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'Cost plus' approach to justify discrimination?

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In the case of Woodcock v Cumbria Primary Care Trust the claimant was employed as chief executive of North Cumbria Primary Care Trust. In 2005, following a local reconfiguration of several Primary Care Trusts, the claimant’s post was at risk of redundancy and he was invited to apply for one of the new chief executive roles.

The claimant was notified on 26 July 2006 that his application had been unsuccessful and informed that he was formally at risk of redundancy and the Trust would carry out consultation. However, on 23 May 2007 the Trust issued the claimant with written notice of redundancy before the first formal consultation meeting took place. The redundancy notice issued to the claimant provided 12 months notice of dismissal, and was timed to ensure that it would expire before the claimant turned 50.  This was to make sure he left his job before he became eligible for enhanced pension payments – triggered when he reached his 50th birthday.  Instead, he left his job with a redundancy package of £220,000.

The claimant issued proceedings for unfair dismissal on the grounds of age discrimination.

Decision

The Employment Tribunal found that the aim of the Trust in terminating the claimant’s employment was not in itself to save costs, but rather it was in order to achieve the dismissal of a redundant employee. This was a legitimate aim, and only part of this aim was to achieve it in a cost effective manner. The discriminatory treatment was therefore justifiable as being a proportionate means of achieving a legitimate aim.

The claimant appealed to the Employment Appeal Tribunal (‘EAT’). However, the EAT agreed with the Tribunal that the ‘legitimate aim’ of the Trust satisfied the “cost plus” approach set out in Cross v British Airways. Whilst cost saving reasons alone cannot justify a discriminatory act, cost plus some other factor (“cost plus” approach) may justify such an act. Thus, the EAT ultimately found that the treatment was justified.

However, the EAT did express some concerns about the “cost plus” approach. Some issues over the artificiality of the approach were raised, as the EAT discussed concerns that employers might seek to play games of ‘find the other factor’ in order to justify discriminatory acts.

The claimant appealed to the Court of Appeal, which gave judgement dismissing his appeal. The Court held that the saving or avoidance of costs will not, without more, amount to the achieving of a legitimate aim. However, the Court took the view that the aim of the discriminatory treatment of the claimant was not cost alone; it agreed with the Tribunal and EAT that the legitimate aim of dismissing the claimant was genuinely to give effect to the redundancy decision, and it was a legitimate part of that aim was to ensure that the timing of the dismissal saved significant additional cost.  In fact it was stated it would have been ‘irresponsible’ for the Trust not to try to reduce costs.

The claimant was not given permission to take his appeal further to the Supreme Court.

Implications

Although the decision may appear to allow employers to circumvent the consultation process in redundancy scenarios and make decision based on cost saving alone, it in fact falls significantly short of permitting such action. The Court has in fact endorsed the ‘cost plus’ approach, meaning that costs alone will never justify discrimination, but costs plus another factor may do so.

The EAT did comment on the artificiality of the ‘cost plus’ approach, but the Court of Appeal does not seem to have overly concerned themselves with this issue. It is therefore difficult to concern what factor in addition to cost may be required in order to justify discriminatory behaviour, and in fact it can be suggested that the Court may have indicated that there is a very low threshold for what will be required.

For now the ‘cost plus’ approach remains and employers should take care before taking any discriminatory actions for which their only justification is cost. Advice should always be sought before any attempts are made to circumvent a substantive process.

For further information please contact Alexandra Dean of Gepp & Sons on 01245 228141 or deana@gepp.co.uk

The above is not legal advice; it is intended to provide information of general interest about current legal issues.

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