Why care?

In this case the EAT considered whether the fact that early retirement benefits were only available to the over-50s meant that a employee aged over 50 could not compare his treatment in relation to a redundancy exercise to that of an employee under 50.

An employee claiming direct age discrimination has to show that they have been treated less favourably than a real or hypothetical comparator whose relevant circumstances are not materially different to theirs and that the treatment is not a proportionate means of achieving a legitimate aim.

The case

Mr Donkor worked for Royal Bank of Scotland as a Regional Director. In 2012 a restructure took place which gave rise to what was seen as a new Regional Director role for which prospective candidates would need to go through a selection exercise. The bank carried out a preliminary selection exercise on paper to decide who was to be interviewed for new roles and who was to be given the option to apply for voluntary redundancy. Those aged over 50 who were not given an interview would also be given the option of early retirement (which is not unlawful discrimination).

Mr Donkor was one of four Regional Directors not selected for interview, of whom he and one other were aged over 50. The two Regional Directors under 50 (Ms Alexander and Mr Batey) applied for and were given voluntary redundancy. When the severance costs for the over-50s were calculated, it became apparent that, out of redundancy costs of £1.4 million, £1.25 million would be accounted for by the two individuals over 50 (due to the cost of early retirement). For Mr Donkor this would have resulted in severance costs of over £500,000 (mostly related to pension enhancement). The bank therefore changed its mind so that the four Regional Directors including Mr Donkor were given the opportunity to apply for an alternative role. Mr Donkor and two others were not successful. The two individuals aged under 50, Ms Alexander and Mr Batey, were given letters giving them the opportunity to apply for voluntary redundancy or redeployment. No such letter was given to Mr Donkor. Later in 2012 an alternative role did become available which was suitable for Mr Donkor. The bank decided that he and Mr Batey, (who had declined voluntary redundancy), should be offered the opportunity to be considered for this. The bank told Mr Donkor that he did not have the option of voluntary redundancy while this role was on offer. Mr Donkor applied for and was appointed to the role.

In the meantime, following a two month consultation, the bank changed its pension scheme rules from 1 October 2012 so that only those aged over 55 were entitled to early retirement benefits. In 2013 there was a further restructuring, in which Mr Donkor applied successfully for voluntary redundancy and his employment terminated on 30 September 2013.

Mr Donkor brought a tribunal claim arguing that the decision not to allow him to apply for voluntary redundancy in the 2012 restructuring, after it was decided he would not be offered one of the new Regional Director roles, as it had Ms Alexander and Mr Batey (his under age 50 comparators), was an act of direct age discrimination. The tribunal held that neither individual was an appropriate comparators, because the fact that they were not entitled to early retirement benefits was a “material difference” between their circumstances and those of Mr Donkor. Even if they were appropriate comparators, it held that Mr Donkor had not been treated less favourably than them. His complaint had been that he had not been allowed to apply for early retirement benefits. Since neither of his comparators were entitled to early retirement benefits either, the tribunal found it difficult to see how it could be said that Mr Donkor had been treated less favourably. In any event, the tribunal thought that the treatment was not on grounds of age but on grounds of the cost of his redundancy package and the unlikelihood of that being approved when there was an alternative role available. The tribunal did not consider justification.

Mr Donkor appealed to the EAT which allowed the appeal and held that a this was a case of direct age discrimination. It declined to make any assumptions about the bank’s legitimate aims, or whether it had acted proportionately. It remitted the justification issue to the same tribunal for a decision.

  • held that the tribunal had been wrong to find that Ms Alexander and Mr Batey were not appropriate comparators. Any difference between their circumstances and Mr Donkor’s was one of age as this was why Mr Donkor was eligible for early retirement benefits and they were not.
  • Noted that the bank conceded that the fact that his comparators had the opportunity to apply for voluntary redundancy and he did not amount to a detriment and less favourable treatment.
  • held that the reasons for the treatment were Mr Donkor’s age rather than the tribunal’s conclusions of cost, legal risk and the need to obtain approval. All the factors identified were simply matters arising from the claimant’s age.

What to take away?

In this case, the additional cost of giving a non-discounted early retirement pension was a factor that only applied to the over-50s and therefore to have taken it into account was prima facie discrimination. As was held in James v Eastleigh Borough Council [1990] IRLR 288 (HL), if the respondent (the bank) applies a criterion (cost of early retirement) which itself distinguishes between people based on a protected characteristic (age), this is itself discriminatory. Employers should not be wholly focussed on whether or not a particular individual is an appropriate comparator. Also key is the reason why the employer acted as it did. Having found that the bank had based its decision on the cost of early retirement, which was an age-related factor, the only remaining question was whether the employer’s actions were justified.