any hasty decisions based on age

This spate of age discrimination cases should be a stark reminder to employers in both the public and private sector to think twice before basing any redundancy policies on age, directly or indirectly. Relying on statute may only get employers so far and may not be as helpful to employers as it first seems. Focusing only on that defence is likely to lead to difficulties.

All employers considering different treatment on the basis of age need to continue to think carefully about whether or not that treatment can be objectively justified, or whether there is an alternative (and less discriminatory) way of achieving their aim. The fact that public sector employers are coming under the spotlight in increasing numbers simply reinforces the message to all that ignoring objective justification when it comes to age is likely to be costly, and that there are no guarantees of success for employers at tribunal.


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