The issue of age discrimination and stock option plans has come before the EAT. The decision focuses on whether an employer was able to justify a decision not to allow employees leaving employment at under the age of 55 to retain unvested stock options.
The claimant was an employee who was entitled to stock options under the employer's "Long Term Incentive Plan" (LTIP). When the employee left employment aged 50 he was entitled to take a pension, which he did. However, he was not permitted to retain his unvested share options. Had he been aged 55 or over he would have been allowed to do so, because he would have been treated as leaving the company on or after the "customary retirement age" with an entitlement to an immediate pension. He claimed that this was direct age discrimination.
The employer admitted less favourable treatment because of age, but said that its decision was objectively justified. It argued that its legitimate aims were intergenerational fairness and consistency; rewarding loyalty and experience; and ensuring a mix of generations in the workforce. In particular, employees such as the claimant were entitled to retire at 50, but members of the more recent pension scheme were only entitled to retire at 55 and their pension entitlement would be less generous. The tribunal accepted that these were all legitimate aims and that it was only possible to achieve the aim of consistency between members of the different pension schemes by fixing the age at which employees could retire and retain their unvested share options at 55; members of the defined contribution scheme could not retire before that age.
On appeal, the EAT concluded that the legitimate aim in this case was simply to ensure consistency between members of two different pension schemes. The tribunal had not explained why this aim included "intergenerational fairness" or what this "intergenerational fairness" consisted of. Further, in assessing proportionality the tribunal had not sought to compare the loss sustained by the Claimant in not being allowed to retain his options with the importance of the aims pursued by the employer. What was required from the tribunal was a four stage approach:
- What is the employer's aim;
- Why that is a legitimate aim;
- What steps the employer has taken to implement that aim; and
- Whether those steps were appropriate and reasonably necessary to achieve that aim (including a comparison of its importance with the loss caused to the individual).
The case was remitted to a new tribunal for fresh consideration of whether the admitted less favourable treatment was justified.