Hello, another Friday is upon us which means it is time for another dose of employment law. After last week’s employment law update we are back to our case law update. This week’s case concerns pensions and discrimination. We also have a new feature for you at the end of today’s update. (Cue dramatic music and mood lighting.)

Section 13 of the Equality Act 2010 says the following:

(1) A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favorably than A treats, or would treat, others.

(2) If the protected characteristic is age, A does not discriminate against B if it can show A’s treatment of B to be a proportionate means of achieving a legitimate aim

For example, if the Government introduced a policy to tackle youth unemployment by encouraging employers to take on younger people then it would be unlikely to considered discriminatory if the percentage of younger successful applicants suddenly became significantly higher than other age applicants because it was to achieve the aim of reducing youth unemployment.

The Lord Chancellor & Secretary of State for Justice v McCLoud & Ors

The questions in this week’s case are:

  1. Do changes to pension provisions that protect employees within 10 years of retirement directly discriminate against younger employees?
  2. Do changes to pension provisions indirectly discriminate against female and BAME employees if they are predominately in the younger category?
  3. Can changes to pension provisions that protect older employees lead to Equal Pay claims if female employees are predominately in the younger category?

The Claimants, including Ms McCloud, were judges appointed by the Lord Chancellor, the Respondent, to work in Her Majesty’s Courts. Following changes to the way pensions were calculated, younger judges would now receive smaller pensions than older judges.

The reason pensions were reformed were as part of changes to public sector pay. Following the Hutton Report – not the one that investigated the mysterious death of a whistle-blower who raised concerns about the evidence used to justify the invasion of Iraq –  it was recommended all public sector pensions were reformed to make them more sustainable.

As part of this reform, the Respondent made changes to the way Judge’s pensions were calculated and taxed. Judges within 10 years of retirement were protected from the reforms and their pensions were ring fenced meaning they would suffer no financial detriment.

The Claimants argued that this was discriminatory because the protection of older judges was not a legitimate part of making pensions more sustainable. The Respondent countered that it was in line with uniform reforms across the public sector.

The Claimants initiated an ET claim for age discrimination and also brought claims for indirect discrimination for sex and race as female and BAME judges were mostly younger judges. An equal pay claim was also piggy-backed in as younger female judges receiving inferior pensions meant they received worse pay than their male counterparts.

The ET allowed the claim and the Respondent appealed. The EAT rejected the appeal because the Respondent had failed to show that the changes to pension provision only impacting younger employees was a proportionate means of achieving a legitimate aim.

The takeaway point:

In this case, yes, changes to pensions that only impact younger employees can be discriminatory. In this case it also created sex and race discrimination issues due to the demographic of stale, male & pale older employees.

Lots of companies are changing the way their pensions are calculated at the time of writing as several employers, including BT, have large pension deficits and this case shows that employers need to tread carefully to not discriminate against younger staff when implementing any changes.

Feedback of the week:

Last year we changed how we obtained feedback from clients when their files were closed. Instead of filling out a survey that results in meaningless statistics we now obtain more qualitative feedback, this can be found in the testimonial section of our website.

Every week we will now be sharing some feedback from clients to inform readers of the work we are doing. Our inaugural choice comes from a client who Sam helped with a settlement agreement and their shareholdings:

“HI, I contacted PJH Law to receive advise (sic) on an employment matter, I have to say from the 1st call to the follow up email, the service has been fantastic. Sam and her team treated me with respect and resolved all questions quickly and efficiently. Thank you very much!”

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