In the recent case of HM Land Registry v Benson, the EAT considered an employer was justified in selecting employees for voluntary redundancy on the basis of whom it would cost least to dismiss - even though this involved indirect age discrimination against employees between aged 50 and 54.  

Background

The employer, HM Land Registry, offered employees a voluntary redundancy/early retirement scheme with enhanced benefits. Employees over 50 would be offered the opportunity to volunteer for "compulsory" early retirement or, if aged 50 or under, offered the opportunity to volunteer for "compulsory" early severance (redundancy), under the terms of the Civil Service Compensation Scheme (CSCS). HM Land Registry budgeted £12 million in respect of these voluntary terminations.

Due to the large number of applications, one of the selection criteria applied was how much it would cost to release any given applicant (the "cheapness criterion"). Mrs Benson and four colleagues aged between 50 and 54 were not selected, and claimed indirect discrimination on grounds of age. Had they been selected, Mrs Benson and her colleagues would have received up to 10 additional years’ pension payments on top of their ordinary pension entitlement, which would have cost HM Land Registry an additional £19.7 million. It was inherently cheaper under the scheme to release younger employees who were entitled only to "compulsory" early severance or older employees who were entitled to fewer additional years’ pension payments.

The applicable legislation was the Employment Equality (Age) Regulations 2006, but the principles equally apply to age discrimination claims now brought under the Equality Act 2010. Unlawful indirect age discrimination occurs if:

  • A applies to B a provision, criterion or practice (PCP) that A applies or would apply equally to person not of the same age group as B.
  • The PCP puts or would put persons of the same age group as B at a particular disadvantage when compared with others.
  • The PCP in fact puts B at that disadvantage.
  • The A cannot show that the PCP was justified – i.e. a proportionate means of achieving a legitimate aim. The exercise required of the Tribunal on such a test is to weigh the reasonable needs of the employer against the discriminatory effect of the PCP and to make an assessment of whether the former outweigh the latter.  

An oddity in this case was that the Claimant brought her claim not because she had been dismissed, but because she had not been dismissed (or at least offered the opportunity to retire)! However, HM Land Registry accepted that it had applied a PCP that put employees in the 50-54 age group at a particular disadvantage when compared with other age groups. HM Land Registry also accepted that the exclusion from the opportunity to receive the attractive benefits available under the CSCS was capable of amounting to a detriment. HM Land Registry therefore accepted that prima facie age discrimination had taken place and that it would be unlawful unless it could be justified.

The Employment Tribunal found that the "cheapness criterion" was the only practicable criterion to achieve the required redundancies at the £12m limit. However, it found that the employer failed to conduct an equality impact assessment which would have identified the disproportionate impact on the 50-54 age group. It held that HM Land Registry should have avoided the indirect discrimination by releasing everyone who applied under the scheme. The Tribunal believed that the additional £19.7 million cost of doing so should have been incurred as it was not unaffordable.

The EAT overturned this decision. The EAT held that it was legitimate for HM Land Registry to impose a budget on the amount to be spent on the voluntary severance scheme, even if that might mean that selection had to be made between applicants.

The EAT went on to hold that the adoption of the "cheapness criterion" was a proportionate means of selection in order to meet the £12m budget limit. Key to its decision was the fact that the Tribunal had itself found that the cheapness criterion was the only practicable solution.

The EAT also held that the Tribunal’s finding that the extra £19.7m was not "unaffordable" was to treat the language of "legitimate aim" (i.e. a "real need"), in the context of objective justification, as connoting a requirement of "absolute necessity". In the EAT's view, the task of the employment tribunal is to accept the employer’s legitimate decision as to the allocation of his resources as representing a genuine "need", but to balance it against the impact complained of.

Comment

Employers should note the EAT's warning that the use of a similarly discriminatory selection criteria will not necessarily be justified in other cases. Whether an employer’s selection criteria will be lawful or unlawful will turn on the facts of each individual case. Central to the EAT’s reasoning in this case was the fact that the impact on the Claimants was not as severe in other cases – they did not lose their jobs or any other benefits that they had a positive expectation of receiving – and also that HM Land Registry had no real alternative to using the cheapness criterion. Where other reasonable options are available to employers, the tribunals are likely to find that the discrimination cannot be objectively justified.

In a separate claim arising from the same circumstances the EAT upheld the Tribunal’s decision that a female employee on a career break was indirectly discriminated by being excluded from the redundancy scheme.