The EAT has upheld a decision of an Employment Tribunal dismissing an indirect age discrimination claim. Whilst the employer's decision to impose new terms on its employees placed older workers at a particular disadvantage, as they were more likely to lose their existing contractual rights when compared to younger workers, the decision was objectively justified.

On justification, the EAT held that the employer had a legitimate aim, namely reducing staff costs to ensure its future viability and to have in place a market competitive, non-discriminatory set of terms and conditions. The Tribunal was entitled to find that there were no practicable alternatives to the changes proposed by the employer and that its changes were proportionate.

Braithwaite and others v HCL Insurance BPO Services Ltd

HCL provided services to life insurance and pensions businesses. Over a number of years, it had acquired employees from different companies under TUPE. As a result, its employees were on different terms and conditions, particularly in relation to working hours, holiday, private medical insurance, carers' leave, and enhanced redundancy. Following the collapse of Lehmans and the economic downturn, HCL incurred substantial losses. It reviewed its staffing costs. It considered that some of the employees' terms and conditions were generous, not market competitive and in respect of enhanced redundancy, might be age discriminatory insofar as the entitlement was based on length of service. It therefore proposed introducing a standardised set of terms and conditions for all of its employees "to provide a more equitable and fair reward system, and potential savings in order to maintain financial stability". In doing so, HCL removed or reduced some of the benefits mentioned above. Following extensive consultation, the employees were told that if they did not accept the new terms, they would be dismissed. A number of employees refused to accept the new terms and brought claims for unfair dismissal and indirect discrimination on the grounds of age.

The Employment Tribunal held that the requirement on the employees to accept the new terms or be dismissed was a provision, criterion or practice ("PCP") which put employees in the age 38 to 65 bracket at a particular disadvantage as they who had built up greater entitlements through longer service. I accepted that the introduction of the new terms was objectively justified as a proportionate means of achieving the legitimate aim, namely redusing staff costs to ensure HCL's future viability and to have in place market competitive, non discriminatory terms and conditions. The employees appealed against the finding that the PCP was objectively justified and HCL cross-appealed the Tribunal's finding that it had applied a PCP.

EAT's decision

The EAT dismissed the employees' appeal and HCL's cross appeal.

Was the requirement to accept the new terms or be dismissed a PCP?

HCL argued, relying on the EAT's decision in ABN Amro Management Ltd v Royal Bank Scotland, that the introduction of the new terms was not capable of amounting to a PCP unless the new terms themselves gave rise to a particular disadvantage. This wasn't the case here, as the new terms applied to all of HCL's employees and did not put any particular employee at a particular disadvantage.

The EAT distinguished this case from ABN Amro which case considered whether a change in a discretionary bonus policy was discriminatory on the grounds of age. At no time in ABN Amro were some employees treated differently from others; there in that case the claimant was seeking to compare himself with what happened at a different time when a different bonus policy was in place. In those circumstances the EAT held that a change of policy could not amount to a PCP. On the present facts, the requirement to enter into new terms did put employees in the age 38 to 65 bracket at a particular disadvantage as they had existing contractual rights which were different from other employees. Therefore, the EAT held that the Tribunal had been entitled to find that the requirement to accept the new terms or be dismissed, was a PCP.

Was the PCP objectively justified?

The EAT held that the Tribunal was entitled to conclude that the PCP was objectively justified. It considered that the Tribunal had properly understood the task it had to carry out when assessing objective justification and had properly carried out the balancing exercise between the adverse impact on the employees and HCL's needs. The Tribunal was entitled to find that there were no practicable alternatives available to HCL and that the requirement to accept the new terms or be dismissed was proportionate.

Comment

Employers proposing to change terms and conditions should consider whether the change is likely to have a discriminatory effect bearing in mind the EAT's view here that a change could constitute a PCP. The facts of this case are particularly interesting given the TUPE context and serve as a reminder that harmonisation of terms is possible where it is unrelated to the TUPE transfer. In this case, the EAT and Tribunal accepted that the reason for the change was to ensure HCL's financial viability and to establish non discriminatory and market competitive terms for its employees.