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Heskett v Secretary of State for Justice: Court of Appeal Clarifies Use of Cost Considerations as Justification for Discrimination

Background

The Claimant worked as a probation officer and to meet a cap on increases in public sector pay, the Ministry of Justice changed its pay structure so that progression up a pay scale took longer. The effect of this change meant that the Claimant in particular would in the long term earn less than his longer serving and typically older colleagues.

As a consequence, the Claimant claimed indirect age discrimination and asserted that cost saving alone could not be a legitimate aim that the Ministry of Justice could rely upon to defend a claim of discrimination. The Court of Appeal was considering the issue of justification, and in particular:

  1. Whether the tribunal was mistaken, when considering whether cost was a legitimate aim for the purposes of justifying age discrimination, in holding that there was a valid distinction between costs and an absence of means; and
  2. Whether it was mistaken, when assessing proportionality, in taking into account that there was ‘active consideration’ of changing an unacceptable pay policy.

The Court of Appeal concluded that an employer could not have a legitimate aim justifying discrimination if the only reason for the employer's actions is to save costs. However, the Court found that 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 and defend a claim for discrimination. The judgment confirmed that “an employer's need to reduce its expenditure, and specifically its staff costs, in order to balance its books can constitute a legitimate aim for the purpose of a justification defence."

As a result, the decision was not made on costs alone and therefore the Ministry of Justice was able to successfully rely upon its need to observe the constraints imposed by the pay freeze as a legitimate aim.

Importance of the judgement

Whilst this case confirms the principle that costs alone cannot be enough to justify something which would otherwise amount to discrimination, it illustrates that an employer can rely upon its need to reduce its expenditure, and specifically its staff costs, in order to balance its books as a legitimate aim. This case further demonstrates that the Court has taken a pragmatic approach, recognising that almost any decision by an employer will have regard to costs, and stressing the needs to look at the employer’s aim in a more subtle way.

What does this mean for employers?

As a consequence of the decision, employees who assert that an alleged discriminatory act was based on costs alone, will struggle to rely on the argument. Therefore, from an employer’s perspective, the decision will be warmly welcomed, specifically by those employers who are faced with cost saving decisions which result in an adverse impact on certain groups of employees who then bring indirect discrimination claims.

This bulletin is for general guidance only and should not be used for any other purpose. It does not constitute, and should not be relied upon as legal advice.

JMW Solicitors is a Limited Liability Partnership.

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