Justification in Age Discrimination
It is well understood by employment law practitioners that cost alone cannot amount to justification of indirect discrimination (Woodcock v Cumbria Primary Care Trust  EWCA Civ 330). This has led to the development of so-called ‘cost+’ justification arguments.
An example of cost + justification is where an organisation seeks to break even year on year and makes decisions about the allocation of its resources accordingly.
In the recent case, of Heskett v Secretary of State for Justice UKEAT/0149/18 the Employment Appeal Tribunal looked at the cost+ argument in relation to a change in pay increments.
What was it about?
Following funding cuts imposed by central government the Ministry of Justice made changes to the rate at which certain Probation Officers progressed up an incremental salary scale. The effect was that progression to the top of the scale would take many years longer than had previously been the case.
The Employment Tribunal found that the policy was prima facie discriminatory in favouring employees over the age of 50 as against younger employees. However, the Employment Tribunal went on to find that the policy was, in all the circumstances, justified.
What did the Employment Appeal Tribunal think?
The Employment Appeal Tribunal accepted that a cost only justification argument is insufficient. Reference was made in argument to the EHRC’s Code of Practice explains at 4.29 which states that:
“Although reasonable business needs and economic efficiency may be legitimate aims, an employer solely aiming to reduce costs cannot expect to satisfy the test. For example, the employer cannot simply argue that to discriminate is cheaper than avoiding discrimination.”
However the Employment Appeal Tribunal went on to reject the appeal. It pointed out that there is a distinction to be made between an absence of means and an employer seeking impermissibly to place reliance solely on cost. Where through no fault of its own, the employer was compelled to find a way of squaring a circle brought about by central government policy. It is legitimate for an organisation to seek to break even year on year and to make decisions about the allocation of its resources.
A further matter taken into account by the Employment Tribunal was the fact that the discriminatory effect of the policy had been noted by the Respondent and that steps were being taken to address it within a short period of time. The Employment Appeal Tribunal accepted that the likely duration of the discriminatory impact was a legitimate consideration for the Tribunal to have regard to.
Finally, where a Tribunal had properly weighed the relevant factors in the balance (see para 4.30 of the EHRC’s Code of Practice), the Employment Appeal Tribunal will not interfere with the conclusion that the cost+ argument amounted to justification.
What can we take away?
It can sometimes be quite difficult to differentiate between a cost only argument and a cost+ argument. However, where an employer intends to rely on a cost+ argument, the employer must ensure that clear budgetary/financial evidence is available to the Employment Tribunal with supporting minutes, if possible, evidencing how and why the allocation of limited resources has been arrived at. Failing to do this will mean that an employer runs the real risk that the Employment Tribunal will find it was simply about reducing costs.
It is also worth noting that if further steps are being contemplated by the employer to remove the discriminatory impact then evidence of these steps should be led as well.