In the case of Heskett v Secretary of State for Justice, the Court of Appeal considered the long held view that costs alone could not justify something which would otherwise amount to indirect discrimination on the grounds of age. Whilst concluding that this remained correct, the Court of Appeal also confirmed that something else such as the need to live within budgetary restraints could be distinguished from the “costs alone” principle and amount to a legitimate aim providing this justification.
The facts in this case involved the Ministry of Justice, as a result of budget cuts and public sector pay freezes, changing its pay structure so that progression up a pay scale took longer than it previously had.
The changes meant that the claimant, a newly appointed probation officer, would take 23 years to progress to the top of the pay scale, whereas prior to the changes, this would have taken 7-8 years. In the long term, Heskett would earn less than his longer-serving (and hence, typically older) colleagues.
Mr Heskett claimed indirect age discrimination, and further argued that saving costs alone could not amount to a legitimate aim, so could not justify the discriminatory effect of the new pay structure.
The tribunal and Employment Appeal tribunal each found that living within the employer’s means was a legitimate aim and could be distinguished from a “solely costs” aim. The Court of Appeal considered the appeal against this decision.
The Court of Appeal upheld the decision of the EAT that saving, or avoiding cost could not, without more, amount to a legitimate aim. In other words, an employer cannot discriminate just because it is cheaper to do so, but in reaching that decision, the Court focused on how the employer’s aim could be fairly characterised.
The Court of Appeal stated that ignoring the real life constraints within which the employer operated would be artificial and that’s “never a good thing” when determining that living within an employer’s means was legitimate and distinguishable from the aim of solely saving costs.
Whilst the Court simply reasserted the existing “costs only” rule, the interpretation and explanation they gave to what was previously referred to as the “costs plus” rule will effectively mean that an employee will struggle in the future to rely on an argument that an alleged discriminatory act is based on costs alone.