Some forms of discrimination can be defended on the basis that the discriminatory treatment can be justified. To be able to justify the treatment an employer must show that they had a legitimate aim they were trying to achieve and that there were no less discriminatory means by which it could be achieved.
For some time now, the position has been that costs, by themselves, cannot amount to a legitimate aim. It had to be costs plus something else. However a recent case has helped to clarify that where a reduction in costs is needed due to budgetary constraints this may amount to a costs plus argument in itself.
According to the Court of Appeal in Heskett v Secretary of State for Justice, whilst the sole reason of saving costs is not, in itself a legitimate aim, an employer’s need to reduce expenditure as a result of financial constraints in order to balance its books, could constitute a legitimate aim.
In this case, the Ministry of Justice, changed their pay structure in order to meet a cap on increases in public sector pay. It meant that it would take the Claimant longer to reach the same pay level as other longer serving and typically older colleagues. Consequently, this meant that the Claimant was paid less than his longer serving, older colleagues.
The Claimant subsequently claimed indirect discrimination on the grounds of age. He claimed that saving costs alone could not amount to a legitimate aim and therefore the new pay structure could not be justified.
Whilst the Court of Appeal concluded that saving costs, on its own, could not constitute a legitimate aim sufficient to justify discrimination, if an employer is subject to financial constraints and therefore has to reduce costs as a consequence in order to ‘balance the books’, this could potentially be a legitimate aim in justifying age discrimination.
It is important to note that this case does not give employers the green light to implement cost saving measures which could be seen as discriminatory on the grounds of age. However, if an employer is subject to financial constraints which oblige it to reduce its costs, then that can be enough to amount to a legitimate aim. It makes it more difficult for an employee to argue that the decision cannot be justified and gives employers a greater opportunity to defend the decisions taken. Employers should seek legal advice to ensure that any cost saving measures that they choose to implement are not seen as discriminatory as compensation for discrimination is uncapped.
If you would like any further information, please contact Sabrina Rahman on 0114 228 3262 or Sabrina.Rahman@luptonfawcett.law or another member of the employment law team.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.