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Court of Appeal considers whether cost considerations can justify discrimination

28 March 2012 #Employment


In Woodcock v Cumbria Primary Care Trust the Court of Appeal upheld the view of the tribunal that a redundancy dismissal, of which the purpose was to avoid the cost of an enhanced pension if the employee was still employed at the age of 50, was justified direct age discrimination.

The Court explained that while the age discrimination legislation does not exclude cost considerations from the justification defence, ECJ case law prohibits an employer from justifying discriminatory treatment `solely` because the elimination of such treatment would involve increased costs.

Mr Woodcock was the chief executive of an NHS Trust.  National reorganisation meant that his role was no longer required.  He failed to secure the new chief executive role and was informed that he was at risk of redundancy in September 2006.  The Trust expected Mr Woodcock to find alternative employment and therefore delayed giving him notice of dismissal.  He was invited to a redundancy consultation meeting in March 2007, but this was delayed until 6 June.  Prior to this meeting the Trust realised that if they honoured Mr Woodcock’s contractual 12 month notice period, this would end after his 49th birthday on 17 June.  Therefore he would still be employed on his 50th birthday, and would be entitled to take early retirement on enhanced terms.  The Trust noted that this would increase the cost of his redundancy by at least £500,000.  Therefore the Trust gave Mr Woodcock notice of his dismissal on 23 May.  Consequently, Mr Woodcock lodged a claim of direct age discrimination.  

The tribunal stated that issuing the notice of dismissal prior to Mr Woodcock`s 49th birthday was less favourable treatment on the ground of his age.  It was noted that a comparator who was not the same age would not have been treated in the same way.  The tribunal highlighted the EAT`s decision in Cross and ors v British Airways plc, which said that although saving costs alone could not be a legitimate aim, cost plus another factor could be.  The tribunal said that dismissing Mr Woodcock because he had been made redundant prior to the consultation in order to avoid further costs, was a legitimate aim which was proportionate and justified.   

Mr Woodcock had a very long notice period, and it was clear that consultation would have achieved nothing, as there were no other roles available.  The EAT rejected Mr Woodcock’s appeal based on, amongst other things, an argument that the tribunal had failed to correctly apply the `costs plus` approach.  Underhill P expressed obiter doubts over the `costs plus` approach to justify the discrimination set out in Cross v BA.  Instead he took the view that an employer should be entitled to justify discriminatory treatment simply on the basis that the cost of avoidance would be `disproportionately high`.  Mr Woodcock appealed. 

The appeal was rejected because given the unusual facts of the case, issuing Mr Woodcock’s dismissal notice was not purely treatment aimed at avoiding costs.  Like the tribunal and EAT, the Court considered that the dismissal was genuinely due to the acceptable aim of the Trust’s decision to make Mr Woodcock redundant.  It was reasonable and legitimate for the Trust to ensure that it avoided substantial and additional costs.

The Court of Appeal Court stated that there was `some degree of artificiality` in an approach to justification that rendered a cost factor inadmissible on its own, but admissible if linked to a non-cost factor.  The Court accepted that every decision an employer takes is likely to involve a cost consideration.  They also noted that the wording of the Employment Equality (Age) Regulations 2006 did not exclude cost considerations, but merely required that the treatment of employees be a proportionate means of achieving a legitimate aim.

This case does not give employers grounds to generally justify discrimination on the grounds of cost, direct age discrimination is the only  type of direct discrimination that can be objectively justified. The test of objective justification also applies to indirect discrimination cases.

Clarkslegal, specialist Employment lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Employment matter please contact Clarkslegal's employment team by email at employmentunit@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.
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