Can saving cost be a 'legitimate aim'?

[Thanks to William Young of Outer Temple Chambersfor providing this case summary]

The Court of Appeal today gave judgment in Woodcock v Cumbria Primary Care Trust. In dismissing Mr Woodcock's appeal, it rejected the argument that cost cannot be a legitimate aim, so as to justify some types of discrimination.

Mr. Woodcock was a displaced Chief Executive whose post disappeared during a large scale restructure of the NHS. He did not obtain a post in the new structure and his employment was transferred to the newly constituted respondent Trust as the successor to his former employer. The Trust gave Mr. Woodcock 12 month's notice of dismissal on the grounds of redundancy shortly before his 49th birthday and before the commencement of a formal consultation process between Mr. Woodcock and the Trust. The ET found that this had been done with a view to ensuring that the notice would expire prior to his 50th birthday, at which point he would have become entitled to a very substantial enhancement to his pension at an equally substantial cost to the Trust.

The ET found that service of the notice at that point was less favourable treatment on the grounds of the claimant's age. Nonetheless, they rejected the claim of age discrimination. The ET found that, by the time the notice was given, consultation would have achieved nothing. In addition, it accepted that this treatment of the claimant was a proportionate means of achieving the Trust's legitimate aim of achieving the dismissal of a redundant employee in a cost effective manner and so as to prevent him from benefitting from a windfall. This last finding arose from the fact that, but for what was later described as a 'chapter of accidents', the initial consultation meeting would have been held long before Mr. Woodcock's 49th birthday so that he would ordinarily have been given notice long before any prospect of the enhanced pension arose. This was found to have satisfied the 'costs plus' test that had been established in Cross v British Airways [2005] IRLR 423. As such, the treatment was justified and the discrimination claim (along with an unfair dismissal claim) was dismissed.

The EAT (Underhill, President) allowed an appeal substituting a finding that the dismissal was automatically unfair given that notice was served prior to the Stage 2 Meeting under the now repealed Dispute Resolution Procedures but awarded no compensation given that consultation would have achieved nothing. More importantly, it dismissed the appeal in relation to the age discrimination claim. In the course of his judgment, Underhill J noted that the "current orthodoxy" of the "cost plus" approach in Cross v BA, whereby an employer could not rely on cost alone but could rely upon cost together with something else, was difficult to justify on principled grounds. In addition, such a test resulted in artificial game-playing ("find the other factor") resulting in arbitrary and complicated reasoning. Despite this, the EAT was unwilling to depart from previous authority when it was not necessary to do so. Instead, it upheld the finding that the timing of the dismissal was based not on cost alone but also on the need to dismiss a redundant employee and to prevent Mr Woodcock from benefiting from a windfall.

Mr Woodcock appealed to the Court of Appeal. In the interim, the obiter comments of Underhill J were followed by a differently constituted EAT in Cherfi v G4S Security Services [2011] UKEAT 0379/10.

The Court of Appeal has now dismissed Mr. Woodcock's appeal. Giving the only judgment, Rimer LJ reviewed the domestic and European authorities as to justification and cost. He accepted that there were in fact two strands of authority. One established that a member state (with a notionally bottomless purse) could not be permitted to justify discriminatory social policy on the grounds of cost. The other, commencing in Hill & Stapleton v Revenue Commissioners [1998] IRLR 466, was to the effect that an employer could not justify discrimination "solely" on the grounds of cost.

He rejected as artificial a submission that this meant that that cost alone could not provide an employer with a legitimate aim, noting that almost every decision taken by an employer is going to have regard to cost. The legislation provided that would otherwise be discriminatory treatment may be justified (and therefore not discrimination) if it was a "proportionate means of achieving a legitimate aim".

As a result, he said that "the relevant question must be whether the treatment complained of was such a means". The guidance of the ECJ jurisprudence "meant nothing more than that the saving or avoidance of cost will not, without more, amount to the achieving of a legitimate aim". In the present case, the Trust's treatment of Mr. Woodcock was not to be characterised as being no more than treatment aimed at saving or avoiding cost. Dismissing a redundant employee was a legitimate aim. It was also a legitimate part of that aim for the Trust to ensure that the dismissal also saved the Trust the additional element of cost that it would otherwise have incurred.

He went on to reject a submission that, contrary to the decisions of the ET and EAT, the treatment was not proportionate, holding that "in the very particular circumstances" of the case the discriminatory effect of the treatment on Mr. Woodcock was outweighed by the needs of the Trust, particularly as the "corner cutting" in consultation deprived him of nothing of value given that the ET had held that it could achieve nothing.

In the light of this decision, it seems that future cases raising issues of cost will turn on substantive questions of proportionality rather than artificial debates as to whether behavior was properly to be characterised as cost or cost plus.

The Court of Appeal refused Mr. Woodcock permission to appeal to the Supreme Court.