Cockram v Air Products Plc UKEAT/0122/15/LA
Appeal against the dismissal of the claimant's claim of age discrimination. Appeal allowed and remitted to a fresh Tribunal.
The respondent ran a scheme, known as the "Long Term Incentive Plan" ("LTIP") in which certain employees were offered stock options. The award of options to the employee was discretionary. Options awarded to an employee vested at various times. Options which had been awarded to an employee but were not able to be realised for a period of time are described as "unvested options". The general principle was that unvested options were forfeited when the employee left the respondent, except in certain defined situations. It was accepted that the claimant left employment of the respondent aged 50, but the respondent did not allow him to take his unvested options, because although he had retired, he had not reached the age of 55. The issue between the parties was whether the respondent could justify having a rule that the claimant was not entitled to unvested options because he had not reached the age of 55. The respondent accepted that it had discriminated against the claimant on the basis of age but argued that the discrimination was justified. The ET rejected the claimant's claim of age discrimination saying that "We accept that limiting the advantage enjoyed by one age group over another is a legitimate social policy aspect of intergenerational fairness. Our conclusion is that the Respondent's aim is a legitimate aim." The claimant appealed.
The EAT allowed the appeal. The ET had erred in law in finding that the aim in this case was anything other than consistency between employees who were members of two different pension schemes. The ET had not given sufficient reasoning for its acceptance that the aim included intergenerational fairness; nor had it in its Reasons explained what that intergenerational fairness consisted of.
Appeal No. UKEAT/0122/15/LA
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE
At the Tribunal
On 10 September 2015
Judgment handed down on 24 November 2015
THE HONOURABLE LADY STACEY
MRS C BAELZ
MS G MILLS CBE
AIR PRODUCTS PLC (RESPONDENT)
Transcript of Proceedings
For the Appellant
MR JAMES LADDIE QC (of Counsel)
MR DANIEL TATTON-BROWN (of Counsel)
Stevens & Bolton LLP
For the Respondent
MR DANIEL STILITZ QC (of Counsel)
MR ANDREW BLAKE (of Counsel)
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
The Respondent refused to allow the Claimant to take stock options on leaving employment because he was under 55 years of age. Age discrimination was admitted, but said to be justified.
Held: the Employment Tribunal did not carry out the necessary examination of the asserted aim, nor did it explain its finding that it was a legitimate aim. Remitted to a new Tribunal to decide.**THE HONOURABLE LADY STACEY**
- This is the appeal of the Claimant in the case of Michael Cockram and Air Products plc. We will refer to the parties as Claimant and Respondent as they were in the Employment Tribunal. Mr James Laddie QC along with Mr Daniel Tatton-Brown appeared for the Claimant and Mr Daniel Stilitz QC along with Mr Andrew Blake appeared for the Respondent. Mr Tatton-Brown and Mr Stilitz with Mr Blake appeared in the Employment Tribunal.
- The Employment Tribunal ("ET") sat in London and comprised Employment Judge Zuke, Ms N Christofi and Mr M Walton. The Written Reasons were sent to the parties on 2 January 2015. The ET decided that the Claimant's claim of age discrimination fails and is dismissed. He appeals against that decision.
- The facts are that the Respondent is an international company with its parent company based in the USA. It has operations in around 50 countries and employs about 20,000 people worldwide. The Claimant worked in the UK, where there are about 1,500 employees.
- The Claimant worked for the Respondent from 1 August 1988 until 28 February 2013. It is wrongly stated by the ET that the latter date was his 50th birthday. In fact his birthday was on 14 June 2012, but nothing turns on that error. The circumstances of his leaving were controversial between the parties; he made claims in respect of unfair constructive dismissal and whistle blowing. Those claims were dismissed; this appeal is not concerned with them.
- The Respondent ran a scheme, known as the "Long Term Incentive Plan" ("LTIP") in which certain employees were offered stock options. We shall refer to it as "LTIP" or "the plan" as the context requires. The plan is managed by the board of directors of Air Products and Chemicals Inc in the USA. It is set out in writing and amended from time to time by the board. The version in force at the time of the Claimant's leaving was that amended and restated as of 24 January 2013. Interpretation of the plan as it applies to employees is entrusted to the Management Development and Compensation Committee. The award of options to the employee is discretionary. Options awarded to an employee vested at various times, all in terms of the conditions set out in the plan. Options which had been awarded to an employee but were not able to be realised for a period of time are described as "unvested options". The general principle was that unvested options were forfeited when the employee left the Respondent, except in certain defined situations. Those situations are referred to as exemptions, and they comprise death, disability and retirement.
- It was accepted that the Claimant left employment of the Respondent aged 50, and as he had entitlement under the pension scheme to take his pension at that age, he did so. The Respondent did not allow him to take his unvested options, because although he had retired, he had not reached the age of 55. The issue between the parties was whether the Respondent could justify having a rule that the Claimant was not entitled to unvested options because he had not reached the age of 55. The Respondent accepted that it had discriminated against the Claimant on the basis of age but argued that the discrimination was justified. The value of the unvested options was in dispute. Had the ET found in favour of the Claimant, a hearing would have been necessary to determine the worth of his unvested options. The figure would depend on the price of shares at the date of valuation. The Claimant estimated the value at £245,000. The Respondent in contrast estimated the value at £27,000. Counsel for the Respondent accepted that, even on the Respondent's estimate, the value was significant.
- The purposes of the plan are described in the current scheme thus:
"The purposes of this Plan are: (i) to provide long-term incentives to those executives or other key employees who are either in a position to contribute to the long-term success and growth of [the company] or who have high potential for assuming greater levels of responsibility or who have demonstrated their critical importance to the operation of their organizational unit; (ii) to assist the Company and Participating Subsidiaries in attracting and retaining nonemployee directors … executives and other key employees with experience and ability; and (iii) to associate more closely the interests of such directors, executives and other key employees with those of the Company's shareholders."
Clause 6(c)(iv) of the scheme concerns termination of service and so far as relevant is in the following terms:
"(A) In the event an employee Participant ceases to be employed due to Retirement, Disability, or death, his or her Stock Options shall continue to be or become exercisable following such cessation of employment as if the Participant had continued to be an active employee and such Stock Options may be exercised by the Participant … on the same terms and conditions as would have applied to such Participant had such Participant continued to be an active employee …
(B) Except as provided in clause (A) of this Section 6(c)(iv), if an employee Participant's employment with the Company … terminates for any reason other than for cause, any of his or her outstanding Stock Options that are not exercisable as of the date employment terminates shall be forfeited …"
Retirement is defined in clause 14 thus:
" "Retirement" shall mean
(a) in the case of an employee Participant, separating from service with the Company … on or after a customary retirement age for the Participant's location, with a fully vested right to begin receiving immediate benefits under a retirement income plan sponsored or otherwise maintained by the Company …"
There is no definition of "customary retirement age".
- The Respondent ran a defined benefits (or final salary) pension scheme which closed to new members from the beginning of 2005. The scheme provided for pensions from age 50. The Claimant was a member of the defined benefits scheme. The Respondent opened a new defined contribution scheme for new employees, in which the minimum age at which pension was payable was 55. In 2010 the UK Parliament passed legislation to the effect that the earliest age at which pensions could be taken is 55. The legislation provided for protection for employees who were already members of schemes providing for a minimum age of 50, which included the Claimant. There was some uncertainty about this within the Respondent; having taken legal advice it came to the conclusion that the Claimant was entitled to take his pension from age 50. Thus as he left during his 51st year, he was entitled to, and did, take his pension.
- The Respondent maintained the position that despite being entitled to a pension, the Claimant was not retiring at a customary retirement age and so was not entitled to take his unvested benefits. The Claimant disagreed. The ET found at page 11 paragraph 66 that as a result, Ms Reese and Ms Afflerbach, Corporate Secretary and Chief Governance Officer of the Respondent, wrote to the LTIP Committee on 1 March 2013 as follows:
"In the United States "Retirement" has been interpreted to be attaining age 55 with at least 5 years service, reflecting the age and service requirements for early retirement under the Salaried Pension Plan … In the United Kingdom (UK) until recently pension plan participants could retire and commence their pension benefits at age 50 … Since the government changed the rules in 2010, two employees between the ages 50 and 55 have terminated … A third employee in this age category [the Claimant] voluntarily terminated employment this month. This employee is challenging the age 55 interpretation of Retirement on the basis that he is eligible to commence his pension benefit under the UK pension plan because of his protected status, and should therefore be treated as separating from service at a 'customary retirement age' … We are requesting that the Committee determine that in the UK, 'Retirement' for purposes of the Plan occurs upon separation from service after attaining the age of 55. We believe 55 is now the 'customary retirement age' in the UK, notwithstanding that some benefits under our pension plan are grandfathered, and we want treatment to be consistent for employees in the defined benefit and the defined contribution scheme."
- The numbering of the paragraphs in the ET's Reasons goes awry at the top of page 12, and so on page 12 paragraphs wrongly numbered 59 to 62 set out findings about the Respondent's response as follows:
"59. Mr Davis, a Director and Committee member wrote to Ms Afflerbach on 1 March asking if the individual (ie the claimant, who was not referred to by name) knew when he resigned that his LTIP benefits would because [sic] he was below age 55. Ms Reese replied to that enquiry on 2 March:
"Regarding the individual, he submitted a notice letter dated 25 July 2012 stating that he would resign [on] 28 February 2013. In July 2012 the retirement age under the defined benefit pension plan was being administered as age 55 to avoid making unauthorised payments until there was clarification of the ambiguity in the Pension Plan."
60. Mr Davis was satisfied with this explanation. He replied "… I agree that he should have been fully aware when he notified us of his plan to retire early that he would not be included in the LTIP payout as he was not yet 55."
61. The Committee approved the memorandum on 8 March, and resolved that
"it is the Committee's interpretation under the Plan for UK employee participants occurs upon separation from service on or after attaining age 55."
62. Ms Patterson informed the Claimant on 15 March that he would forfeit the LTIP benefits because he was below age 55."
- The relevant statutory provision is the Equality Act 2010 ("EqA") section 13, which provides as follows:
"(1) A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.
(2) If the protected characteristic is age, A does not discriminate against B if A can show A's treatment of B to be a proportionate means of achieving a legitimate aim."
- The ET note the Respondent's position as accepting that the refusal of the LTIP benefits to the Claimant was direct age discrimination, which it then sought to justify. It gave three aims which it asserted were legitimate aims, as follows:
(i) Intergenerational fairness and consistency;
(ii) Rewarding experience and loyalty;
(iii) Ensuring a mix of generations and staff so as to promote the exchange of experience and new ideas.
- Counsel for the Claimant did not accept that (i) in its entirety and (ii) so far as related to rewarding loyalty were legitimate aims. He accepted that (iii) may be.
- The ET directed itself on the law. It found the leading authority to be [Seldon v Clarkson Wright and Jakes ]() IRLR 590. It deduced eight points from that case, as follows:
- The aim of measures which are justified must be social policy objectives, as opposed to purely individual reasons particular to the employer's situation.
- There have been a number of aims recognised in the context of direct discrimination; any measure must be both appropriate to achieve its aim and necessary to do so.
- The gravity of the effect upon those discriminated against must be weighed against the importance of the legitimate aim in assessing the necessity of the measure chosen.
- Intergenerational fairness is a legitimate objective. It can mean a number of different things depending upon particular circumstances.
- After the event rationalisation is permissible.
- An aim identified has to be found to be legitimate in the particular circumstances.
- Means have to be scrutinised carefully to see whether they do meet the objective and that there are not other, less discriminatory measures which would do so.
- Where it is justified to have a general rule, then the existence of that rule will usually justify the treatment which results from it. It will be a rare case in which the particular application of the rule has to be justified.
It was accepted that the ET had correctly distilled the essence of the case of Seldon. The question was whether it had applied the law as there set out.
- The ET dealt firstly with the first aim set out above. Counsel for the Respondent submitted to the ET that the Respondent wanted to achieve consistency between those in the defined benefits pension scheme and those in the defined contributions scheme. We noted errors in paragraphs 94 and 96 of the Written Reasons where the ET muddled the two schemes, but we and counsel were content to proceed on the basis that the ET had properly understood the position which was that the defined benefits scheme closed to new members on 31 December 2004, and the defined contribution scheme came into effect immediately thereafter. The defined benefit scheme provided a more generous pension than the defined contribution scheme. There was no agreement on whether the ET had made a mistake in paragraph 95, penultimate line, by referring to the defined benefit scheme. Nothing turns on it; it was accepted that the ET were correct in stating at paragraph 96 that:
"96. … Members of the more generous scheme will generally be older than members of the defined contribution scheme."
Thus the ET accepted counsel for the Respondent's assertion that members of the defined benefit scheme, including the Claimant, are in a more favourable position than members of the defined contribution scheme because they can take their pension at age 50, and the pension is more generous.
- The ET accepted the submission made by counsel for the Respondent that the aim of the Respondent in discriminating against the Claimant on grounds of his age was to achieve intergenerational fairness. It rejected the submission made by counsel for the Claimant that in the circumstances intergenerational fairness was not a social policy objective, but rather an individual reason related to the Respondent's situation; as such it was not a legitimate aim as set out in Seldon. Their reasoning was that intergenerational fairness may be a legitimate aim; and it may manifest in different ways in different cases. Some cases, such as those which provided for reduced opportunity for promotion of older employees in order to increase opportunities for younger employees would result in one generation's loss being another generation's gain. The ET accepted that feature was not present in the current case. In paragraph 100 the ET gave its conclusion thus:
"100. However, we are persuaded by Mr Stilitz [counsel for the Respondent] that this is not a necessary aspect of intergenerational fairness. The categories of intergenerational fairness are not closed - "It can mean a variety of things" (see Seldon above). We accept that limiting the advantage enjoyed by one age group over another is a legitimate social policy aspect of intergenerational fairness. Our conclusion is that the Respondent's aim is a legitimate aim."
In considering the rewarding of loyalty, the ET found authority for the proposition that it could be a legitimate aim in the case of MacCulloch v Imperial Chemical Industries plc  ICR 1334 and in the Advocate General's opinion in HK Danmark v Experian  ICR 27. It did not accept counsel's submission that in light of Seldon **the rewarding of loyalty could not be a legitimate aim. The ET decided that rewarding loyalty could be a legitimate aim, and that the way in which that aim is achieved must be examined when considering proportionality.
- The ET noted counsel for the Claimant's submission that there was an absence of evidence that the Respondent's aims were in fact being pursued. They did not accept that submission. At paragraph 107 they referred to evidence from Ms Reese:
"107. … that the purpose of the LTIP is to strike a balance between encouraging retention up to a point, and then providing some incentive to retire, in order to create opportunities for younger employees. That point was decided to be the age of 55, which became known as the customary retirement age."
The ET stated that it preferred counsel for the Respondent's submission, that there was adequate evidence to show that the aims were being pursued.
- Having found that the three aims set out above were all legitimate aims which the Respondent had in this case, the ET the directed itself on the issue of whether the treatment was a proportionate means of achieving those aims. It set out four principles taken from MacCulloch: that the burden was on the Respondent; that the measures must correspond to a real need, and must be appropriate and reasonably necessary with a view to achieving the aim; that a balance must be struck between the discriminatory effect of the measure and the needs of the undertaking, with more cogent justification needed where the disparate adverse impact was more serious; and that it was for the ET to weigh the reasonable needs of the undertaking against the discriminatory effect and to make its own assessment.
- The ET noted counsel for the Claimant's submissions that the provision was not an appropriate or reasonably necessary means of achieving the end, because the end could be achieved by using less discriminatory means. He gave as examples: (i) all departing employees could keep LTIP benefits; (ii) some departing employees who were classed as "good leavers" could keep them; (iii) length of service could be the criterion for deciding which employees kept LTIP benefits; and (iv) everyone aged 50 could keep LTIP benefits. These submissions were not accepted. The ET decided that treating all employees the same no matter which pension scheme they were in achieved intergenerational fairness. Using the age of 55 gave an incentive for employees to stay until that age, and thereafter provided no disincentive to retirement. The ET found that struck a balance between rewarding experience and loyalty, encouraging retention, and ensuring a mix of generations. The ET found the length of service as the criteria the most arguable suggestion. It discussed an example where a person with 22 years' service between ages 23 to 54 would lose out, compared to a person with 7 years' service between ages 48 to 55. Nevertheless, the ET accepted counsel for the Respondent's submission that the Respondent had to justify the policy viewed overall, rather than in every case. They found support for that view in MacCulloch and Seldon.** They accepted evidence given by Ms Reese that the policy was intended to balance all factors.
- Further, the ET found that the only way to achieve the aim of consistency between members of the schemes was by fixing the age at 55, because those in the defined contribution scheme could not take their pensions before reaching that age. They also found relevant evidence from Ms Patterson to the effect that 50 is a young age for retirement, and that 55 is the lowest customary retirement age in the countries in which the Respondent operates. They found that reducing the age below 55 in the UK might be perceived as unfair by employees elsewhere. They also found that 50 could be seen as an arbitrary age, unfair to those younger.
- The ET found that in weighing the discriminatory effect against the needs of the Respondent, it was relevant to recall that the Claimant triggered the situation by deciding to leave. Lastly they found that while counsel for the Respondent acknowledged that the financial loss to the individual may be significant, it did not comprise all of his LTIP entitlement as he was entitled to keep those LTIP benefits which had vested by the date of his leaving.
- Mr Laddie QC for the Claimant argued that the ET had erred in law in concluding that justification was made out. Ground 1 was that it was an error of law to conclude that consistency of treatment was a social policy objective rather than an individual aim peculiar to the Respondent. The members of the defined benefit scheme would tend to be older than the members of the defined contribution scheme, but there was no necessary correlation between age and membership of one scheme rather than the other. Counsel argued that "intergenerational fairness" was a label that had been applied to the reason underlying the decision taken by the Respondent to discriminate against the Claimant. In reality, the reason was, according to the evidence accepted by the ET, a desire by the Respondent to have consistency between members of the two pension schemes. A decision to allow the Claimant to take his LTIP benefits would not be at the expense of another employee. While counsel accepted that intergenerational fairness could cover many differing situations, he argued that the reason for this decision was not covered by the label.
- Ground 2 was that there had been insufficient evidence to show that the Respondent actually did pursue an aim of retaining employees who were entitled to LTIP benefits up until age 55. The evidence which might have been expected was, for example, of internal policy documents setting out such a goal, or of a redundancy scheme for employees over 55. There could have been statistical evidence of the age of the workforce, particularly those entitled to take LTIP benefits. Such evidence could have shown a difficulty in achieving a mix of generations. Other evidence could have been led in support of the existence of the aim, such as showing that those who left after attaining 55 were replaced by younger employees. Neither was there any evidence of difficulty in retaining employees until they reached 55 prior to the legislation in 2010 which brought in the higher age of pension entitlement. Counsel argued that the change which the Respondent sought to make from 50 to 55 was not connected to any idea of intergenerational fairness, but rather was for the purpose of achieving consistency between the two pension schemes. As the workforce did not know that LTIP benefits would be forfeited by those entitled to take a pension at 50 if they left before reaching 55, it could not sensibly be said that the policy acted as an incentive for them to stay.
- Counsel argued that detailed analysis of these arguments which had been put to the ET was required. Instead, the ET simply stated that it accepted the submissions of counsel for the Respondent. Counsel argued that parts of the equality questionnaire sent by the Claimant for completion by the Respondent were relevant to his argument that the Respondent did not have the aim now claimed in justification. We heard his argument under reservation, it being indicated to us that it was objectionable as the questionnaire had not been referred to at the ET. We decided to place no weight on it for that reason. Counsel argued that the ET had erred in law or had made a perverse decision as there was no evidence on which to base it.
- Counsel took grounds 3 and 4 together, arguing that, on the authority of Seldon, means of achieving a legitimate aim have to be carefully examined. There was no indication that the ET had done so. There was no evidence demonstrating that the Respondent set out to meet any particular objective, and none to show the extent of any perceived problem. There was no evidence to show how well or otherwise the discriminatory policy had achieved the claimed aims. There was no evidence that the policy, said to be in use to act as an incentive to employees to remain with the company until they reached 55, had been communicated to them. Counsel argued that such a policy could not be an incentive unless the employees knew of it. As he put it, you have to be able to see the carrot.
- Further, counsel argued that the Respondent did not lead any evidence to show that it had properly weighed the considerable financial loss to the Claimant against any perceived benefit. Counsel referred to the case of Hardys & Hanson plc v Lax  ICR 1565 for the level of examination and analysis required by an ET before accepting that discriminatory conduct is justified. Finally, counsel argued that the ET did not provide any proper analysis of the comparison they should have made with the less discriminatory means of linking length of service to retention of LTIP benefits.
- Counsel for the Respondent argued that the aim of the LTIP plan was explained by Ms Patterson, a witness for the Respondent, as "an anchor to keep people in the business". The Respondent operated in a competitive industry where there can be shortages of specialised staff. According to Ms Reese's evidence, the Committee talked every year about the retentive hold of the plan. She gave evidence of an employee leaving even though the Respondent would have wished to retain him, commenting that it was even more likely he would leave before 55 if he could take his LTIP benefits. Thus there was evidence before the ET that one of the aims of the plan was retention of staff.
- The Respondent also wished to allow space for succession by younger staff, and so allowing those who reached 55 to take their LTIP benefits at that age assisted in achieving that aim, as was said in evidence by Ms Reese. Counsel argued that the retirement exception met a number of legitimate aims including workforce planning, and encouraging a mix of generations in the workforce. If enforcement of retirement at age 65 to meet such objectives is legitimate, as found in Seldon, then it must be legitimate and less intrusive to have a scheme whereby retirement at 55 has no disincentive. The challenge presented by the Claimant was not to the principle of having a retirement exception, but rather to the age at which he could take advantage of the exception.
- Counsel argued that the main reason for the Respondent interpreting the retirement provision in the plan as separation from service on or after attaining 55 was to treat employees consistently, and in a manner which ensured intergenerational fairness. He referred to the memo to the Committee which stated:
"… we want treatment to be consistent for employees in the defined benefit scheme and the defined contribution scheme."
His argument was that intergenerational fairness was not a separate single aim of the Respondent, but rather an aim which was part of the aim of treating employees consistently. The retirement exception was there to facilitate workforce planning, and intergenerational fairness was the main reason why the age at which an employee could benefit from that exception was 55. The ET was entitled to find that the Respondent was pursuing a social aim as defined in Seldon. It was part of the workforce planning and succession aims, which are clearly social policy aims. Thus the age which had to be fixed was merely a part of the bigger picture. Counsel referred to the case of [Chief Constable of West Midlands Police v Harrod]() UKEAT/0189/14/DA, in which Langstaff J (President) at paragraph 24 and 25 stated:
"24. … This involves determining what the aim was which the Forces actually had in mind when taking the steps which are complained of as being discriminatory, and not that which they might have had if they had started out with justification of the means adopted at the front of their minds. Identification of such an aim is a question of fact for a Tribunal to determine, and will usually if not inevitably be established by evidence as to relevant history. However, in doing so a Tribunal must bear in mind that the actual aim may be defined within a range which spreads from that which is very broad, to that which is quite specific. Here, it might be said (broadly) that the aim was efficiency; or (more closely related to means) achieving a reduction in staffing; or (running the two together) that it was achieving efficiency by reducing numbers. Since a central feature of what the Forces sought to achieve was certainty, that too might find its way into the expression of the aim, as would be the case if it were expressed as being "to achieve efficiency by reducing officer numbers with certainty". Whether a broad or specific approach is taken cannot sensibly affect the outcome of the proceedings, since if it were to do so the same set of facts, productive of some disadvantage, and might be capable of giving rise to two equally legitimate results. The examples given of three possible statements of aims here shows that the more specific they become, the more they may seem to incorporate means within definition of aims. This does not invalidate the reasoning: as Underhill J (President) recognised in Pulham v Barking and Dagenham London Borough Council ICR 133 and repeated in HM Land Registry v Benson  ICR 627 …:
"… the dichotomy of 'aim' and 'means' is not always clear cut and the two elements can sometimes reasonably be formulated in more than one way."
In saying so he quoted the observation of Elias J (President) in Loxley v BAE Systems Land Sytems (Munitions and Ordnance) Ltd  ICR 1348, when he said that "whether [they] are better described as aims or as proper means of achieving aims is perhaps a matter of semantics" and added his own memorable phrase:
"Tribunals need not cudgel their brains with metaphysical inquiries about what count as aims and what count as means as long as the underlying balancing exercise is carried out"
25. Though identification of the aim which the Respondents had in mind is a question of historical fact, whether the aim is legitimate is a conclusion of law, which is to be answered by the Tribunal."
- Counsel argued that the ET had found as a matter of fact that the Respondent was pursuing a legitimate aim. The Claimant now argued there was no evidence on which the ET could base its finding, hence the decision made was perverse. Counsel argued that was unfounded. As Langstaff J (President) had said in Seldon (No 2) an argument that there was no evidence to support a particular conclusion must mean the there was no evidence at all. There had been evidence in this case, from Ms Patterson and Ms Reese. Thus it was wrong to argue that there had been no evidence. It was for the ET to decide what evidence to accept and what to reject, and the test for perversity was high.
- Counsel argued that the workforce did know of the decision that attainment of the age of 55 was necessary, as there was evidence that two employees had left below that age and forfeited their unvested options. Further, according to counsel it was well known that employees would seek advice from Human Resources if they were thinking of leaving and would ask what pension and LTIP benefits they could expect; such enquiry would lead to confirmation that attainment of 55 years of age was needed.
- The ET had done all it needed do to decide on proportionality, counsel argued. It set out the reasons why it found that the provision of age 55 was proportionate. The age was chosen because 55 was the minimum age in the defined contributions scheme. Similarly the ET had properly considered the other methods which were put forward as being less discriminatory. They rejected them for good reasons which they set out. They did not err in law in doing so.
- Counsel argued that the Claimant's arguments were flawed in linking the retirement exception to the aim of rewarding loyalty and experience. It is the plan itself which does that. The retirement exception is there for purposes of succession, that is to ensure there is no disincentive to retirement of those of 55 or over. If the unvested options were linked to length of service and not to retirement age, the aim of the retirement exception would not be achieved. As was shown by the decision in Blackburn v Chief Constable of West Midlands Police  ICR 505, an employer cannot be forced to adopt a less discriminatory scheme which does not achieve his aims.
- We find that the ET has erred in law in finding that the aim in this case was anything other than consistency between employees who were members of two different pension schemes. The ET has not given sufficient reasoning for its acceptance that the aim included intergenerational fairness; nor has it in its Reasons explained what that intergenerational fairness consisted of. We appreciate that assertions were made in evidence by the witnesses (Ms Reese and Ms Patterson) that intergenerational fairness was the purpose. Thus counsel for the Respondent is correct to say that it cannot be said that there was no evidence. It is not however sufficient for an ET to proceed in this case upon the basis of an assertion without explanation of why that assertion is accepted in the face of other evidence which could tend to contradict it. It is necessary for the ET to explain what it made of the evidence of the memorandum which refers to consistency; of the evidence that nothing was done by the Committee to amend the scheme when the new pension age was introduced with the new scheme in 2005; why nothing was done when the legislation was passed in 2010; and why the provision of 55 as the qualifying age could be said to be an incentive to employees to stay until then if the employees did not know of its existence.
- The ET did not explain sufficiently its reasoning on proportionality. It did not make findings that the Respondent considered the loss sustained by the Claimant and compared that to the aim or aims of the Respondent. More importantly, it did not make findings itself of the loss and then compare that to the aim. We appreciate that the figure for loss was controversial and that a hearing on that would have been necessary had the ET decided in favour of the Claimant. It did not need to have a figure; while the disparity between the figures suggested by each side is large, it is clear that at best for the Respondent the sum lost is a significant sum. We do not find the case of Harrod in point. There is no question in this case of the aim and the means of achieving it legitimately shading into each other. While we respectfully agree that there is no need for the ET to "cudgel its brains" there is a need for clear findings on the aim, why that is a legitimate aim, what steps are taken in implementation, and whether or not the steps taken are appropriate and reasonably necessary to achieve the aim, including a comparison of the loss caused with the aim. We do not find any such reasoning in this case.
- We have decided that the case should be remitted to a freshly constituted Tribunal to decide if the discrimination is justified. The only question is one of law: was the discrimination justified? Thus the new Tribunal should accept the facts as found, and perform the function of finding from those facts what aim or aims were being pursued; whether they were legitimate aims, and whether they were proportionate in light of the discrimination and the needs of the Respondent. Parties will of course be entitled to make such representations on these matters to the fresh ET.
Published: 26/11/2015 11:54