The perks of old age?
Meredith Hurst Wednesday, February 18, 2015
Can the removal of perks amount to indirect age discrimination? If so, can it be justified? Solicitor Julie Goodway has the answers.
According to the recent decision of the Employment Appeal Tribunal in the two claims against HCL Insurance BPO Services Limited, the answer to both questions is 'yes'.
Many of the staff at HCL had been transferred to it under TUPE from various companies. As a result, the staff had different terms and conditions. These differences included enhancements relating to working hours, annual leave, redundancy payments, private health care and carer's leave. As HCL was struggling financially, it wanted to harmonise these contracts particularly to remove the costly enhanced contractual terms.
HCL gave its staff an ultimatum - either accept new terms and conditions or be dismissed. This came about following a lengthy consultation during which ways of avoiding this course of action were considered.
Whilst many of the staff accepted the new terms, others did not. A number of employees brought claims against HCL complaining of indirect age discrimination. This was on the basis that the requirement to accept new terms or be dismissed put older workers (namely those within the 38 to 64 year age bracket) at a particular disadvantage as they were the employees who had built up the greater entitlements by virtue of longer service. These claimants also suggested that HCL could have avoided making these changes or have lessened their impact by seeking voluntary redundancies, phasing in the changes, and/or securing extra funding from HCL's parent company in India.
The first instance decision by the Employment Tribunal was that:
- HCL's actions were potentially discriminatory. The requirement that employees agree new terms and conditions or be dismissed amounted to a "provision, criterion or practice" (PCP) under section 19 of the Equality Act 2010. This was because, whilst the PCP applied to all employees (young and old), the older employees were placed at a particular disadvantage because they would be losing their existing contractual rights compared with the younger employees who were not so disadvantaged. This would be indirectly discriminatory on the grounds of age unless it could be objectively justified.
- The PCP, under the circumstances, was objectively justified and therefore HCL was not guilty of indirect age discrimination. HCL had a legitimate aim of needing to reduce staff costs to ensure its future viability and, in that context, to have in place market competitive terms and conditions which applied to all. It was considered that HCL's actions had been proportionate and did not go further than was necessary to achieve the legitimate aim. Indeed, the claimant's suggestions for ways of avoiding the proposed changes would not have addressed HCL's legitimate aim at all, but instead would have compounded HCL's ongoing losses.
The above decision was appealed. The employees appealed against the decision that the PCP was justified. In turn, HCL counter-appealed on whether there had been a PCP. The Employment Appeal Tribunal considered both of these appeals and upheld the original decision. In particular, the EAT noted that it was a legitimate aim for a business to seek to break even, year-on year and to make decisions about the allocation of resources.
The outcome was that HCL was not guilty of indirect age discrimination.
These cases were determined on the basis that HCL needed to make urgent staff cost savings in order to ensure its future. In this case, the annual loss being incurred by HCL was in the region of £4 million, and it was believed that changing the terms and conditions would provide potential savings of between £1-2 million per year.
HCL's actions would not have been objectively justified if its reasoning for the changes had been based on cost reasons alone. Here, however, the changes were necessary to ensure the continued survival of the company. HCL had also ensured a proper consultation with its staff to explore ways of avoiding the changes, which helped to demonstrate that its decision was proportionate.