One of the key differences between direct and indirect discrimination is that a claim for indirect discrimination can be defeated if the employer can show that the provision criterion or practice under challenge is a ‘proportionate means of achieving a legitimate aim’. The circumstances in which this defence of justification will succeed have been the subject of many years of case law. One principle that has emerged is that an employer cannot simply rely on cost savings as a legitimate aim – although it has generally been accepted that cost can be counted as one among several factors – a so called ‘costs plus’ approach.
The issue came up for review by the Court of Appeal in Heskett v Secretary of State for Justice in which an employee complained of indirect age discrimination.
The case concerned the pay of probation officers which was based on a pay scale with 25 incremental points. A probation officer would previously have progressed three points up the scale each year, with the result that they could reach the top of their pay scale within about 8 years. In 2010, however, the Government introduced a pay freeze – limiting the increase in any public sector employer’s pay bill to just 1%. The Probation Service responded to this by limiting pay progression to just one point on the scale per year. Since those at the bottom of the scale were likely to be younger than those at the top it was clear that this change would amount to indirect age discrimination unless it could be shown to be a proportionate means of achieving a legitimate aim.
The employer argued that its policy was legitimate given the limitations imposed on it by central Government. The employee argued that this amounted to no more than relying on a desire to avoid the cost of allowing pay progression to continue as it had in the past. The Employment Tribunal and the Employment Appeal Tribunal (EAT) sided with the employer and the employee appealed to the Court of Appeal.
The Court conducted a detailed review of the case law and concluded that the term ‘cost plus’ was unhelpful. What had to be decided was whether, looked at fairly, the employer’s primary objective had been to save money. If that was all the employer was doing, then that would not amount to a legitimate aim. However, an employer was entitled to take proportionate steps to ensure that it ‘lived within its means’. It followed that the Tribunal was entitled to find that the employer in this case was pursuing a legitimate aim in seeking to operate within the financial constraints imposed on it by the Government.
As for proportionality the Tribunal had taken into account the fact that the employer had accepted that its current pay system was unsatisfactory and that it intended to change it so that it was less dependent on length of service. The Court of Appeal rejected the argument that this was an irrelevant consideration. The Tribunal had held that the reduction in pay progression was justified as a temporary measure while the employer carried out a more fundamental reform of its pay structure. That was a finding that it was entitled to reach, although it raised the possibility of future claims succeeding if the reform was not carried out. The appeal was dismissed.