Imposing changes to terms and conditions of employment is rarely a straightforward exercise.  As well as dealing with issues such as collective and individual consultation, the risk of unfair dismissal and breach of contract claims, and (in some cases) the effect of TUPE, the recent case of Braithwaite v HCL Insurance BPO Services Ltd illustrates the need to consider the potential for age discrimination claims. 

Background

Over time, a number of employees from different companies had had their employment transferred to the Respondent company. As a result, different employees had different terms and conditions, some more generous than others. The employer was facing economic difficulties and decided to address the problem by introducing a single set of terms for all employees that would not provide entitlement to certain benefits. Employees who were not prepared to agree the new terms were dismissed.

Legal proceedings

A number of employees brought Tribunal claims alleging, amongst other things, that the employer’s approach had discriminated against older workers, who were more likely to lose out on existing benefits under the new terms.

The Tribunal agreed that the employer had applied a 'provision, condition or practice' (PCP) to the Claimants and other employees, namely that if they wished to remain employed, they were required to enter into a new contract under which they would not have contractual entitlements to private health insurance, carer days and enhanced redundancy payments and in which their working hours would be 37 hours per week and annual leave would be 25 days a year.  On the particular facts of this case, that requirement put older employees at a particular disadvantage as employees within the 38 to 64 year age range were more likely to be working fewer than 37 hours per week and have an existing contractual right to PHI and carer days, more than 25 days’ annual leave and more generous redundancy entitlements.

However, the Tribunal was satisfied concluded that the requirement imposed by the employer was not discriminatory, because it was objectively justified.   The employer had a legitimate aim of reducing staff costs to ensure its future viability and having in place a market competitive, non-discriminatory set of terms and conditions. The Tribunal considered the effect of the changes upon the affected employees and balanced those effects against the needs of the employer, before concluding that no the PCP was objectively justified as there were no practicable alternative to the changes proposed by the Respondent and its changes were proportionate.

The Tribunal’s decision was upheld by the EAT on appeal.

Comment

In many organisations, older employees tend to have more generous terms of employment, whether through length of service, or by virtue of new, less favourable, terms having been introduced for new employees over time.  What this case demonstrates is that attempting to remove existing contractual rights can give rise to a risk of indirect age discrimination claims.

Although, in this case, the employer managed to successfully defend itself, it does not automatically follow that all employers treading a similar path will be able to do so.  In this case, for example, the financial position of the employer was particularly unhealthy, and getting worse: the annual loss being incurred was in the region of £4 million and employee remuneration as a percentage of revenue was 115%.  The employer, therefore, had good cause for believing there was an urgent need to take action on staff costs and no doubt this influenced the Tribunal’s decision that the employer’s aim was not merely saving costs (which would not, on its own, have been legitimate) but ensuring its future existence as a viable business.

The Tribunal also noted that the changes were ‘carefully planned and implemented’ and there were no viable alternative ways of achieving the employer’s aims.  This suggests that the way in which the employer handles the issue, and, in particular, its consideration of alternatives, are likely to be important factors influencing the outcome of any claim.

Braithwaite v HCL Insurance BPO Services Ltd, 5 February 2015