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Potential for cost alone to be a legitimate aim in justifying discriminatory treatment
In the recent case of Woodcock -v- Cumbria Primary Care Trust [2012] the EAT has revisited the issue of whether cost alone can be a legitimate aim so as to justify discriminatory treatment. The decision has opened the door to such a defence by employers in the future.
Mr Woodcock was a chief executive with the Trust who was given 12 months notice to terminate his employment shortly before his 49th birthday on grounds of redundancy. Notice was given prior to any formal consultation process being undertaken with Mr Woodcock with the aim that the notice expired before Mr Woodcock’s 50th birthday. This was to ensure that Mr Woodcock was not in employment with the Trust at that time when, if he was, he would have become entitled to early retirement on substantially enhanced pension terms. The timing of the notice was with the express intent of depriving him of this benefit, which would have resulted in the Trust incurring considerable cost of approximately £500,000. Mr Woodcock claimed age discrimination, in response to which the Trust argued that the treatment was justifiable on the basis that it was ‘a proportionate means of achieving a legitimate aim’.
The EAT referred to the leading case of Cross -v- British Airways plc in which it was held that cost, or economic or financial factors alone, is not itself a legitimate aim for the purposes of justifying discriminatory treatment. However cost plus some other factor (the ‘cost plus’ approach) may be. It also referred to the case of Loxley -v- BAE Systems which held that a discriminatory act to avoid an employee receiving a windfall can be a legitimate aim. In line with these cases the EAT held that Mr Woodcock’s dismissal notice was not just served only with the aim of saving the Trust expense but, instead, with the legitimate aim of giving effect to the decision to terminate his employment on grounds of redundancy. In respect of the proportionality of that action, the EAT stated that what is required is ‘striking an objective balance between the discriminatory effect of the treatment of Mr Woodcock and the needs of the Trust’. In the circumstances, although no formal consultation had taken place with Mr Woodcock he had received the benefit of extended discussions about his position including the potential for alternative employment. He therefore ‘knew the score’ and should have had no legitimate expectation that he might be in employment on his 50th birthday.
As well as being an affirmation of existing case law on this area, this case is particularly interesting in light of the view expressed by the EAT in relation to the use of costs as a justification for discriminatory treatment. The EAT stated that if it wasn’t for the existing case law on this subject its view was that an employer should be entitled to justify such treatment on the basis of cost alone if the costs of avoiding that impact, or rectifying it, would be disproportionately high. This principle was supported in the subsequent EAT case of Cherfi -v- G4S Security Services [2011] in which it was stated that although G4S had not relied alone on cost considerations to justify its actions if it had the EAT would have taken ‘as correct’ the views expressed in the Woodcock case.
In summary, these cases provide a glimmer of hope for employers seeking to respond to allegations of discrimination on the grounds of cost. It now appears that cost alone could be stated as a legitimate aim in a defence to such claims, but that in order to be successful the employer will still need to satisfy the test of proportionality in respect of such an aim.
Potential for cost alone to be a legitimate aim in justifying discriminatory treatment
In the recent case of Woodcock -v- Cumbria Primary Care Trust [2012] the EAT has revisited the issue of whether cost alone can be a legitimate aim so as to justify discriminatory treatment. The decision has opened the door to such a defence by employers in the future.
Mr Woodcock was a chief executive with the Trust who was given 12 months notice to terminate his employment shortly before his 49th birthday on grounds of redundancy. Notice was given prior to any formal consultation process being undertaken with Mr Woodcock with the aim that the notice expired before Mr Woodcock’s 50th birthday. This was to ensure that Mr Woodcock was not in employment with the Trust at that time when, if he was, he would have become entitled to early retirement on substantially enhanced pension terms. The timing of the notice was with the express intent of depriving him of this benefit, which would have resulted in the Trust incurring considerable cost of approximately £500,000. Mr Woodcock claimed age discrimination, in response to which the Trust argued that the treatment was justifiable on the basis that it was ‘a proportionate means of achieving a legitimate aim’.
The EAT referred to the leading case of Cross -v- British Airways plc in which it was held that cost, or economic or financial factors alone, is not itself a legitimate aim for the purposes of justifying discriminatory treatment. However cost plus some other factor (the ‘cost plus’ approach) may be. It also referred to the case of Loxley -v- BAE Systems which held that a discriminatory act to avoid an employee receiving a windfall can be a legitimate aim. In line with these cases the EAT held that Mr Woodcock’s dismissal notice was not just served only with the aim of saving the Trust expense but, instead, with the legitimate aim of giving effect to the decision to terminate his employment on grounds of redundancy. In respect of the proportionality of that action, the EAT stated that what is required is ‘striking an objective balance between the discriminatory effect of the treatment of Mr Woodcock and the needs of the Trust’. In the circumstances, although no formal consultation had taken place with Mr Woodcock he had received the benefit of extended discussions about his position including the potential for alternative employment. He therefore ‘knew the score’ and should have had no legitimate expectation that he might be in employment on his 50th birthday.
As well as being an affirmation of existing case law on this area, this case is particularly interesting in light of the view expressed by the EAT in relation to the use of costs as a justification for discriminatory treatment. The EAT stated that if it wasn’t for the existing case law on this subject its view was that an employer should be entitled to justify such treatment on the basis of cost alone if the costs of avoiding that impact, or rectifying it, would be disproportionately high. This principle was supported in the subsequent EAT case of Cherfi -v- G4S Security Services [2011] in which it was stated that although G4S had not relied alone on cost considerations to justify its actions if it had the EAT would have taken ‘as correct’ the views expressed in the Woodcock case.
In summary, these cases provide a glimmer of hope for employers seeking to respond to allegations of discrimination on the grounds of cost. It now appears that cost alone could be stated as a legitimate aim in a defence to such claims, but that in order to be successful the employer will still need to satisfy the test of proportionality in respect of such an aim.
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