Age Discrimination – counting the cost

This week the big employment law news story has been the Court of Appeal decision in Woodcock v Cumbria Primary Care Trust. The issue in this case was whether the employer was justified in giving an employee notice of redundancy before rather than after a consultation meeting on the grounds that if notice was given afterwards he might reach the age of 50 before his dismissal took effect. If that happened then the employer would be liable to make a lump sum contribution to his pension scheme of something in excess of £500,000. The legal issue at stake was whether cost can be used as the justification for age discrimination.

The Daily Telegraph has a report of the case here with the headline ‘Older staff can be made redundant to avoid pension charges, judges rule’. This is actually an amended version of the article they published yesterday which gave the impression that the employer made Mr Woodcock redundant because he was 49 – which was simply not the case. Even this amended article, however, gives a completely misleading impression of what the case decided. For example, we can categorically say that the judges did not rule that ‘older staff can be made redundant to avoid pension charges’.

The Court of Appeal decision is disappointing in many ways because it rather fudged the issue of cost and justification and made no clear ruling that will help us in other cases. Mr Woodcock’s case is very unusual and it is clear that the particular facts of the case have influenced the decisions taken by both the Court of Appeal and the EAT.

This was an employee who had known for over a year that there was a risk of redundancy and who had had several conversations about his career prospects with the Chief Executive of the Strategic Health Authority. He was entitled to a one year notice period and the employer issued the notice just before a formal consultation meeting to ensure that his redundancy was not delayed until after his 50th birthday at which point the huge extra pension costs would kick in. He received a severance payment of £220,000.

It is difficult to put out of mind the fact that Mr Woodcock was not hard done by.He managed to stay in a well remunerated position for much longer than most employees whose job has vanished would normally expect and he received a pay off that would hardly leave him in abject poverty.

These facts are important when judging the discrimination argument. Remember, he was not made redundant because of his age. He was not selected for redundancy to minimise pension costs. The discrimination consisted in the fact that his 12 months’ notice was issued before rather than after the consultation meeting. That discrimination falls to be balanced against the £500K cost of issuing notice after he had tuned 49.

The key point to my mind is that the employer’s actions prevented Mr Woodcock from receiving a windfall. When his job disappeared in 2006, he could have had no reasonable expectation that he could have remained in employment until 2008 when he reached the age of 50.

The situation would be entirely different if an employer brought forward a reorganisation or dismissed an employee in advance of it in order to prevent him or her qualifying for enhanced pension rights. There the balance would be different and justification would be much harder to establish.

The Woodcock case frankly does not resolve the cost issue around justification which remains unclear. On the one hand, employers should not be able to discriminate just because its the cheapest option. On the other hand, where the cost of avoiding discrimination is out of all proportion to any actual harm the discrimination does, then surely the employer should be able to rely on that?

We should also remember that it is only in age discrimination that the issue of justification even arises when it comes to direct discrimination. In most cases the issue of cost will only apply where there is indirect discrimination.

We really do need a clear ruling on the issue from the Supreme Court and the Woodcock case, despite its unusual facts, may be the best option we have of getting that. In the meantime employers should be aware that  any age discrimination is likely to be difficult to justify. They certainly can’t make staff redundant to avoid pension costs.

UPDATE: Mrs Markleham’s blog does a great job of taking apart the original report from the Telegraph here.

About Darren Newman

Employment law consultant, trainer, writer and anorak
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