Case review: can employers justify discrimination solely on the basis of cost?
The Court of Appeal have recently held that while cost alone is not sufficient, an employer's need to reduce expenditure due to budgetary constraints imposed by the Government is a legitimate aim, and the discriminatory pay policy a proportionate means of achieving that aim.
Mr Heskett works for the probation service under the Ministry of Justice ("MoJ") and has been employed since 2006.
The pay progression policy was the traditional public sector set-up which allowed probation officers to progress three pay points per year until they reached the top. Pre-2010 it would take around 8-9 years to get from the bottom to the top of the band Mr Heskett was in, however, in 2010 when the economic downturn hit, the Government imposed a pay freeze in the public sector resulting in budgets being cut and public sector services having to tighten their belts. The probation service did so by slowing down the pay point progression so that it would now take 3 times as long to climb the pay point scale.
The result of this meant that those at the top of the scale had nowhere left to go, whilst those lower down were climbing at a much slower pace and had to look far into the future before they'd be earning a comparative salary to their colleagues at the top of the ladder.
At age 38, Mr Heskett brought an indirect age discrimination claim against the Respondent. The essence of his claim was that it would take significantly longer as a result of the policy for younger probation officers to get to the top of the pay band compared to older employees who had already benefited under the old policy thus giving them greater salary and pension benefits.
Under s.19 of the Equality Act 2010, indirect age discrimination arises when an apparently neutral provision, criterion or practice (PCP) has the unjustifiable effect of disadvantaging people who share a particular age. A PCP is justified if the employer can show it is a proportionate means of achieving a legitimate aim.
Mr Heskett's claim was dismissed by Employment Tribunal in October 2017 as was his appeal by the Employment Appeal Tribunal in June 2019 on the basis that the progression policy was prima facie discriminatory but was a proportionate means of achieving that aim. He then appealed to the Court of Appeal ("CoA") on the basis that there is no distinction between cost-cutting and absence of means as both have the sole aim of reducing a financial burden.
Court of Appeal decision
The CoA undertook a lengthy excursion through domestic and European case law and said it was clear from the Court of Appeal case in Woodcock v Cumbria Primary Care Trust  that actions aimed at saving or avoiding costs cannot, without more, amount to a legitimate aim. The fundamental question in this case therefore was whether the aim was no more than a wish to save costs. If it was, justification failed.
The CoA was satisfied that an employer's need to reduce its expenditure and staff costs, to balance its books, can be a legitimate aim. It emphasised that establishing a legitimate aim is only the first step in the consideration of the justification defence and that the focus in cases concerning financial pressures should be on whether or not the measures adopted are a proportionate means of achieving that aim. The CoA held in this regards that the MoJ's need to observe the budgetary constraints imposed by the Government's pay freeze is a legitimate aim. In particular, Underhill LJ considered he would take 'some convincing' before he could be persuaded it was illegitimate for a government department to keep to the budget imposed by the Treasury (which must be right as a common sense conclusion).
The Court of Appeal also upheld the tribunal's finding that the changes to the pay policy were justifiable on a temporary basis. The Court said that it should be open to an employer to argue that something is proportionate as a temporary response whilst recognising it wouldn't be proportionate in the long term. However, as the ET had itself recognised in this case, the longer a stop-gap remains in place, the harder it might become to justify.
That analysis will clearly be dependent on the facts of the individual case, but the employer would be wise to keep under review at least.