The Court of Appeal confirmed that saving or avoidance of costs, without more, is not sufficient for the justification defence. However an employer’s need to reduce its expenditure in order to balance its books could be a legitimate aim.
In Heskett v Secretary of State for Justice, (bailii.org) the government had introduced limits on public sector pay rises. To comply, the National Offender Manager Service modified its system of increasing pay for each year an employee had been in the job. It much reduced the annual increases, which disproportionately affected younger employees who would take longer to reach the salary levels of their older colleagues.
The Court of Appeal upheld the employment tribunal decision that this was not indirect age discrimination under the Equality Act. The tribunal was entitled to find the new pay scheme was justified.
The court upheld the so-called ‘cost plus’ principle that the saving or avoidance of costs, without more, is not sufficient for the justification defence. However the Court of Appeal said the principle did not apply to these facts, given the government pay constraints.
The court stressed that even where the ‘cost plus’ principle does not apply, so that the employer has a legitimate aim, the employer’s actions will not necessarily be justified. The tribunal must examine whether they are proportionate.