Discrimination Cannot be Justified on Grounds of Cost Alone

An employer who timed a redundancy dismissal notice to ensure an employee did not become entitled to an enhanced pension, did not discriminate on grounds of age.  Whilst discrimination cannot be justified “solely” on grounds of cost, cost factors can form part of the justification.

In Woodcock v Cumbria Primary Care Trust, W was informed that he was at risk of redundancy in September 2006, after he failed to secure a new chief executive role in a reorganisation of the Trust announced in 2005.   He was entitled to receive 12 months’ notice.  The Trust delayed giving notice in the expectation that W would find an alternative role with the Trust.   This did not happen and by March 2007 it realised it needed to give notice before W’s 49th birthday on 17 June in order to avoid him becoming entitled to an enhanced pension at an additional cost to the Trust of £500,000.  A redundancy consultation meeting was arranged for 10 April but W was unable to attend and difficulties in identifying a mutually convenient date meant that the meeting could not be rearranged until 6 June.   The Trust considered that W was delaying matters and decided to give notice of termination on 23 May 2007, and before the meeting, in order to protect the Trust’s position and taxpayers’ money. W claimed age discrimination.

The employment tribunal found that the decision to give notice on 23 May, before the consultation meeting, was less favourable treatment on grounds of age but was justified and so not unlawful.  The Trust’s aim of bringing about W’s dismissal for redundancy without incurring the additional cost consequent on him reaching age 50 was a legitimate one, and dismissal without consultation was a proportionate means of achieving it.  The EAT upheld the tribunal decision and W appealed to the Court of Appeal.

Before the CA, W argued that the Trust could not justify its treatment of him as its justification was based purely on cost grounds and this was not permissible.   The CA accepted that employers seeking to justify discrimination cannot rely “solely” on cost considerations, but concluded that, on the unusual facts of this case, this was not what the Trust had done.  W's dismissal notice had not been served with the sole aim of saving money, but to give effect to the Trust’s genuine decision to terminate his employment on grounds of redundancy.  This was a perfectly legitimate aim and it did not cease to be legitimate just because it was achieved in a manner designed to save cost.   By 2007, W did not have any right, entitlement or expectation of remaining employed until age 50 and had he done so he would have received a pure “windfall”.      

The CA also agreed with the employment tribunal that on the “very particular” facts of the case, giving notice of dismissal for redundancy before the consultation meeting was a proportionate means of achieving its legitimate aim. The Trust had been entitled, and had decided, to terminate W’s employment for redundancy in advance of his 50^th birthday.  Implementation of that decision had been delayed though no fault of its own but through a chapter of accidents.  Whilst the “corner-cutting” of giving notice before the consultation meeting in theory deprived W of an opportunity, in fact it deprived him of nothing of value because the tribunal found that consultation would have achieved nothing.  

Although the decision in this case was based on its own particular facts, the Court of Appeal did accept that ECJ case law precludes an employer from relying on cost alone as a justification for discriminatory treatment.  This means that employers will always need to look for another factor as well as cost, but it is clear from this decision that cost can be a significant factor.  

The CA agreed that the Trust’s justification defence was not based on cost alone and its decision to dismiss prior to consultation was proportionate.  W had already had a far longer period before notice was given than he was entitled to expect (an extension of almost a year), he had had the “substance of a consultation process” about alternative employment though discussions with the chief executive, it was only a chapter of accidents that deferred the consultation meeting to a point where he was nearing his 49^th birthday, there was no alternative employment available and the meeting on 6 June would not therefore have prevented dismissal.  In any event, if there was still a chance of alternative employment, the 12 month notice period gave plenty of opportunity for it to be explored.  

Other employers seeking to justify discrimination may not be able to point to such factors and should not assume that dismissal in similar circumstances will always be lawful.