Can Cost Alone Justify Discrimination?

Every decision an employer makes is likely to involve a cost consideration, yet the traditional legal position is that cost saving is not, in itself, sufficient to justify discriminatory treatment.  This position remains following the Court of Appeal decision in Woodcock v Primary Care Trust [2012] EWCA Civ 30, although the Court viewed the so called "costs plus" test as somewhat artificial, and stressed that the correct test is whether the treatment is a "proportionate means of achieving a legitimate aim".

Mr Woodcock was the chief executive of a NHS Trust.  He was served with notice of redundancy before the formal redundancy process had finished which meant that his employment ended before he reached the age of 50 and he therefore did not receive the enhanced retirement benefits he would otherwise have received.  Mr Woodcock claimed direct age discrimination.  The Court of Appeal considered the basic test of whether the treatment (dismissal) had been a proportionate way of achieving a legitimate aim.  It said that although cost saving was clearly one of the aims, the dismissal was also necessary to effect a genuine redundancy.  Also relevant was the fact that Mr Woodcock had deliberately stalled the consultation process, and even if full consultation had taken place, the outcome would have been the same. 

It will be reassuring to employers that a decision to dismiss which was so clearly motivated by cost was considered non-discriminatory.  However, the Court of Appeal did not go so far as to say that cost alone will be enough, and employers must continue to bear this in mind when dismissing employees.  Also see our previous update: http://www.faegredrinker.com/12391.