Justifying Age Discrimination – more than just cost saving (but not much more)

Stephen Richards

In my last blog piece I asked whether pension cost alone could justify discriminatory treatment in terminating employment. The answer is no, but it does help, the Court of Appeal has ruled: Woodcock v Cumbria PCT. Saving money can’t be the sole aim of a discriminatory practice – there has to be a non-cost reason as well. But it may not be particularly difficult to find that non-cost reason. If an employer can do that, then balancing cost factors against the effect of the treatment may allow the employer to justify its actions.

To recap, the understanding to date has been that employers can’t justify discriminatory treatment on the grounds of cost alone – they need a non-cost factor as well, in order to show that the treatment is a proportionate means of achieving a legitimate aim, so as to justify the discrimination. The Employment Appeal Tribunal in this case had thrown some doubt on the ‘cost plus’ principle, suggesting that it made sense for ordinary principles of proportionality to apply – and that the ‘cost-plus’ approach resulted in artificial game-playing – “find the other factor”.

The Court of Appeal has refused to go that far. It agreed there is ‘some degree of artificiality’ about the ‘cost plus’ approach – almost every decision taken by an employer is going to have regard to costs – but it made clear that it accepts ECJ guidance that saving or avoiding costs cannot, without more, amount to a legitimate aim.

It seems that the hurdle for finding an additional reason isn’t particularly high – here, the employer wanted to dismiss an employee on the grounds of redundancy, and had been planning to do so for some time. That was enough to establish a legitimate aim, and the court then went on to say that the employer could – and, in fact, should – give effect to the dismissal in the most cost-effective way it could. In this case, the consultation period Mr Woodcock had been deprived of would have changed nothing – it was simply the cutting of a procedural corner. Balanced against the substantial windfall he would otherwise have had, the discriminatory treatment was a proportionate means of reaching the employer’s legitimate aim. 

Stephen Richards is an associate at Allen & Overy LLP.

Comments published on Pensions Talk do not necessarily reflect the views of Allen & Overy or its clients.

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