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Manager dismissed quickly to avoid huge pay-out loses age claim

Posted: 3rd April 2012   In: Business Employment

A manager whose redundancy was rushed through before his 50th birthday to avoid giving him up to £1m in pension benefits has lost his claim of age discrimination.

The Court of Appeal ruled that the actions by the employer to save money were justifiable under the circumstances. Employment law specialists say it overturns previous case law on discrimination.

The case involved NHS manager Nigel Woodcock and Cumbria Primary Care Trust. Mr Woodcock’s job was due to disappear following reorganisation and he was not selected for a successor post.

He was given 12 months notice of dismissal on redundancy grounds without proper consultation when he was just approaching his 49th birthday. The timing meant that he would leave before his 50th birthday and so would not qualify for enhanced pension benefits worth up to £1m.

His claim of discrimination on the grounds of age was dismissed by an employment tribunal which found that although the treatment was discriminatory, it was justified as being a proportionate means of achieving a legitimate aim of saving money for the Trust.

The Employment Appeal Tribunal later found that although cost alone could not justify a discriminatory act, cost plus another factor could be justifiable. In this case, the primary reason to dismiss Mr Woodcock was because he had become redundant.

Those findings have been upheld by the Court of Appeal. Giving the lead judgment, Lord Justice Rimer said it would have been irresponsible for the Trust not to take cost implications into account. He said: “Mr Woodcock had, by 2007, no right, entitlement or expectation to the enjoyment of the enhanced benefits that he would have enjoyed had he remained in the trust’s employment until he was 50.

“Had he in fact so remained so as to enjoy them, he would have been the beneficiary of a pure windfall.”

Commenting on the case, employment law barrister Daniel Barnett said: "The Court of Appeal has overturned previous case law, and stated that employers are allowed to rely on cost savings in order to justify certain types of discrimination.

"The effect will be that some employers will be able to defend certain discrimination claims on the grounds that it is cheaper to discriminate than not to discriminate.

"This will make it easier for employers to justify cost-cutting measures on grounds of costs. The ramifications are wide ranging. For example, it will be easier for employers to refuse to make adjustments for disabled employees because of cost.

"It will also be possible to dismiss long-term sick employees earlier, because of the cost of keeping them on the books and it will probably mean LIFO (last-in, first-out) becomes acceptable again as grounds for redundancy, having all but disappeared since 2006 in the light of age discrimination laws.

"Older workers could be discriminated against as this judgment makes it easier for employers to refuse to provide benefits (eg health insurance cover) to older workers, on grounds of increased premiums."

Please contact Robert Bedford if you would like more information about the issues raised in this article or any aspect of employment law.