A group of London firefighters has won an appeal to overturn an employment tribunal ruling that they were not subject to age discrimination after new pension rules were brought in.
The London Fire and Emergency Planning Authority’s implementation of transitional procedures to bring employees into a new public sector pension scheme had a discriminatory impact on older workers, the Employment Appeal Tribunal (EAT) found.
Despite this, the authority was pursuing a legitimate aim, and could potentially justify that discriminatory effect, it found in a judgment handed down on 29 January 2018.
However, the judge found that the employment tribunal that dismissed the firefighters’ claims in February 2017 had inappropriately applied a ‘margin of discretion’ approach when considering if the transitional scheme’s banding was proportionate to achieving the legitimate aim, and incorrectly found that the means were proportionate.
Mrs R Sargeant and a group of other firefighters had been members of the Firefighters’ Pension Scheme (FPS) for six years when public sector pensions underwent a national review. This was initiated after the Hutton report by the Independent Public Service Pensions Commission was published in 2011.
The report recommended pension reforms across the public sector, but did not seek to change the allowance on retirement of existing pension beneficiaries who were approaching retirement with 10 years or less until their pension age.
However, the New Firefighter Pension Scheme 2015 (NFPS), which came into force on 1 April 2015, involved less generous regulations. The normal pension age rose from 55 to 60 years of age, with a deferred pension age of 65. The NFPS also stipulated that pension benefits be calculated on average career earnings – not final salary.
Transitional provisions for the NFPS created three age groups, subject to different protections from 1 April 2015. Members of the FPS born on or before 1 April 1967 were treated to full protection, members born after 1967 but before 1971 were treated to tapered protection, and members born after 1971 received no transitional protections. They moved to the new scheme from 1 April 2015 – unless they opted out of pensionable service altogether.
At an employment tribunal, the firefighters claimed in an age discrimination case that the combination of the change in pension arrangements and their exclusion from transitional protections on the grounds of their age had caused them to be less favourably treated than their older colleagues.
The fire service contended that the transitional changes, if discriminatory, could be justified as proportionate. It relied on previous case law finding that "the employer does not have to demonstrate that no other proposal is possible. The employer has to show that the proposal… is justified objectively notwithstanding its discriminatory effect.
“The principle of proportionality requires the tribunal to take into account the reasonable needs of the business. But it has to make its own judgment, upon a fair and detailed analysis of the working practices and business considerations involved, as to whether the proposal is reasonably necessary."
The fire service argued that it was a legitimate aim to support one group of older workers over younger ones, because those closer to retirement age would have less time to make the necessary financial adjustments under the NFPS.
The employment tribunal found in favour of the fire service, but at the EAT the firefighters challenged that, stating: “The judge erred in applying the article 6(1) test derived from the Court of Justice of the European Union line of authorities, both to the issues of legitimate aim and proportionality, whereas she should have applied an objective test…"
While the EAT judge accepted that these aims were legitimate, in applying the proportionality test, the tribunal judge had to establish whether the need to protect those aged 48 or older on 1 April 2015 from the financial consequences of pension reform was sufficiently important to justify the receipt of pension benefits that were more valuable than those received by younger firefighters for the same work.
The tribunal had applied “only the level of scrutiny described in the decisions of the European Court of Justice and the Court of Justice of the European Union”, rather than of domestic case law on proportionality, the EAT ruled. The appeal therefore succeeded on this basis.
While the tribunal had found that the respondents were able to justify the discriminatory treatment of some firefighters based on age, “the EAT concluded that the tribunal had applied the wrong level of scrutiny of the claim to satisfy the requirement of legitimate aims and proportionate means”, Barry Stanton, head of employment law at Boyes Turner, told People Management.
The EAT concluded that the employment tribunal failed to properly consider the specific context of the firefighters’ pension schemes, and the impact of the transitional provisions – particularly the age-based disparity of treatment – by excluding a specific group from the protections offered by the transitional provisions.
“The decision potentially makes it more difficult for employers making social policy decisions to justify acts of direct age discrimination," Stanton added.
Presiding judge Sir Alan Wilkie said: “In my judgment, the employment judge’s decision on the issue of legitimate aims was correct; it did not contain any error of law so the appeals on those grounds fail.
“She did, however, err in law in her consideration of the question of whether the means were proportionate for achieving the legitimate aims and, accordingly, the appellants’ appeal must be upheld in that respect.”
Additional claims by one firefighter that she had suffered sex discrimination and equal pay discrimination because of her gender were remitted to another employment tribunal for fresh consideration.