Individuals ‘in employment’, which extends to those under a contract personally to do work, are protected under the Equality Act 2010 against age discrimination, harassment and victimisation. Indirect discrimination is permitted where it is objectively justified, but age is unique in the nine protected characteristics under the Act, as direct age discrimination is also capable of being justified.
Direct or indirect age discrimination is not unlawful if it can be justified as a ‘proportionate means of achieving a legitimate aim’. In indirect discrimination claims, it is sufficient that the aim pursued corresponds to a real business need but, for direct discrimination, only social policy aims will potentially be legitimate. Recent cases have highlighted that, for both types of discrimination, tribunals will apply an enhanced level of scrutiny when assessing whether those aims are proportionate.
The case of Lord Chancellor and Secretary of State for Justice and another v McCloud and others concerned transitional provisions applied to reforms to the judicial pension scheme, under which older judges were permitted to remain in a scheme, either until retirement, or until the end of a period of tapered protection. It was estimated that those with no or tapered protection would incur losses running into hundreds of thousands of pounds as a result of the changes.
The government conceded that this was less favourable treatment because of age and that the provisions also had a disproportionate impact on female and BAME judges, and so amounted to prima facie indirect sex and race discrimination. But it argued that the transitional arrangements were justified because they were necessary to protect those within 10 years of retirement, and to ensure consistency of approach across all public sector pension reforms.
The Employment Appeal Tribunal (EAT) held that the tribunal had misdirected itself in concluding that no legitimate aim had been shown – it had failed to take into account the “complex moral and political judgments” involved in formulating social policy.
However, the EAT agreed that the transitional arrangements were not proportionate and so were not justified. It held that the “extremely severe” discriminatory impact on the younger judges (which involved an unattractive combination of lower pension entitlements and increased tax burden) far outweighed the public benefit of the policy; there were less discriminatory ways of achieving the same aim and the discriminatory effects of the transition arrangements outweighed the good of the social policy objective.
Tips for employers
Discrimination claims can be costly to defend, and employers that fail to properly consider these issues risk reputational damage as well as significant financial compensation claims. So when will discrimination be justified?
There is no exhaustive list, but cases in the UK courts and the European Court of Justice provide examples of potentially legitimate aims such as creating a balanced workforce; promoting the recruitment of younger workers; promoting inter-generational fairness; ensuring dignity for older staff members; and rewarding experience. On the other hand, cost saving by itself is not legitimate. Whether a legitimate aim applies will depend on the particular set of facts.
In the case of any policy that is directly age discriminatory, such as a compulsory retirement age, employers need to ensure they have a legitimate social policy aim, not just a business need. This makes it harder in practice to justify direct age discrimination and so employers may wish to consider whether there is an alternative, such as a genuine occupational requirement, in which their legitimate business needs are not restricted by considerations of social policy.
If they have a legitimate aim, employers will also need to show that their actions are a proportionate means of achieving that aim. This involves a balancing exercise between the importance of the aim pursued and the extent of the discriminatory effect, and evidence will be crucial.
It is estimated that extending the same level of protection to all serving judges regardless of age in McCloud would have increased the cost to the public purse from about £23m to £70m, and that there are even greater sums at stake in the case of London Fire and Emergency Planning Authority & others v Sargeant & others, which concerns similar issues relating to changes to firefighters' pensions. We understand that the government will appeal both cases, so we can expect further consideration by the Court of Appeal of what amounts to a legitimate aim and proportionality.
Jane Amphlett is head of employment and immigration, and Anjali Raval is an associate, at Howard Kennedy