The government is canvassing opinion on options to reform the law governing the use of...
Cost considerations and justifying indirect discrimination
Heskett v Secretary of State for Justice
While saving costs can never of itself justify indirect discrimination, a need to reduce expenditure to live within budgetary constraints can be a legitimate aim for the purposes of justifying indirect discrimination.
An employer which finds itself in tribunal having to justify an indirectly discriminatory policy or practice will have to show that the policy or practice was (a) pursuing a legitimate aim and (b) that it was proportionate. This case principally concerns the scope of a legitimate aim and how far cost can play a part.
Following government-imposed funding cuts, the Ministry of Justice (MoJ) made changes to the rate at which certain probation officers progressed up an incremental salary scale. This meant that it would take someone 23 years to reach the top of the salary scale, compared with 7 or 8 years previously. The practical effect was that older employees close to (or at) the top of the band would earn more in salary and pension than those lower down the band (around £5,000 a year). Mr Heskett, who’d been disadvantaged by the policy, argued that it amounted to indirect age discrimination.
A tribunal found that the policy was indirectly discriminatory but that it was justified. The MoJ had a legitimate aim of setting a pay progression scheme which enabled it to live within its means. It was not relying on cost alone as a justification – the absence of means had forced it to take the action it did – and this wasn’t the same thing. It was also proportionate in that the MoJ had acknowledged the discriminatory effect of the policy and told the tribunal that steps were being taken to address it within a short period of time.
The EAT agreed, holding that there is a difference between justifying a discriminatory policy on cost alone – which is not normally a valid justification by itself – and justifying it on the basis of absence of means. The EAT held that the MoJ had been compelled to cut costs because of government policy and it had tried to avoid redundancies and had negotiated with the unions. The EAT also accepted that the likely duration of the policy’s discriminatory impact was a legitimate issue for the tribunal to consider when assessing proportionality. Mr Heskett appealed.
Court of Appeal decision
The appeal was dismissed.
On the legitimate aim issue, the Court of Appeal held, after a lengthy review of the relevant case law, that saving or avoiding cost could not, without more, amount to a legitimate aim. The fundamental question was whether the aim was no more than a wish to save costs. If it was, justification fails. If it was not, it will be necessary to arrive at a fair characterisation of the employer’s aim taken as a whole and decide whether the aim is legitimate. Applying such a principle to this case, the Court of Appeal held that the MoJ’s need to reduce its expenditure, and specifically its staff costs, in order to balance its books can constitute a legitimate aim for the purposes of the justification defence. Lord Justice Underhill who gave the main judgment (and who is a former President of the EAT with great employment law knowledge) said: ‘I can see no principled basis for ignoring the constraints under which an employer is in fact having to operate. It is never a good thing when tribunals … are required to make judgements on an artificial basis’.
On the proportionality issue, the Court of Appeal accepted that it can be relevant that a particular measure is intended to be a temporary stop gap. It should be open to an employer to argue that something is proportionate as a temporary measure whilst recognising that it wouldn’t be proportionate in the long term. However, as the tribunal has recognised, the longer a stop-gap measure remains in place, the harder it might become to justify.
Link to judgment: https://www.bailii.org/ew/cases/EWCA/Civ/2020/1487.html
This is very helpful guidance to employers. The important word in any justification defence is ‘proportionate’ and this means that the employer needs to have looked at all reasonable alternatives and that there is nothing they can do which will lessen the discriminatory effect on the employee. A very clear distinction is also drawn between wanting to save costs and having a budget cut and having to operate within it.