Age Discriminatory Pay Protection Arrangements Always Potentially Justifiable

In Pulham and others v London Borough of Barking and Dagenham UKEAT/0516/08 the Employment Appeal Tribunal (EAT) held that an Employment Tribunal had been wrong in its approach regarding the question of whether the employer could objectively justify the continuation of a remuneration scheme based on length of service and age criteria after the Employment Equality (Age) Regulations 2006 (the Regulations) came into force. It held that pay protection arrangements that are discriminatory on the ground of age are always potentially justifiable.

The London Borough of Barking and Dagenham (LBBD) operated the Local Knowledge and Experience Increment Scheme (the Scheme) to reward loyalty and experience. Under the Scheme, employees were entitled to be paid additional increments provided they had completed 25 years' service and were over age 55. In anticipation of the Regulations, LBBD identified the Scheme as potentially discriminatory and agreed to discuss the future of the Scheme with the relevant trade unions. It was subsequently agreed that the Scheme would be closed to new entrants with effect from 1 April 2007. Any employees who were in receipt of payments under the Scheme at that date would have their payment frozen at the current rate. Ms Pulham satisfied the length of service criterion but was not old enough to join the Scheme until 2011. She complained to LBBD that the age criterion was unlawful under the Regulations and that she was entitled to receive payment under the Scheme from the date the Regulations came into force. LBBD argued that as Ms Pulham was not currently in receipt of payment under the Scheme, she was not entitled to any payment. Ms Pulham brought a claim for direct and indirect age discrimination.

The Tribunal held that as Ms Pulham was treated less favourably than an employee aged 55 or above, LBBD had directly discriminated against her. However, it went on to find that the discrimination was objectively justified. Ms Pulham appealed and her appeal was allowed by the EAT. While the principal decision of the EAT was that there was no reason why an employer should not be allowed an element of pay protection to make the adjustments necessary to conform to the coming into force of the Regulations, especially since all kinds of age discrimination can, in principle, be justified and LBBD's pay protection arrangements were therefore capable of justification, it also held that the Tribunal had attached too much weight to the fact that LBBD had negotiated the continuation of the scheme with the relevant trade unions and that LBBD was facing significant potential cost against it from historic equal pay claims. While these factors could be relevant to justification, they were not determinative. The EAT therefore remitted the case to a fresh Tribunal.