In this article...
- MacCulloch v Imperial Chemical Industries plc ET/2700083/2007
- Then there was … Woodcock v Cumbria Primary Care Trust ET/2506917/08
Two recently published age discrimination cases have provided some, if not total, clarity on the issue of justification in age discrimination claims. Sarah Lamont explains more.
As we reported back in July 2008 the case of MacCulloch v Imperial Chemical Industries plc deals with the operation of the objective justification test in the context of a generous redundancy scheme.
Miss MacCulloch (“M) was made redundant at the age of 36 after seven years’ service. ICI calculated employees’ redundancy entitlement based on their age and length of service up to a maximum of 10 years. As such, on redundancy, an employee aged between 50 – 57 who had worked for ICI for 10 years was entitled to 175% of their gross annual salary. On being made redundant, M was entitled to approximately 55% of her salary.
It was conceded by ICI that the redundancy scheme was directly discriminatory on the grounds of age and, therefore, the crucial issue was whether the difference in treatment could be justified, i.e. whether the scheme could be treated as a proportionate means of achieving a legitimate aim.
The Employment Tribunal accepted that the following amounted to legitimate aims:
- the ten year service criterion, which encouraged and rewarded loyalty;
- the larger financial payment to older workers, to protect those who are more vulnerable in the job market; and
- the generosity of the scheme, which encouraged turnover, helped to avoid compulsory redundancies and made it easier for ICI to manage change.
The Employment Tribunal did not, however, accept that it was a legitimate objective that ICI should honour contractual promises that it had made to the workforce.
After identifying these aims, the Employment Tribunal said that the scheme was a proportionate means of achieving these aims. However, they failed to provide any detailed reasoning in reaching this decision.
M appealed but the Employment Appeal Tribunal (‘EAT’) agreed with the Employment Tribunal’s findings that the aims of the scheme were legitimate. However, the EAT upheld M’s appeal on the basis that the Tribunal failed to carry out the appropriate consideration of proportionality.
It stated that a “most careful appraisal is required in order to justify this discrimination” and agreed with the Claimant that the Tribunal failed to properly engage in the proportionality exercise.
The case was remitted back to the Employment Tribunal to allow an appropriate consideration of proportionality to take place and in a reserved judgment dated 14 April 2009 (and not available on BAILI) the Tribunal held the scheme was proportionate, and dismissed M’s claim under the Age Regulations.
In reaching this conclusion the Tribunal considered that:-
- ICI had tried to introduce a “flatter” scheme but the workforce had rejected this as it left a number of people worse off. The retention of the scheme was acceptable to the unions and employees as a whole and its abolition may have caused poor industrial relations therefore the retention of the scheme contributed to the commercial viability of the company which was a legitimate aim.
- At hearing, none of the parties has identified an alternative scheme that would have allowed ICI to achieve their legitimate aims (above).
- There was judicial support for the notion that older people find it more difficult to find work than younger people.
- It was “fallacious” to argue that a redundancy scheme cannot reward loyalty as it is only effective on dismissal. It is appreciated by employees as a cushion or fall back position.
- Taking account of age and length of service encouraged people to stay in post with the hope they may receive a higher severance package. 10 years with one company was the level to reflect this loyalty in light of the reality that employees move around and rarely remain with one company for their whole working lives.
The Tribunal also found that the requirement to have ten years service did not put the claimant (37 years old) at a substantial disadvantage to a 50 year old as it found, even if the claimant had not entered the labour market until 23 as a graduate, she would have had ample opportunity to build up 10 years service therefore the indirect discrimination argument failed in any event.
The Tribunal appear to have adopted a common sense approach to justification which is simple to follow in its logic, however…
This is another claim in which the Tribunal had to consider whether potentially age discriminatory treatment could be justified.
In this case Mr Woodcock (“W”) was Chief Executive of North Cumbria Primary Care Trust. Following the merger of a number of Primary Care Trusts (“PCTs") in the area he was asked to apply for a new chief executive position which would be determined via an assessment and interview process. Unfortunately there were not enough new roles to accommodate all the affected chief executives and if unsuccessful, it was anticipated that notice of termination would be issued so that it would expire on 30 June 2007.
W was told his application had been unsuccessful on 26 July 2006, a meeting was held on 9 August 2006 and on 4 September 2006 W received a letter advising he was formally at risk of redundancy, and his notice period if no suitable alternative role could be found would be 12 months.
On 30 March 2007 W was invited to a meeting to take place on 10 April 2007 to start the redundancy process. Because of difficulties in arranging a mutually convenient date however, the meeting could not actually take place until 6 June 2007. The new chief executive of the Respondent PCT, Ms Page, felt W was trying to delay the process until his 50th birthday on 17 June 2008 when he would become entitled to an enhanced pension (the additional cost of which was between half a million and one million pounds). Therefore, despite not having consulted W, Ms Page wrote to him on 23 May 2007 to give him notice that in order to protect the PCT’s position and tax payer’s money, unless alternative work could be found, his employment would terminate on 22 May 2008.
Consultation began formally on 6 June 2007, W worked on secondment until 29 February 2008 and was then placed on garden leave until his termination took effect on 22 May 2008, when he received a redundancy payment of £230,428 and commenced proceedings for age discrimination.
The Employment Tribunal held that W’s dismissal without proper consultation, in view of his impending 50th birthday, was less favourable treatment on the grounds of age. In reaching this decision the Tribunal found that:
- While there had been no discrimination in the events that took place prior to the issue of notice in May 2007, the decision to issue notice at this time, before proper consultation could take place, was less favourable treatment on the grounds of age.
- The decision to issue notice at this time was motivated by the fact that if meaningful consultation took place before notice was issued, the notice would expire after W’s 50th birthday when he would be entitled to enhanced payments.
However the Tribunal went onto find that the discrimination was justified as a proportionate means of achieving a legitimate aim.
They found the aim in question was “to bring about Mr Woodcock’s dismissal for redundancy and to avoid the additional costs to the [Trust] of his attaining the age of 50 before the end of his notice period and thus being entitled to enhanced payment.”
They further found that the means of achieving that aim i.e. the dismissal without proper consultation was a proportionate means of achieving that aim because:-
- W had been aware of the possibility of redundancy since the issue of his “at risk” letter in September 2006
- W was also aware of the original intention to bring about any redundancy dismissals by no later than 30 June 2007;
- W wanted a chief executive role and would not consider any other role suitable;
- There were no alternative chief executive roles available; consultation would therefore have achieved nothing
In reaching this decision the tribunal referred to two EAT authorities which were:-
- A discriminatory act to avoid an employee receiving a windfall can be a legitimate feature of a redundancy scheme (Loxley v BAE Systems (Munitions and Ordnance) Ltd 2008); and
- The avoidance of cost is not, in itselff, a legitimate aim but that cost can be out into the balance with other justifications, if there are any (Cross v British Airways plc  )
It is doubtful in this case however whether W’s enhanced redundancy package is analogous to the windfall referred to in the Loxley case (which related to the possibility of an employee receiving more by way of a redundancy payment and immediate access to pension benefits than they could have earned had they remained employed until retirement) or that cost was one of several justifications in the decision to dismiss W on 22 May 2008 (in fact it appears to have been the only justification).
The clarity provided in MacCullough therefore seems to have been muddied somewhat by the less than clear logic in the Woodcock case. It will be interesting to see how the EAT deal with this issue should the Woodcock case be referred to them. We will keep you updated!