The EAT has recently considered an interesting point in the case of Braithwaite, Edie & Others -v- HCL Insurance BPO Services Ltd 2015. It found that the practice of terminating employees’ existing employment contracts and reappointing on new terms and conditions was a PCP (provision, criterion or practice) under the Equality Act 2010. It could, therefore, form the basis of discrimination claims where there was an unjustified disparate impact on employees with a protected characteristic under the Act. 

The case related to claims by 27 employees of HCL, whose employment had transferred to that company pursuant to TUPE in 2008. They had originally been employed and TUPE transferred by three or four separate previous employers, so that, by the time HCL came to employ them all in 2008, there were disparate terms and conditions in force. 

HCL was severely hit by the economic downturn in 2009, incurring £4 million losses per annum.  It undertook a review of its business in early 2010, which concluded that staff remuneration was a significant and disproportionate cost, and that some of the terms and conditions in place for a section of the workforce (agreed in the proceedings as being in the age range of 38 or 45-64) were not only very costly, but generous and outside industry norms.

Accordingly, in May 2010, consultation was commenced informing staff that the business was experiencing significant losses and that the respondent proposed to make changes to terms and conditions in order to ‘provide a more equitable and fair reward system and potential savings in order to maintain financial sustainability’. The changes were estimated to achieve annual savings of £1-2 million. Essentially, the proposal was to harmonise terms and conditions and this impacted the different groups to differing degrees; some parts of the workforce (the younger ones who had previously had less favourable terms) were better off under the changes, but those most adversely affected would have:

  • increased hours (two hours per week);
  • decreased holidays (two days per annum);
  • removal of carer days and private health care; and
  • removal of enhanced redundancy entitlement (in some cases valued up to £60,000 if that contingency arose, which was a possibility).

Following the consultation exercise, HCL’s proposals were adjusted but, ultimately, staff were required to agree to new terms and conditions by 13 April 2011 or be dismissed. Those who did not accept the new terms had their employment terminated on 15 June 2011. Those who remained in employment commenced on their new contracts from 16 June 2011. 

Claims for unfair dismissal (including automatically unfair dismissal on the grounds that they were TUPE-related) were dismissed and not appealed. However, the claimants did appeal the age discrimination decision, which also went against them, as the ET found that, while HCL’s actions were indirectly discriminatory to those in the specified age range, they were justified. The EAT upheld the decision and confirmed that:

  1. the process of termination and reappointment and/or requirement to accept new terms and conditions or be dismissed, was a PCP and so capable of being the basis of an indirect discrimination claim; and
  2. in this case, the PCP was objectively justified as the needs/legitimate aim of the Respondent ‘to ensure its future viability [and to have] market competitive non-discriminatory terms and conditions’, was achieved in a proportionate way by the imposition of new terms and conditions. This was notwithstanding the significant impact on some employees, which had to be weighed in the balance against the employer’s needs.

Comment

This is an important decision for employers seeking to enforce a variation of terms and conditions by termination and reappointment (often when an agreement to do so has not been reached). Employers will not only need to ensure that they can meet the general requirements for a fair dismissal, but will also need to consider any potentially discriminatory impact on employees with a protected characteristic under the Equality Act (sex, race, disability etc etc). If so, the more stringent requirement to objectively justify such a move will also have to met.