Indirect age discrimination justified in cost-based selection procedure for redundancy

Is an employer justified in selecting employees for voluntary redundancy on the basis of who would cost the least to dismiss, even where such a selection would give rise to indirect age discrimination to employees in a particular age group?

Yes, held the EAT in HM Land Registry v Benson.

HMLR, needing to reduce its headcount, offered a voluntary redundancy/early retirement scheme, with enhanced benefits. Receiving more applicants than could be accommodated within its £12m budget, a selection exercise was undertaken, in which HMLR opted to choose employees who it would cost the least to dismiss. This allowed it to maximise the number of redundancies within its budget. Unsurprisingly, the adoption of this policy had a disproportionate impact on employees in the age group 50-54, who would have been entitled to early retirement on an unreduced pension. Claims for indirect age discrimination were made by five employees and upheld by the Employment Tribunal (ET) on the basis that HMLR could have afforded to select them for redundancy even whilst doing so would have cost them an additional £19.7m. In the ET’s view, HMLR could not therefore objectively justify its indirect discrimination by claiming its actions were a proportionate means of achieving a legitimate aim.

Allowing the appeal, the Employment Appeal Tribunal held that the budget of £12m was part of a “legitimate aim”. By finding that the extra £19.7m was affordable, it had implied HMLR could find the funds and that it would not become insolvent by doing so. The ET should have accepted the employer’s decision to allocate a redundancy budget as representing a genuine “need” which was to be balanced against the impact complained of. Had the ET done that, it would have found HMLR’s indirect discrimination to have been objectively justified as a proportionate means of achieving a legitimate aim.

In reaching its decision, the EAT rejected an argument based on Pulham v London Borough of Barking and Dagenham. In that case, the EAT had stated that an employer could not automatically justify discrimination by referring to the costs of a particular budget and then simply declaring the budget to be exhausted. The Pulman case was distinguished from the HMLR case on the basis that it had involved a directly discriminatory pay practice, which the employer wished to continue on grounds of cost, rather than an isolated budget for a particular purpose (redundancy) that was not directly discriminatory but for which a selection exercise could only be done practicably on the basis of indirect age discrimination.

Additionally, the EAT rejected HMLR’s appeal against the ET’s finding of indirect sex discrimination against a female employee who had been refused voluntary redundancy on the basis she was on a career break and would not represent a cost saving. She had not been notified that employees in her position would be excluded, but would have given notice to return to work within the relevant period in the event she had have been. It was accepted that the exclusion of employees on career breaks had a disproportionate impact on female employees. Whilst in principle it was capable of being justified, the ETA found that the failure to notify her was unfair. As a result, the criteria applied to her could not be relied on as proportionate and the ET’s decision on that aspect of the case was upheld.

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1 Response to Indirect age discrimination justified in cost-based selection procedure for redundancy

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