The Court of Appeal has held that an enhanced redundancy scheme, which benefited older employees, was objectively justified by the legitimate aim of providing a proportionate financial cushion to older employees, who were statistically more likely to suffer a longer period of unemployment and have greater family and financial commitments than younger employees.

Lockwood v Department of Work and Pensions and anor

Miss Lockwood worked for the DWP.  Her position became redundant and she sought to benefit from the voluntary redundancy scheme offered by the DWP (the "Scheme").  Under the Scheme, enhanced redundancy payments were based on age and length of service, with older employees receiving a higher payment.  Miss Lockwood had 8 years' service and was 26 years old at the time of her redundancy.  Under the Scheme, she was entitled to an enhanced redundancy payment of around GBP 10,850. However, if she had been over the age of 35 with the same length of service, she would have been entitled to an enhanced redundancy payment of around GBP 17,700.

Miss Lockwood's claim for direct age discrimination was dismissed by the Tribunal.  It considered that her circumstances were not materially comparable to employees in the aged 35 and over group (the "Older Age Group") as the statistical evidence produced at the Tribunal showed that employees in her age group (the "Young Age Group") had fewer financial and family obligations and therefore greater flexibility to manage the loss of their employment.  Therefore, she could not claim discrimination by comparison to an employee in the older age group.  The Tribunal went onto hold that if they were wrong on this point, it would nevertheless have held that the treatment was objectively justified.  The Tribunal's decision was upheld by the EAT on appeal.  Miss Lockwood appealed to the Court of Appeal.

Decision

The Court of Appeal held that the Tribunal and EAT were wrong in ruling that Miss Lockwood's circumstances were not materially comparable to employees in the Older Age Group.  The Tribunal and EAT had erred in factoring into the comparative exercise, the greater financial responsibilities on older employees and their reduced flexibility to react to the loss of employment compared with younger employees.  These considerations were directly related to age or were connected to age.  The relevant protected characteristic should be ignored when conducting the comparative exercise.  For example, in a case relating to race discrimination, it would be invalid to say that a black claimant was not materially comparable to a white comparator solely because of the difference in race. 

However, the Court of Appeal agreed with the Tribunal and the EAT that the less favourable treatment was objectively justified on the facts of this case. 

The Tribunal had concluded that the aim of the scheme was to produce a proportionate financial cushion until alternative employment was found or as a bridge to retirement and the receipt of a pension.  This was a legitimate aim and the means adopted of achieving it were proportionate. It held that:

  • The requirement for administrative workability required the use of clear cut age bands (rather than carrying out an individual assessment of the position of each employee).  Other age bands could have been chosen but it could not be said that the bands that were chosen were inappropriate or disproportionate;
  • To pay everybody the same sum as older employees would have been a substantial burden on the public purse (although it would have been cheaper to level everyone down to treat them equally);
  • the statistics supported the view that younger employees suffer unemployment for a shorter time and have fewer family responsibilities (the DWP had produced statistics from the Office for National Statistics showing that the unemployed in younger age groups were more likely to move into employment quickly and were less likely to be married, and statistics from the Council for Mortgage Lenders indicating that average age of first time buyers was 37 in 2009);
  • workforce recruitment and workforce planning supported the conclusion that it was legitimate to have the scheme in place (there had been evidence that reasonable terms were necessary to attract and retain employees and also to attract volunteers for redundancy when numbers needed to be reduced);
  • There were cogent business aims and proportionate means of implementing them which outweighed the discriminatory effects of the measures;
  • It was significant that the unions had not argued that the scheme was discriminatory or sought to challenge it on that ground.

Miss Lockwood had argued that the Tribunal had not applied the test of objective justification with appropriate rigour.  The Court of Appeal rejected this.  The Tribunal had applied the test with appropriate rigour and was entitled to reach its conclusions on the evidence available.

Comment

The Court of Appeal's decision on the "materially comparable" point follows previous decisions in saying that when constructing a comparator for age discrimination purposes, the comparator should not have any of the claimant's age related characteristics.

The objective justification point suggests a continued willingness on the part of the courts and tribunals to accept fairly wide levels of disparity in redundancy payments based on age and allowing a fairly broad discretion for employers to set age bands.  This approach was taken in early cases (MacCulloch v ICI) but it was open to question whether this would change over time as age discrimination became more embedded; that appears not to be happening yet.  However, the DWP in this case did have statistics to give broad support to its use of age bands.  The fact that unions support a scheme is also a factor which has been helpful in establishing justification in previous cases.

It is interesting that the case considered that lower payments for younger employees were justified because they were less likely to have family commitments or mortgage commitments.  Previous cases have tended to rely only on the difficulty that older employees face in the job market to justify higher payments, although the contrast here was between employees in their 20s and 30s.  The factors could be different when justifying lower payments to employees in their 30s with those in their 50s/60s as those in the latter age group may be less likely to have dependant children and mortgages than employees in their 30s.

The Court of Appeal referred to the need (post Seldon) for the aims of a discriminatory measure to have a public interest nature in order to objectively justify direct discrimination.  However, it did not carry out any detailed analysis or explanation and seemed content to accept that the aims in this case qualified.