In Woodcock v Cumbria Primary Care Trust, the Court of Appeal has re-iterated that cost saving alone cannot, by itself, constitute a legitimate aim, so as to objectively justify age discrimination.

Following the merger of NHS trusts, Woodcock, who had been the Chief Executive of one of the predecessor Trusts, was not appointed to post of Chief Executive of the new combined Trust. Attempts were made to find Woodcock alternative employment but they were unsuccessful.  It had been agreed as part of the merger arrangements that any employee for whom there was no suitable job in the merged Trust would have their employment guaranteed until 30 June 2007, however, in the case of employees (like Woodcock) with a 12-month notice entitlement, any such notice ought to be given so as to expire at the end of that employment guarantee period. 

Woodcock, like other employees in the pension scheme, was entitled to a substantial enhancement to his pension if dismissed on grounds of redundancy after the age of 50.  Woodcock did not turn 50 until 17 June 2008. 

The Trust, in managing Woodcock’s situation, did not serve notice on 30 June 2006 as expected by the policy.  However, by the Spring of 2007 the Trust was keen to consult with Woodcock prior to issuing him with 12 months’ notice of redundancy.  It became difficult to arrange a consultation meeting with Woodcock.  Consequently, the Trust served notice of dismissal for redundancy on 23 May 2007, which notice would expire a year later and shortly before Woodcock’s 50th birthday. The formal redundancy consultation process did not commence until after notice had been served. 

The Tribunal held that the decision to serve notice prior to the start of consultation was direct age discrimination. The decision had been motivated by the realisation that the cost of Woodcock’s redundancy would have increased significantly if delayed until after he turned 50.   There was also a belief that Woodcock was deliberately stalling the onset of the consultation process to delay his redundancy so that he could benefit from the enhanced pension terms when his redundancy did eventually take place.  However, the Tribunal found that the Trust’s treatment of Woodcock was objectively justified, as a proportionate way to achieve the Trust’s legitimate aim of dismissing a redundant employee in a cost efficient manner, preventing the employee from benefitting from a windfall.

The Court of Appeal has upheld this decision, ruling that the treatment of Woodcock was proportionate, with the discriminatory effect outweighed by the needs of the Trust given the ‘very particular circumstances’ of the case.  The Court stated that the guidance given by European authorities on the subject of costs ‘meant nothing more than that the saving or avoidance of cost will not, without more, amount to the achieving of a legitimate aim.’  The Court took the view in this case that preventing the employee from benefiting from a windfall was, in the circumstances, more than merely an exercise in cost saving.  Further, they said that given the objective justification test provided in the legislation, the ‘relevant question must be whether the treatment complained of was [proportionate]’.  In this case, it was.

Impact for employers

  • The Court of Appeal’s decision emphasises the importance of proportionality, and acknowledges that most discriminatory decisions by employers will have a costs basis.  However, it doesn’t go so far as to address the artificial distinctions between ‘exclusive’ costs factors and other criteria. Accordingly, the ‘cost-plus’ basis for justification identified in previous cases remains unaffected by this decision.
  • Employers should remain cautious when dismissing aging workers on the basis of avoiding enhanced pension/redundancy liabilities. Reference was made by the Court of Appeal to the particular distinguishing facts of this case. The Trust had been very generous with Woodcock in maintaining his employment for a significant period of time when he had no role, and had he received the enhanced redundancy/pension on dismissal this would have been an undeserved windfall on the part of Woodcock, because given the terms of the merger policy this could not have been a legitimate expectation for him.