The Employment Appeal Tribunal (“EAT”) has recently held, in the case of Mr N Woodcock v Cumbria Primary Care Trust, that dismissing an employee to avoid paying him an age related benefit is not unlawful provided that the employer is able to show that the cost of avoiding the discriminatory impact of the dismissal would be disproportionately high.
The Claimant held the position of Chief Executive of North Cumbria Primary Care Trust. As a result of a reorganisation, his role disappeared and he worked in temporary positions for a year before he received a letter informing him that he was at risk of redundancy.
The Claimant’s contractual notice entitlement was 12 months. It became apparent to the successor Trust that the Claimant was due to turn 49 on 17 June 2007, some 11 days after the date fixed for a meeting on 6 June 2007 to discuss the question of the Claimant’s continued employment and possible dismissal for redundancy. The Trust realised that were the Claimant not given notice of dismissal until after 17 June, he would have still been in employment on his 50th birthday, at which time he would have been entitled to take early retirement on enhanced terms. The additional cost of the enhanced retirement was valued at between £500,000 and £1,000,000.
In view of this, the Trust decided to give Mr Woodcock his notice on 23 May 2007, in advance of the meeting on 6 June 2007, in order to protect the Trust’s financial position. This decision appeared to have been motivated in part by a perception that Mr Woodcock had intentionally delayed the dismissal meeting so that he would be entitled to the enhancement payable on early retirement.
On 6 June, the meeting took place. Mr Woodcock asked for the Notice to be withdrawn but his request was refused. In May 2008, his employment ended and he received a redundancy payment of £230,428. He thereafter commenced proceedings for age discrimination.
The issue central to the dispute was whether Mr Woodcock’s dismissal without proper consultation was less favourable treatment on the grounds of age pursuant to the Employment Equality (Age) Regulations 2006. The 2006 Regulations, the relevant provisions of which are replicated in the Equality Act 2010, provided that any such treatment could be justified if the action was a proportionate means of achieving a legitimate aim.
The Employment Tribunal held that although the dismissal was found on the face of it to be discriminatory unless it could be justified, the aim of the dismissal was justified on the basis that the Claimant was redundant, that there was no suitable alternative work for him, and dismissal was legitimate for the Trust to seek to avoid incurring costs unnecessarily.
Mr Woodcock appealed to the EAT on 30 June 2010.
The Claimant sought to argue that the Employment Tribunal had erred in holding the factor of cost alone to justify the dismissal. The Claimant relied upon the decision of Cross v British Airways Plc  in which another constitution of the EAT had held that cost alone could not be a legitimate aim to justify the discrimination.
The EAT dismissed the appeal and upheld the decision of the Employment Tribunal.
In doing so, the EAT disagreed with the proposition that cost considerations could never, by themselves, constitute sufficient justification, or that they needed to be combined with some other element (expressed as “costs plus”) in order to be viewed as legitimate and doubt was expressed that such a “rule” was, in fact, the effect of previous binding authorities. The EAT noted that the adoption of such a rule was likely to cause parties to partake in artificial “game-playing”, namely finding “the other factor”. Employers should be able to justify such an act producing a discriminatory impact on the basis that the cost of avoiding or rectifying the impact would be disproportionately high.
However the EAT also found that the Employment Tribunal had, in fact, adopted the “costs plus” approach and so cost alone was not the sole factor in the treatment of the Claimant. The EAT found that the Employment Tribunal was entitled to find that the Claimant’s “accelerated notice” was justified, as it prevented the Trust from incurring a disproportionate liability in pension costs. In addition, the detriment suffered by the Claimant with regard to not having a consultation meeting before notice was given was deemed insignificant in the circumstances, in particular that to do otherwise would have led to a windfall in his case by virtue of him being able to take early retirement with enhanced terms as a consequence of the Trust having failed to act as quickly as it could have done to effect his redundancy. To avoid that windfall was a legitimate aim.
Whilst the decision may give employers reassurance that in some circumstances they are able to justify age discrimination for costs reasons only, employers should note that the EAT has not entirely departed from the orthodox stance in Cross v British Airways Plc, namely the “costs plus other factor” approach. Employers must be aware that such treatment is likely to be justifiable only in circumstances where the discriminatory impact is trivial and the costs of avoiding or rectifying such discrimination would be disproportionately high.