The EAT have considered the question of objective justification in an age discrimination claim and the sort of factors employers should be considering when justifying age discrimination Pulham and others v London Borough of Barking and Dagenham [2009] (EAT).

The EAT held that when considering the justification for a discriminatory policy the fact that: a discriminatory measure was negotiated with and agreed with the union is a relevant factor; the size of relevant budgets is a useful benchmark, but cannot be determinative; and evidence must be produced as to the discriminatory impact of a particular measure on employee(s) and the alleged costs and financial background against which the affordability of those costs fails to be judged.

Implications

This case is a useful reminder for employers that they can justify both direct and indirect age discrimination and in doing so:

  • they need to consider the impact of the discriminatory policy on the affected employees and consider what they do in respect of different classes of employees and the impact various alternatives to the policies may have on them;
  • it is advisable to consult with any unions or employee representative bodies or with the employees direct on any such policies if it is likely they may be said to be unlawfully discriminatory; and
  • cost is a relevant factor, but should not be the sole factor or the deciding factor. It is therefore useful for HR to have carried out an assessment of costs of various options before choosing a discriminatory policy and to have this information retained and available.

Facts

Under the Age Discrimination Regulations, unlike other strands of discrimination, both direct and indirect discrimination can be justified provided the employer can show that the discriminatory treatment or provision is “a proportionate means of achieving a legitimate aim”. This requires an employer to weigh up the discriminatory effect of the measure against the reasonable needs of the business.

The London Borough of Barking and Dagenham operated the Local Knowledge and Experience Increment Scheme (‘Scheme’) for some of its employees under which the employees would be entitled to increments if they had 25 years’ continuous service and had attained the age of 55. In advance of the Age Discrimination Regulations coming into force on 1 October 2006, the Council reviewed the Scheme and considered that it was potentially discriminatory. The Council consulted with the unions about proposed changes to the scheme as part of the negotiations into its Single Status Agreement.

As a result of the negotiations, the Council agreed with the unions to close the Scheme to new entrants with effect from 1 April 2007. Any employees who were in receipt of increments under the Scheme at that date would have their pay frozen at that time, i.e. their pay was protected.

One of the affected employees, Ms Pulham, satisfied the service criterion in 1999, but would not reach the age of 55 until 2011. Ms Pulham brought a claim for direct and indirect age discrimination against the Council. She argued that the age criterion was unlawful under the Age Discrimination Regulations and she should have been entitled to the increment from the day the Regulations came into force. She further argued that the age criterion was unlawful from 1 October 2006 and, following the Court of Appeal’s decision in Redcar and Cleveland Borough Council v Bainbridge and others [2008], which considered the pay protection arrangements that had been put in place to cushion the effect of changes in grade following implementation of the Single Status Agreement, the pay protection arrangements introduced in April 2007 could not be justified.

The Council sought to argue that it had set aside £5.5million to resolve equal pay litigation arising from implementation of the Single Status Agreement and could not afford the potential costs of opening up the Scheme to all employees who met the length of service criterion only. Against this background, it negotiated with the unions to phase out the Scheme.

The EAT held that the pay protection arrangements were capable of justification. The Council had a legitimate aim in seeking to phase out the Scheme. However, in considering whether the arrangements could in fact be justified, the EAT said that the following considerations should be taken into account:

  • the fact that a discriminatory measure was negotiated with and agreed with unions is a relevant factor. However, the Tribunal must still consider whether there was a fair balance between the reasonable needs of the Council and the discriminatory impact of the decision taken in order to determine whether the treatment could be justified. In this case, there was no evidence that the position of those who had satisfied the service criterion, but not the age criterion, had been considered;
  • the size of relevant budgets is a useful benchmark, but cannot be determinative. An employer cannot justify a failure to eliminate discrimination by allocating the costs of doing so to a particular budget and declaring that budget to be exhausted. The size of any such budget is the employer’s choice and they may not limit the extent of their obligations by the choice that they make; and
  • evidence must be produced as to the discriminatory impact of a particular measure on employee(s) and the alleged costs and financial background against which the affordability of those costs falls to be judged.

The EAT decided the Tribunal had not considered the correct questions and therefore remitted the case back to the Tribunal for consideration.