Indirect Discrimination, Justification and ‘Cost Plus’

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Indirect discrimination tends to happen where a ‘barrier’ exists, so that people with a certain protected characteristic are disadvantaged.  An example: an Employer requires everyone to work full time; women – who tend to have the lion’s share of child care responsibilities – are more likely to be disadvantaged by this.

Similarly, if pay relates to years of service, that may be indirectly age discriminatory.  Both younger people and older people may have long service but, on balance, younger people are going to be disproportionately disadvantaged by long service requirements.

Indirect discrimination can be ‘justified’ if the Employer can show that it was trying to achieve a legitimate aim and that it took proportionate steps to do so.

One of the difficulties that the Courts and Tribunals have grappled with over the last few years, is whether ‘cost’ can justify indirect discrimination.

The starting point has been that ‘solely cost’ will never justify discrimination.

The argument goes that if it is all about cost, then an Employer can effectively choose to discriminate by spending or withholding money.  Likewise, the level of protection that a member state of the EU affords to its employees will depend on the current state of that State’s finances.

A series of court decisions, over several years, has caused the Courts to start to look more carefully about what ‘solely cost’ means.

Over time the Courts began to formulate the test in this way: whilst cost on its own wasn’t enough to justify discrimination, ‘something extra’ might do so.

What might that ‘something extra’ be? The distinction can be fine.

Trying to stay within a budget might be “something extra” – although one has to ask, is there much of a difference between saving money and staying within a budget?  Common-sense might say not.  The cases often talked about “Cost plus” justification.

Heskett -v- Secretary of State for Justice Case

All of this has led now to a Court of Appeal case with Judgment delivered on 11th November 2020: Heskett -v- Secretary of State for Justice.

Heskett has valiantly tried to tackle this ‘how many angels on the head of a pin’ problem. If you’re brave enough, you can watch the decision!

In Heskett, the Claimant was a Probation Officer affected by the government’s austerity measures which, in effect, meant that he would take longer to reach the top of the pay scale.  What would have taken, say, 9 years was likely to take him 23.

Plainly younger people were disproportionately affected by the new system – many older workers had already reached the top of the scale (or would do so sooner).

Could the employer justify the pay scale changes flowing from austerity cuts on the basis this was a “cost plus” case?

Lord Justice Underhill says this:

  1. The law remains that ‘solely cost’ cannot justify discrimination.
  2. ‘Cost plus’  is not a helpful description.
  3. You can’t discriminate just because it is cheaper to do so (otherwise you might argue ‘we will pay women less than men’, because that is cheaper!)
  4. Nevertheless, Tribunals can have regard, for example, to the issues faced by an Employer who has to ‘make choices about how best to allocate a limited budget’.
  5. It can be difficult sometimes (tell us about it!) to “draw the line between a case where an Employer simply wishes to reduce costs and cases where it is, in effect, compelled to do so”.

What is the effect of this new decision?

It seems to me that, whilst ‘Cost plus’ (with apologies to Underhill LJ) remains the law, in practice Employers in most cases will be able to rely on cost as a justification for indirect discrimination.

We can see already Respondent Solicitors preparing arguments to say that ‘saving money’ is in reality about ‘balancing budgets’ – and this decision seems to permit that sort of approach.

That is not, however, a green light for indirect discrimination.  It remains clear from the Judgment that even if an Employer can show that balancing a budget is a legitimate aim, nevertheless it will need to go on to prove that it has adopted proportionate means in trying to meet that aim.

Perhaps, in the end, this Judgment is going to be helpful for everyone: we can avoid some of the hypothetical and, frankly, slightly nonsensical, legal, technical arguments.  Employers can try to argue, in an appropriate case, that what they did was justified because of economic necessity; but Employees and those that represent them can still say that it was not, all things considered – and discrimination can still be made out.