Generally, employers cannot justify direct discrimination. Age discrimination can however be justified if the employer can show a legitimate aim and the means of achieving the aim are proportionate. The case of Cross & Others v British Airways Plc has been interpreted as authority that an employer cannot rely solely on cost to justify a discriminatory provision, criterion or practice (the "costs alone" approach), but that costs together with some other factor (the so-called "costs plus" approach) can justify discrimination that would otherwise be unlawful. The distinction between the inability to justify discrimination based on costs alone in contrast to the "costs plus" approach has been criticised as being highly artificial and was addressed in the case of Woodcock v Cumbria Primary Care Trust.
Mr. Woodcock was made redundant after a re-organisation of the Cumbria Primary Care Trust (the "Trust"). He benefited from a contractual provision which provided that an employee dismissed when over 50 years of age was entitled to enhanced pension benefits. In Mr Woodcock's case, the difference in cost between him being dismissed at age 49 or at age 50 would have cost the Trust approximately £500,000.
To avoid paying the enhanced pension benefits to Mr. Woodcock, the Trust gave him notice to terminate his employment before consulting on his redundancy associated with the re-organisation of the Trust. The notice of termination expired shortly before Mr. Woodcock's 50th birthday. Had the Trust delayed delivering the notice until after consultation, the notice of termination would have expired after Mr. Woodcock's 50th birthday. In addition, it was noted that a series of accidents had delayed the process and that in the ordinary course, the consultation process would have commenced long before Mr. Woodcock's 49th birthday.
Mr. Woodcock claimed that giving him notice without first consulting with him constituted direct discrimination based on age. The Trust argued that any discrimination was justified because not consulting with Mr. Woodcock prior to giving him notice was a proportionate means of achieving a legitimate aim, namely dismissing Mr. Woodcock in a cost effective manner that prevented him from benefitting from a windfall. Mr. Woodcock argued that the Trust's justification was based on costs alone and, therefore, based on the decision in Cross, could not justify discrimination.
The Employment Tribunal held that the Trust's decision to issue Mr Woodcock's notice of termination on 27 May 2007, before consulting on the date scheduled, 6 June 2007, was less favourable treatment based on age. However, the Employment Tribunal then held that the action of the Trust to avoid the additional costs was justifiable as being a proportionate means of achieving a legitimate aim and therefore the less favourable treatment was lawful. Mr. Woodcock appealed against this decision. The Employment Appeal Tribunal dismissed the appeal and Mr. Woodcock then appealed further to the Court of Appeal.
The Court of Appeal rejected Mr. Woodcock's appeal and, in particular, his argument that his treatment could not be justified because it was based solely on the grounds of costs. Rather, the Court of Appeal held that the way in which Mr. Woodcock was treated was not in fact based solely on the grounds of costs. The notice of termination was not simply to save costs but to give effect to the genuine decision to make Mr. Woodcock redundant. The Court of Appeal also held that giving notice before consulting was a proportionate means of the Trust achieving its legitimate aim.
In addition, the Court of Appeal provided guidance suggesting that the distinction between "costs alone" and "costs plus" was artificial, noting that almost every decision taken by an employer will have regard to cost. Rather, the Court of Appeal stated that where there is a legitimate aim, the focus should be on the primary statutory question, namely whether or not the treatment complained of is a proportionate means of achieving that aim.