Three key lessons about indirect age discrimination from the Court of Appeal

The latest age discrimination decision from Court of Appeal is about the lawfulness of changes to the pay structure of the Probation Service in the early days of the public sector pay freeze in 2011. It had to decide whether the agreement negotiated with the union to slow incremental pay progression – which particularly disadvantaged younger workers – amounted to unlawful indirect age discrimination.

The Court of Appeal has decided that the employment tribunal had been correct to rule that slowing incremental progression in this case was not unlawful. It has therefore reached the same conclusion as the Employment Appeal Tribunal, which published its judgment back in June 2019.

The Court of Appeal’s has undertaken a lengthy review of how the relevant case law should be interpreted in this context, which is worth studying in detail. However, three key points can be extracted as follows.

Legitimate aims can include budgetary considerations

Even if a provision, criterion or practice puts a protected group at a particular disadvantage, it does not amount to unlawful indirect discrimination if the employer can show that it is a “proportionate means of achieving a legitimate aim”.  This is often referred to as the employer’s “justification defence”.

It is well established that financial considerations alone cannot be used to justify what would otherwise be indirect discrimination. But to what extent can cost considerations form part of the picture?

In this case the Court of Appeal took a realistic view. Few if any decisions have no financial implications. In this case the decision to change the pay structure was not just about cost cutting. As summarised by the tribunal, it had the aim of creating a “fair pay policy in straitened circumstances.” This was a legitimate aim.

As the Court of Appeal explains:

“The essential question is whether the employer's aim in acting in the way that gives rise to the discriminatory impact can fairly be described as no more than a wish to save costs. If so, the defence of justification cannot succeed. But, if not, it will be necessary to arrive at a fair characterisation of the employer's aim taken as a whole and decide whether that aim is legitimate.”

Cost considerations can form part of the proportionality assessment

Once the employer’s aim has been established, and assuming it is legitimate, the tribunal will then need to consider whether the means adopted were proportionate.  In this case the tribunal decided that the reduction in the rate of progression was a “proportionate short-term response to the extreme financial stringency caused by the pay freeze imposed by the Treasury”.

The direction of travel can be important

The employment tribunal’s overall conclusions on proportionality were not challenged on appeal. However, the Court of Appeal was asked to consider whether the tribunal had been entitled to take into account the fact that the changes to pay progression were seen as a stop-gap measure. As the tribunal put it:

“It should be apparent from what we say above that it is our view that it is principally because the Respondent is actively considering changing the present pay policy to eliminate the lengthy pay progression policy that means that the present policy is justified. If no active steps are taken in the near future the outcome of a further complaint might be very different and we would urge Mr Paskin to see through the task that he has been set to review the present policy as soon as possible.”

The Court of Appeal has confirmed that the fact that a system is in the course of change may represent part of the justification for the state of affairs at a particular time. But it is clear from the extract quoted above that tribunals will expect employers to continue to make progress in eliminating historic pay structures that disadvantage particular groups.