News & Views

Lawful age HR: is cost alone a legitimate justification?

BY Greg Fletcher
Employment law
BG Purple

The Court of Appeal has recently delivered its judgment in the high profile employment case, Woodcock v. North Cumbria Primary Care Trust.

The case has been followed with great interest by businesses keen to receive guidance on when age HR can be justified. The key issue in this case was whether a discriminatory act could be legitimately justified on the sole basis that avoiding HR would be too expensive. 

The issue has been considered by the courts before, in Cross v. British Airways Plc, where the Court of Appeal held that employers could rely on costs as a justification for HR- but only if there was also another factor they could point to. This “costs plus” approach provided the basis for the Court’s decision in Woodcock

Mr Woodcock had been employed as Chief Executive of the NHS Trust; however, in 2006 his post was put at risk of redundancy following a restructure. According to the Trust’s policies, Mr Woodcock was entitled to be given one year’s notice of dismissal. In a departure from their procedures, the Trust gave Mr Woodcock additional time to secure another post; however, when it became clear that no alternative post could be secured, the Trust issued notice in 2007. 

The effect of this was that Mr Woodcock’s employment would be terminated a month before he turned 50- and a month before he would be entitled to an enhanced retirement package costing the Trust a hefty £500,000. The problem for the Trust was that they had issued notice prior to carrying out consultation under their redundancy procedures in order to avoid having to pay the substantially increased redundancy costs. 

Mr Woodcock raised a claim in the Employment Tribunal alleging that, by issuing early notice to avoid payment of the enhanced package, the Trust had directly discriminated against him on the grounds of age. The Court of Appeal (like the ET and EAT before it) rejected this argument finding that, although the Trust had discriminated against Mr Woodcock, this was justified under the “costs plus” approach. Although cost was a consideration, there was another factor; preventing Mr Woodcock from gaining an unexpected windfall that he had no legitimate right to receive. 

So, in the end the Court did follow the “costs plus” rule and did not decide that employers can discriminate against older employees simply because of the cost of employing them. The moral of the story is that something more is still needed, and employers should be careful to balance cost against other justifications in order to legitimately discriminate against older employees. Nonetheless, this case serves as another useful example of the type of balance that should be struck and what is likely to be considered “costs plus”.

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