Is cost-cutting a legitimate aim to justify discrimination?

And how did a change in pay policy lead to an indirect discrimination claim? Was the discriminatory effect justifiable?

In this column we take a look at a recent case and what this means for Watford employers.

What happened?

In the case of Heskett v Secretary of State for Justice, the Ministry of Justice adopted a progression policy in relation to the pay structure which affected the claimant, a probation officer. This resulted in the claimant earning less than his older, longer serving colleagues. He argued that this was a form of indirect age discrimination and that saving on costs would not be a legitimate aim to justify the indirect age discrimination.

The Court of Appeal decided that if the sole reason for the change in policy was to save on costs, this would not be a legitimate aim in justifying discrimination. However, if it was coupled with another reason such as the employer being under financial pressure and the "employer's need to reduce its expenditure, and specifically its staff costs, in order to balance its books", this can constitute a legitimate aim.

What can you learn from this?

This case is fact-specific, but it provides important points for employers to consider when drafting new policies. Where the sole aim of a policy is to reduce costs, an employer cannot discriminate simply to save costs. However, where there are other factors as well as financial constraints, an employer may be able to justify a policy which produces a discriminatory effect.

  • Michael Delaney is a partner at award-winning law firm VWV, which has offices in Clarendon Road, Watford. Get in touch on 07909 912 564 or mdelaney@vwv.co.uk