Employment Law News Analysis

Justifying Discrimination on the Grounds of Cost - Expert Comments

David Reid
27th Mar 2012

It is a well known principle of law that discrimination cannot be justified on the basis of cost alone. Intuitively, this makes sense, as otherwise it would be open to employers to simply decide to discriminate against certain groups within their workforce on the basis that doing so was cheaper than providing their workforce with equal opportunities…

UK Money

It must also be remembered that only certain types of discrimination can be justified in any case. Generally, indirect discrimination claims are the ones to which employers are permitted to run a defence that the discriminatory acts were objectively justified. However, in the area of age discrimination, justification arguments can be presented in a wider set of circumstances


In general terms, age discrimination legislation provides that treating an individual in a potentially discriminatory manner on the grounds of their age, could be justified where that treatment is a proportionate means of achieving a legitimate aim.


In reality, financial considerations are often paramount when employers are considering courses of action that might be age discriminatory. For instance, an employer may wish to prohibit employees below a certain age from driving company vehicles on the basis that the insurance premiums charged for covering young drivers are too high. Likewise, an employer may wish to limit its life assurance cover to employees below a certain age for similar reasons.


It is clear that cost considerations are not excluded from the justification defence. However, European law suggests that an employer cannot justify discriminatory treatment ‘solely’ on the basis of increased costs. From that, a ‘costs plus’ approach towards justification has emerged. In other words, an employer can use cost as one reason for justifying discrimination but the overall reasoning must include some other factor that is not cost. This approach has been criticised as being somewhat artificial and leading to employers trying to find some other factor to rely upon where there may be a sound financial basis to justify their proposed course of action.


The Court of Appeal has recently considered this issue in the case of a senior NHS executive whose role had become redundant. He was issued with notice of dismissal before the normal redundancy consultation meeting had taken place, because his employer wished his notice to expire before he reached 50 years of age, at which point he would have been able to take early retirement and draw his pension. This would have had very significant financial implications for the NHS trust.


The Court of Appeal accepted an argument that the timing of the dismissal was not ‘solely’ on the grounds of cost. The court found that the employer also had a legitimate aim of dismissing an employee whose role was redundant and that in the circumstances of the case, issuing notice before the consultation meeting was a proportionate way of achieving this aim.


Whilst the court acknowledged that the ‘costs plus’ orthodoxy was somewhat artificial, it did not specifically disapprove it. Therefore, it probably remains the case that an employer who wishes to do no more than save money will not be able to justify discrimination on this basis. However, the judgment recognises that it is actually rare for cost to be the only factor under consideration in any employment decision.


It is also noteworthy that the court recognised that cost considerations may be more compelling in some cases than others. The impact of the discriminatory action must be assessed against the cost of avoiding it, said the court.


Therefore, employers must continue to assess the question of justifying discrimination against the particular circumstances of the situation they are dealing with. A strong cost justification may take an employer most of the way towards establishing a defence to unlawful discrimination, but in many, if not all, cases something more in terms of the employer’s objectives will still be required to establish the defence.

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