Can cost alone be enough to justify something which would otherwise amount to indirect discrimination on grounds of age?
Not if the sole reason for the action is to reduce costs for its own sake, held the Court of Appeal in Heskett v Secretary of State for Justice, but if coupled with something else such as the need to reduce expenditure and balance the books, then it can be.
The Claimant was a probation officer in Kent. To meet a cap on increases in public sector pay, the Ministry of Justice changed its pay structure so that progression up a pay scale took longer. This meant the Claimant would, in the longer term, earn less than his longer-serving (and hence, typically older) colleagues. He claimed indirect age discrimination, and argued that under Woodcock saving cost alone could not, as a matter of law, amount to a legitimate aim - and hence the discriminatory effect of the new pay structure could not be justified.
The Court of Appeal considered, at length, whether a 'costs plus' principle exists (see paras 47 onwards). It concluded that there cannot be a legitimate aim justifying discrimination if the only reason for the employer's actions is to save costs. In other words, an employer cannot discriminate just because it is cheaper to do so than not to do so. Accordingly, the 'costs plus' principle is correct and stands. However:-
(a) the phrase 'costs plus' is inelegant and should be avoided. A better question is: is the aim solely to avoid increase costs? (para 89); and,
(b) if an employer is subject to financial constraints which oblige it to reduce its costs, then that can be enough to amount to a legitimate aim. As Underhill LJ states at para 98: "an employer's need to reduce its expenditure, and specifically its staff costs, in order to balance its books can constitute a legitimate aim for the purpose of a justification defence."
The effect of this case (and I've been a real critic of the 'costs plus' rule in the past) is to acknowledge the rule is correct, but to kick it into the long grass so that an employee will hardly ever be able to succeed in an argument that a particular action is based on costs alone.
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