Cost considerations

Although the general rule is that consideration of costs alone cannot justify discrimination, the Court of Appeal has confirmed in Woodcock v Cumbria Primary Care Trust that costs plus another factor, such as avoiding a windfall, can justify it.

Basic facts

Following a reorganisation in 2005, Mr Woodcock’s post as chief executive of the North Cumbria Primary Care Trusts disappeared. He was not appointed to one of the new chief executive roles that were created and in September 2006 he was informed he was at risk of redundancy. By 2007 it was clear that there were no suitable alternative vacancies and he was invited to a consultation meeting in March, which was postponed until 6 June.

At some point before that date, the Trust realised that if it did not give Mr Woodcock 12 months notice of dismissal before 17 June, he would still be in employment on his 50th birthday (17 June 2008), allowing him to claim early retirement on enhanced terms. This could cost anything between £500,000 and £1,000,000.

It therefore wrote to Mr Woodcock on 23 May giving 12 months’ notice of dismissal. The meeting went ahead on 6 June but Mr Woodcock said that consultation was meaningless when he had already been given notice. He asked the Trust to withdraw the notice but it refused and Mr Woodcock claimed age discrimination, amongst other things.

Tribunal and EAT decisions

The Tribunal agreed that Mr Woodcock had suffered direct discrimination, but that it was objectively justified because the Trust’s aim was to avoid the additional cost it would have incurred had he reached age 50 before the end of his notice period.

Referring to the decision in Cross v British Airways (that cost alone cannot be a legitimate aim but that cost plus another factor could be), it concluded that dismissing Mr Woodcock in order to avoid additional costs and thus depriving him of a “windfall” was objectively justifiable. It added that further consultation would not have achieved anything as no chief executive roles were available, which was all Mr Woodcock was interested in.

The EAT agreed, saying the Tribunal had correctly applied the “costs plus” test in Cross. Although the Trust was motivated by the potential costs consequences of allowing Mr Woodcock to remain in employment until his 50th birthday, “it would be artificial to regard that factor in isolation” as the only reason for his dismissal.

In addition, the EAT made a non-binding (or obiter) comment that it could not see any principled basis for a rule that considerations of cost could never by themselves constitute sufficient justification. Having such a rule, it said, just tended to involve both the parties and Tribunals in “artificial game-playing”.

Court of Appeal

The Court of Appeal concluded that the dismissal notice was not issued solely to avoid costs, but also to give effect to the Trust’s genuine decision to terminate Mr Woodcock’s contract on the ground of redundancy. This was a legitimate aim and it was a legitimate part of that aim for the Trust to ensure that dismissing him when it did saved a lot of money.

It also rejected the argument that, as the Trust had deprived Mr Woodcock of his right to consultation, the treatment had not been proportionate. It said that a balance had to be struck between the discriminatory effect of the treatment of Mr Woodcock and the needs of the Trust. Although the consultation 'corner cutting' in theory deprived Mr Woodcock of an opportunity, in reality he had not been deprived of anything of value, because, as the Tribunal had found, it would not have achieved anything.

Finally, in dismissing the appeal, the Court of Appeal ackowledged there was a “degree of artificiality” that an employer could not rely on costs alone as “almost every decision taken by an employer is going to have regard to costs”. However, despite this, the Court of Appeal accepted that the Court of Justice of the European Union (CJEU) had given guidance that costs alone do justify discriminatory treatment.