Justifying discrimination - Case Round-Up: March 2015

In this month's round-up, Mark Shulman consultant solicitor with Keystone Law, looks at recent cases on defences of justification in discrimination claims.

Mark Shulman, Consultant Solicitor at Keystone Law

Justification – shortened redundancy process
Could the dismissal of the Claimant shortly before her 55th birthday be justifiable age discrimination? Possibly said the EAT in [Sturmey v The Weymouth & Portland Borough Council ]()UKEAT/0114/14/RN - the ET's reasons were insufficient and so the case had to be remitted for further findings on liability.

The Claimant was employed as a Risk Management and Insurance Officer by Weymouth & Portland Borough Council ("the Council"). She was dismissed for redundancy with her notice period expiring a few days before her 55th birthday, at which age she would have been entitled to take an immediate pension.

It was her case that the timing of her dismissal was unlawful age discrimination. She was placed into the redeployment pool in May 2012. A draft internal confidential report which dealt with the Claimant's position, stressed the "significant pension costs" if termination did not take place before 19 December 2012.

No suitable vacancies were identified and by August 2012 the Claimant had been in the redeployment pool for three months. At this point she was signed off ill with stress. The Respondent arranged for an occupational health report to be obtained. The report advised that the Claimant's symptoms would not alter until the redundancy process currently in play had reached a conclusion. A meeting in September 2012 decided to make the Claimant redundant. Notice was given by letter dated 6 September. Evidence showed that other employees (relied on as comparators) who had been the subject of "at risk" notices had been in the redeployment pool for six months before being redeployed.

The Claimant's case was that the timing of the dismissal was affected by the fact that she was approaching the age of 55. The Council's case was that the timing of the dismissal was not affected by the Claimant's age.

The ET dismissed her claim of age discrimination, finding that the Claimant was not dismissed 'because of' her age as a younger person in the same position as the Claimant would also have been dismissed in comparable circumstances. The Claimant was not therefore treated less favourably than an appropriate comparator and was dismissed because her job was redundant and she had no real prospect of redeployment.

The ET found that alternatively, if the timing of the redundancy decision was potentially discriminatory, the redundancy was justifiable. (It is unique to the protected characteristic of age that direct age discrimination can be justified - see section 13 of the Equality Act 2010 ("EqA")).

The Claimant appealed and the EAT thought that there was significant evidence to suggest that timing may have been a critical issue and that the treatment of the Claimant on the question of timing may have been less favourable than that received by others because of age. The ET should therefore have explained how it dealt with these issues, but it had not properly grappled with the material before it and their reasoning was not sufficient.

**Burden of proof for justification
**But even if the timing of the dismissal was discriminatory, could any such discrimination be justified? The EAT confirmed that where the issue of justification arises, the Respondent has the burden of showing that its less favourable treatment because of age was justified (i.e. that the treatment was a proportionate means of achieving a legitimate aim). So, where as in the present case the Council wished to omit or elide stages in a redundancy and redeployment process because of age, what it had to justify was not the redundancy itself, but the discriminatory treatment. "It is not the game it must justify; it is the moving of the goalposts".

Could that be done in the present case? The ET's view had been that the case of [Woodcock v Cumbria PCT]() [2012] ICR 1126 showed "remarkable similarities" with the facts of the Claimant's case and was therefore decisive. But the EAT thought that Woodcock was not intended to set out any general principle as to whether omitting or eliding stages in the redundancy process to save pension costs will always achieve a legitimate aim or will always be a proportionate means of doing so. On the contrary, the exceptional features of that case were emphasised in the Judgment of Rimer LJ, who referred to "the 'very particular' circumstances of the case".

The treatment in Woodcock was proportionate because the costs of providing the additional sum for pension costs was truly enormous and the potential need for it resulted from a chapter of accidents which had worked in the employee's favour. However, in the Claimant's case, matters concerned an employee with a more ordinary financial status as part of a general re-organisation where budgetary allowance was expected to be made for those who happened to be 55, (or would reach the age of 55), during the process. It was not obvious that there was any "series of accidents" in her case. It just happened that she was in her 54th year when the re-organisation took place.

The ET ought to have considered and given reasons for its conclusion on proportionality without saying that Woodcock was decisive. Its reliance on Woodcock was not appropriate and the appeal was allowed (on both the timing issue and on justification) and the case remitted to be heard by a freshly constituted ET.

**Justification – sickness absence
*Could the employer's denial of a bonus due to absence on disability-related sick leave be justified? No, said the EAT in [Land Registry v Houghton & Others]()* UKEAT/0149/14/BA.

The Respondent operated a discretionary bonus scheme under which all eligible employees received a bonus of £900. However, whereas managers had discretion in misconduct cases that a warning for conduct would not effect entitlement to the bonus (if awarded), no such discretion existed in relation to any sick absence warning. Each claimant was disabled and had had a number of sick absences attributable to their disability. The Respondent had made reasonable adjustments, both to assist the Claimants in overcoming their disabilities and in adjusting the usual trigger points at which a warning procedure for absence became engaged. Despite that, each claimant received a sickness absence warning which triggered a denial of their bonus.

The employees concerned brought proceedings for disability discrimination and won their claims at the ET under section 15 EqA (discrimination arising from disability). The ET decided that non-payment of bonus was the consequence of each Claimant's disability. Further, the non-payment to the Claimants could not be justified as it was disproportionate to achieve the legitimate aim of acknowledging employees' contributions towards corporate achievements and specifically to encourage and reward good performance and attendance. The Respondent appealed.

Balancing exercise
The EAT had no hesitation in concluding that, on the facts, the Claimants here satisfied the section 15(1)(a) EqA test (i.e. that they had been treated unfavourably because of something arising in consequence of their disability). The remaining issue was therefore whether that treatment could be justified. The ET had decided that the scheme could not be justified, finding that the non-payment to the Claimants was disproportionate.

At the appeal, it was common ground that the Respondent had a legitimate aim in operating the bonus scheme. It was also common ground between the parties at the appeal that the ET had correctly identified the classic test on justification which meant that "… "justifiable" requires an objective balance between the discriminatory effect of the condition and the reasonable needs of the party who applies the condition. …" (Hampson v DES [1989] ICR 179).

Had the Respondent shown that the scheme itself was a proportionate means to achieve that aim? No said the EAT. The question for the ET had been whether the Respondent had shown that the scheme itself was a proportionate means to achieve that aim, balancing the discriminatory effect on the Claimants of the applicable scheme condition (non-payment to an employee with a sick absence warning). The reasons why the Respondent failed to establish the justification defence was because:

* having decided to issue a warning for sick absence, the manager had no discretion to decide that the employee would not then be excluded from receiving a bonus (unlike the position with a warning for conduct) and no explanation was given for that anomaly; * it followed from that lack of discretion that no account could be taken of any improvement in performance after the sickness absence warning and in circumstances where the legitimate aim of the bonus scheme was to reward good performance and attendance.

Ultimately, the balancing exercise was a matter for the ET (absent any irrelevant factors being taken into account or relevant factors being disregarded). The EAT saw no evidence of that having happened and accordingly no error of law was shown such as to interfere with the justification finding by the ET.

Justification – imposing new terms and conditions
*Was the requirement to accept new terms and conditions a PCP which was indirectly discriminatory on the grounds of age, and if so, could it be justified? In [Braithwaite & Ors v HCL Insurance BPO Services Ltd; Edie & Ors v HCL Insurance BPO Services Ltd]()* UKEAT/0152/14/DM; UKEAT/0153/14/DM, the EAT agreed that there was a PCP, but considered that it could be justified.

Following a TUPE transfer, the Respondent was facing financial losses and decided, following consultation, to introduce a single set of terms for all employees that would not provide entitlement to certain benefits. This put older employees at a disadvantage (as they would for example not have contractual entitlements to enhanced redundancy payments) and they had built up the greater contractual entitlements by virtue of longer service. Various workers pursued claims for indirect age discrimination at the ET.

The ET found that the requirement to enter a new contract was a provision, criterion or practice ("PCP"). It considered (but rejected) the employer's arguments, based on the decision in ABN Amro Management Ltd v Royal Bank of Scotland (UKEAT) 0266/09DM) that a change in terms and conditions was not itself discriminatory and could not amount to an indirectly discriminatory PCP. The EAT's view was that, as the Respondent required employees to agree to the new terms and conditions or be dismissed, that was a provision or practice applied to the employees. If they wished to remain in employment, they had to agree to new terms and conditions. That provision or practice did put certain employees within a particular age range at a particular disadvantage. The EAT agreed with the ET's conclusions on this issue.

Correct approach to justification
Could such a PCP be justified? The ET had dismissed the claims on the basis that the introduction of the new terms was a proportionate means of achieving a legitimate aim (i.e. to reduce staff costs to ensure the Respondent's future viability and to have competitive, non-discriminatory terms and conditions).

The Claimants appealed against the finding that the PCP was objectively justified on the basis that the ET had not conducted a sufficiently rigorous and critical analysis of the issue of justification.

The Claimants contended (and the EAT accepted) that the correct approach on the issue of justification was as stated by the Court of Appeal in the case of Allonby v Accrington College [2001] ICR 1189 and in Hardy & Hansons plc v Lax [2005] ICR 1565. Their case included the arguments that the Respondent had failed to consider whether the PCP was reasonably necessary as it had not analysed alternatives advanced by the employees as a means of achieving the legitimate aim. The employees also contended that the ET had failed to consider whether the PCP was a proportionate means of achieving the legitimate aim, given that it involved the removal of benefits from the affected employees and the use of those benefits to subsidise increases in benefits to other employees.

Was the ET's approach correct? The EAT pointed to the fact that the ET's decision had set out relevant paragraphs from the decision in [HM Land Registry v Benson]() [2012] ICR 627 and various paragraphs of the decision of Baroness Hale in the Supreme Court in Chief Constable of [West Yorkshire v Homer ]()[2012] ICR 704. The fact that the ET had identified the correct case law and the correct passages identifying the relevant approach to be adopted to the task in hand was a very strong indication that it properly understood the correct approach. Furthermore, the structure of the ETs decision reinforced the fact that it understood the exercise it was engaged upon.

The EAT accepted that the ET had understood the exercise it was engaged upon and had adopted the correct approach in that it:

* identified a legitimate aim.

The aim was to reduce staff costs to ensure the Respondent's future viability and to have in place competitive, non-discriminatory terms and conditions. The EAT considered that it was, as a minimum, a legitimate aim for a business to seek to break even year-on-year and similarly legitimate for a business to make decisions about the allocation of resources.

* Considered whether the measures were reasonably necessary for the achievement of the Respondent's legitimate aim.

The EAT thought that the ET had carried out a proper analysis of a number of factors in considering whether the measures were reasonably necessary for the achievement of the Respondent's legitimate aim. The ET was well aware of the alternatives proposed by the Appellants, summarised as including the phasing in of the proposed changes in terms and conditions, securing extra funding from the parent company, seeking voluntary redundancies and reducing, rather than eliminating, changes. The ET was entitled to conclude that phasing in changes, or reducing the changes, would delay the achieving of the legitimate aim of reducing staff costs to secure future viability and would have compounded the losses and continued in place conditions which were not market competitive. Seeking further subsidies from the parent company, (extending the time scale for addressing the Respondent's losses), would not have met the legitimate aim of the Respondent of reducing staff costs to secure its future viability. And seeking voluntary redundancies would not have addressed the legitimate aim of the Respondent, as there was no need for fewer employees; its concern was to reduce the unit cost per employee.

* Considered whether the imposition of the PCP was proportionate.

The ET had addressed the question of whether "the wholescale removal of benefits" from the affected employees and the use of that removal to subsidise effective increases to other employees was proportionate. Despite the impact of the changes proposed, the ET was entitled to conclude that there was no practicable or reasonable way of achieving the aim of the Respondent of reducing staff costs to secure viability and to have in place competitive terms unless it imposed the requirement that employees enter into a single set of terms, even though that would benefit a number of employees to some degree.

* Correctly applied the burden of proof on the issue of justification.

The ET had set out an extract from Chief Constable of West Yorkshire v Homer [2012] ICR 704 which expressly said that a "provision, criterion or practice is justified if the employer can show that it is a proportionate means of achieving a legitimate aim." Thus the ET had identified the fact that the burden lay upon the Respondent on the issue of justification.

Therefore the ET had carried out a proper critical evaluation of whether the PCP was objectively justified and the appeal was dismissed.

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.

Published: 09/03/2015 14:58

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