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Employment Law Case Update: Indirect Age Discrimination

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As an employer, it is likely that you will be aware of the ways you can directly discriminate against an employee but how in tune are you with your practices and policies that constitute indirect discrimination.  Our Employment Law team review the recent case of Heskett v Secretary of State for Justice [2020], which discusses indirect age discrimination and how an organisation's pay rise scheme led to a tribunal claim.

Mr Heskett had been a probation officer with the National Offender Management Service (NOMS) since 2006 and, as an employee, was entitled to participate in a pay progression scheme. In essence, every passing year of employment would mean a pay scale rise of three points, until the top pay band was reached.

In 2010 HM Treasury announced there would be financial cuts across the public sector. NOMS therefore modified the existing pay progression scheme, meaning employees would only be able to progress by one point each year, and thus it would take newer employees much longer to progress to the top pay band. Mr Heskett claimed that under the old scheme it would have taken him eight or nine years to get to the top but under the revised scheme, it would take 23 years. Those employees who were older and already at the top of the pay band by 2010 were not affected by the amendments. As such Mr Hestkett issued an indirect age discrimination claim against his employer.

The Employment Tribunal (ET) accepted that the new pay scheme was discriminatory against younger employees, however was this action proportionate and therefore justified? A discriminatory provision, criterion or practice (PCP), may be justified if it has a legitimate aim and is proportionate. Mr Heskett relied on the costs plusprinciple - that the saving or avoiding of costs cannot, on its own, amount to a legitimate aim to justify indirect discrimination. However in this situation, NOMS was tasked with reducing expenditure to continue to operate effectively within the confines of the reduced budget.

The ET was of the view that NOMS was not just trying to save costs when it implemented the new pay scheme rules. This measure was taken with the aim of allowing it to operate within the financial restrictions imposed by HM Treasury. Mr Heskett’s claim was therefore unsuccessful and he appealed against this decision on the basis that the ET had been mistaken to draw a distinction between “costs” and “absence of means,”.  His appeal was rejected by both the Employment Appeal Tribunal (EAT) and the Court of Appeal (CoA).

Lord Justice Underhill clarified this point in his judgment, stating that a PCP will not be justified if it is “solely to avoid increased costs”, however, courts cannot ignore the real world constraints under which employers must operate. Employers must be able to justify disparities by reference to “real world financial pressures” especially in age discrimination cases where it is difficult for an employer to make a decision that will uniformly impact each age group. The ET therefore had been entitled to treat NOMSneed to observe the constraints imposed by the pay freeze as a legitimate aim”.

Having established a legitimate aim, NOMS still had to demonstrate that the new pay scheme was proportionate. The CoA held that when judging proportionality, the temporary nature of the scheme may be relevant. Employers may sometimes need to take urgent action to protect the viability of their business and these measures may have indirect discriminatory effects. Employers may justify those measures as a proportionate short-term means of responding to the problem” even if they would not be justified in the long term.

This case establishes that when attempting to justify a discriminatory PCP, employers may be able to rely on the need to balance the books as a legitimate aim. Such a justification will not fall foul of the ‘costs plus’ principle. Employers should be aware, though, that they’ll still need to demonstrate the proportionality of any measures taken to reduce expenditure. Allocation of the budget or reduction in expenditure should therefore be done in a way that minimises its discriminatory impact.

If you have any questions regarding this article, you can call our Employment team today on 023 8071 7717 or email employment@warnergoodman.co.uk.

This was previously part of our weekly Employment Law Newsletter. If you would like to subscribe, please email us at events@warnergoodman.co.uk or just fill in our subscription form.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.