Age Discrimination Update: Legal Cases & Justifications in Employment Rights

2. Institute of Employment Rights Age Discrimination Update Stuart Brittenden

3. Seldon v Clarkson Wright and Jakes [2012] IRLR 590 SC • Woodcock v Cumbria Primary Care Trust [2012] IRLR 491 CA • HM Land Registry v Benson & Ors [2012] IRLR 373 EAT • Homer v Chief Constable of West Yorkshire Police [2012] IRLR 601 SC

4. Seldon: The wider context • 6 April 2011 – removal of default retirement age • NOW: no automatic fair dismissal for ‘retirement’ OR bar to age discrimination claim • Dismissals now for SOSR • Discrimination? Employer Justified Retirement Age? • ER can set age limit but subject to objective justification • Is aim legitimate? What aims can be legitimate? • Measure must be proportionate means of achieving legitimate aim

5. Rosenbladt v Oellerking Gebaudereingigungsges [2011] IRLR 51 ECJ • Part-time cleaner/automatic termination at age 65 • national court found this caused significant financial hardship to poorly paid EEs given size of pension • CJEU - Automatic termination was justified • Significance of collective agreement with TUs emphasised • Note ECJ reasoning & scope for wider application:

6. The scheme was: • “based primarily on the notion of sharing employment between the generations. The termination of the employment contracts of those employees directly benefits young workers by making it easier for them to find work, which is otherwise difficult at a time of chronic unemployment. The rights of older workers are, moreover, adequately protected as most of them wish to stop working as soon as they are able to retire, and the pension they receive serves as a replacement incomeonce they lose their salary. The automatic termination of employment contracts also has the advantage of not requiring employers to dismiss employees on the ground that they are no longer capable of working, which may be humiliating for those who have reached an advanced age.”

7. Fuchs v Land Hessen [2011] IRLR 1043 • Civil Servant prosecutors required to retire at 65 • CJEU finds no discrimination where aims were to: • (1) establish a balanced age structure • (2) encourage recruitment/promotion of younger people • (3) preventing possible disputes re: fitness of employees to work beyond retirement age

8. Seldon v Clarkson Wright and Jakes [2012] UKSC 16 • Equity Partner in a law firm • 2005 Partnership Deed – provision for retirement at 65 • S requested to continue – refused • Claim for direct age discrimination • 3 legitimate aims relied upon by the Firm

9. (i) Ensuring career progression: that associates were given the opportunity of partnership after a reasonable period • (ii) Facilitating the planning of the partnership and workforce across individual departments by having realistic long term expectation as to when vacancies will arise (these first two arguments were described as "inter-generational fairness" arguments) and • (iii) Limiting the need to expel partners by way of performance management, thus contributing to the collegiate and supportive culture in the firm (described as the "dignity" argument)

10. ET held that mandatory retirement age was justified as an appropriate means of achieving a legitimate aim • EAT – ET failed to consider whether the aims could have been met by retirement age other than 65 (remission to ET) • CofA dismissed S’s appeal • Supreme Court dismissed appeal (but confirmed remission)

11. Supreme Court guidance re permissible justifications for age discrimination • Narrow scope of justification defence vs indirect discrimination • Direct age discrimination can only be justified by legitimate aims of a public interest nature vs considerations specific to firm • “Public interest” aims include “inter-generational fairness” and “dignity” arguments • NB ? Supreme Court higher threshold than CJEU?

12. Mere incantation of a public interest aim will not suffice • Aims must be considered in the context of the Firm • Empirical evidence is required

13. Lady Hale: • “improving the recruitment of young people, in order to achieve a balanced and diverse workforce, is in principle a legitimate aim. But if there is in fact no problem in recruiting the young and the problem is in retaining the older and more experienced workers then it may not be a legitimate aim for the business concerned” • “Avoiding the need for performance management may be a legitimate aim, but if in fact the business already has sophisticated management measures in place, it may not be legitimate to avoid them for only one section of the workforce”

14. The aim need not be articulated by ER at the time or even in its mind when adopted – ex post facto rationalisation is permitted • The means chosen must be appropriate and necessary to meet the aim • ? Are there less discriminatory measures available • Supreme Court does not castigate dignity arguments as specious (a dubious and directly discriminatory stereotype) • Note: the anomaly between the dignity arguments used at justification stage BUT the same cannot be used at job selection stage

15. NB public interest arguments are relatively easy to invoke in most workplaces • ER might argue that intergenerational fairness considerations (blockage/progression) would be undermined if they were trumped by dignity arguments OR each older worker being dealt with by reference to their own individual facts • Dealing with older employees on an individual basis would negate the purpose of the general rule • ? Will ERs have to adduce evidence of staff leaving; reasons for leaving/exit interviews • ? How much evidence is required re: blockage/ceiling/lack of scope for progression • ? Will Seldon cause more employers to re-think their retirement policies

16. Woodcock v Cumbria Primary Care Trust [2012] IRLR 491 • Facts: CEO, 27 year career in NHS • Entitlement to 12 month notice period • Enhanced pension at age 50 • Merger of PCTs – W displaced • 23 May 2007 ER issued written notice of dismissal • Consultation process had not started • If redundancy consultation had taken place before notice issued, W would be age 50 • ER never told W why notice was served or consultation process not followed

17. W unsuccessfully tried to have notice revoked • W claimed direct age discrimination • NB W already received £220,000 and the enhanced pension would have cost £500,000 - £1m • ET found that age was the reason for being issued notice early

18. ‘If there had been consultation Mr Woodcock would have celebrated his birthday and by the time the 12 months notice period would have been served he would have been 50 years old and thus entitled to an enhanced payment. She had a duty to look after the financial side of the Trust which was the tax payer’s money’ (para 33) • ‘The reasonable need of the respondent was to bring about the end of Mr Woodcock’s employment without incurring cost to the taxpayer’ (para 84)

19. QUIZ • Was the reason for the differential treatment of Mr Woodcock on the grounds of age: • (a) To avoid the windfall of an unearned benefit? • (b) To achieve the dismissal of an already redundant employee? • (c) Cost?

20. ? Would a different outcome have been reached if (a) the economic climate was different? Or (b) the sums more modest? • Cost justifications - overview: • (1) Direct age discrimination can be justified where it is a proportionate means of achieving a legitimate aim • (2) For Governments, cost alone cannot amount to legitimate aim • (3) For ERs cost alone cannot amount to a legitimate aim, but can be a factor (in conjunction with other aims) • Has this produced artificiality? Intellectual dishonesty? • Cf observations of Underhill (P) in EAT

21. “But we find it hard to see the principled basis for a rule that such considerations can never by themselves constitute sufficient justification or why they need the admixture of some other element in order to be legitimised. The adoption of such a rule, it seems to us, tends to involve parties and tribunals in artificial game-playing – ‘find the other factor’ – of a kind which is likely to produce arbitrary and complicated reasoning: deciding where ‘cost’ stops and other factors start is not straightforward … If the matter were free from authority it would seem to us that an employer should be entitled to seek to justify a measure, or a state of affairs, producing a discriminatory impact – or, in the case of age discrimination, an act done of discriminatory grounds – on the basis that the cost of avoiding that impact, or rectifying it, would be disproportionately high.” (Underhill P)

22. CofA = rejected W’s appeal • The artificial “game playing” is endorsed/legitimised • ? Courts more willing to adopt an elastic approach to costs plus arguments, provided that some other factor is bolted on (e.g. operational reasons, efficiency, avoiding a windfall) • Legal certainty compromised? • Dilution of effectiveness of legislation designed to combat the social evil of age discrimination • ? Retrograde step created by judicial reaction to specific facts

24. HM Land Registry v Benson & Ors [2012] IRLR 373 • Cost-cutting/scaling back programme • ER obtained Treasury approval to spend £50m on various severance schemes • Of the £50m approved, only £12m was available for the merging offices scheme • Demand outstripped funding • Cost of allowing all who applied to be released would be , £33.6m (a shortfall of £19.7m) • Selection criteria were applied • Primary criterion: “cheapness” the more staff released meant increased saving in costs and space

25. 238 out of 404 applicants were released • 5 unsuccessful claimants = aged between 50 and 54 • ET upheld complaints of indirect age discrimination • ER accepted that the cheapness criterion had put employees in that age group 50–54 at a particular disadvantage • ET found that no other satisfactory method of selection was viable • ET held that ER had not shown a “real need” to limit its spending on the scheme to £12m. It was not “unaffordable” given its reserves and further programmed cuts

26. “The essence of the tribunal's reasoning was that the appellant had not demonstrated a 'real need' to limit its spending on the scheme to £12m – or, to put it another way, to limit its spending on all three schemes to £50m. It held that it had not done so because it had not shown that payment of the additional £19.7m was 'unaffordable'. By that it evidently meant that the appellant had not shown that the funds were absolutely unavailable, in the sense that they could not be paid without insolvency: it pointed out that the appellant's reserves far exceeded that amount (albeit that Treasury approval was needed to spend them) and that later in the same year, in the ATP, it contemplated spending a far greater figure. In our view, to apply a test of unaffordability in that sense is to fall into the error of treating the language of 'real need', or 'reasonable needs', as Balcombe LJ put it in Hampson, as connoting a requirement of absolute necessity” (para 37)

27. “We have not in reaching this conclusion lost sight of the fact that the cheapness criterion was indeed disproportionately unfavourable to employees in the claimants' age group, and we can well understand their disappointment at their non-selection. But it is fundamental that not all measures with a discriminatory impact are unlawful. Sometimes they have to be put up with. And we are bound to say… the impact is not as severe as in many cases. Those affected did not lose their jobs or lose any other benefit which they had a positive expectation of receiving: rather, they lost out on the chance to take advantage of a benefit – admittedly a very substantial benefit – on which they had no right to count and which could indeed be described as a windfall…” (para 38)

28. The ET mistakenly treated the question of the £12m limit as the means adopted by the appellant to achieve more broadly-defined aims • The ET should have accepted the £12m (or £50m) limit as representing a legitimate aim, or real need, while weighing it against its discriminatory impact • An employer's decision about how to allocate its resources, and specifically its financial resources, should constitute a “real need” or “legitimate aim” even if it is shown that it could afford to make a different allocation with a lesser impact on the class of employee in question • The task of the employment tribunal is to accept the employer's legitimate decision as to the allocation of its resources as representing a genuine “need” but to balance it against the impact complained about • ? Ripple effect across the public sector

29. Homer v Chief Constable of West Yorkshire Police [2012] IRLR 601 SC • Gives helpful guidance on what constitutes indirect discrimination and the scope of permissible justification • H employed by Police National Legal Database • 2005 new grading structure introduced, law degree required for promotion • H = age 62, planned to retire at 65 • Part-time study for law degree would take 4 years – impossible for H to comply with PCP • H brought indirect age discrimination claim

30. ET upheld claim, and PCP was not objectively justified • EAT and CofA reversed decision. Reason why H was disadvantaged was not because of age, but impending retirement • If H had not planned to retire, he would have been able to obtain the qualification • Supreme Court: upheld claim • Lady Hale (para 17): • “A requirement which works to the comparative disadvantage of a person approaching compulsory retirement age is indirectly discriminatory on grounds of age. There is … ‘unreality in differentiating between age and retirement’.”

31. Cannot compare someone who is disadvantaged because of retirement vs someone who may leave for other reasons • Scope of justification defence: SC confirmed that justification for indirect age discrimination is not confined to social policy objectives (vs justifying direct age discrimination) • Case remitted to ET to decide whether PCP was justified

32. Contact London 10 - 11 Bedford Row London WC1R 4BU DX 1046 London / Chancery Lane T +44 (0) 20 7269 0300 F +44 (0) 20 7405 1387 Bristol 3 Orchard Court, St Augustines Yard Bristol BS1 5DP DX 78229 Bristol 1 T +44 (0) 117 930 5100 F +44 (0) 117 927 3478 E brittenden@oldsquare.co.uk W www.oldsquare.co.uk