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Funding Cuts and Policy Change - Managing the Risks

on Friday, 05 July 2019.

Funding cuts leading to changes in the Ministry of Justice's pay policy were capable of justifying indirect age discrimination, the Employment Appeal Tribunal has held.

Heskett v Secretary of State for Justice - What Happened?

Due to funding cuts and budgetary constraints imposed by central government, the Ministry of Justice (MoJ) changed its pay policy, impacting many employees across the public sector. The changes impacted the way that probation officers were able to move up the pay scale, increasing the time it would take them to reach the top pay grade significantly.

Employees who were over 50 would benefit most from these changes, as they would be at the top of the band and therefore earning more than those younger employees who were at the bottom. Mr Heskett claimed that this was indirect age discrimination, as older employers would be on higher salaries and also have better pension contributions.

What Constitutes Indirect Discrimination?

Indirect discrimination occurs when a policy, criterion or practice is applied and, although it is not intended to treat anyone less favourably, it has the inadvertent impact of disadvantaging a particular group who share a protected characteristic. The protected characteristics under the Equality Act 2010 include age, race, religion or belief, gender reassignment, marriage and civil partnership, pregnancy and maternity, sex, disability and sexual orientation. The policy, criterion or practice must put a group of people with the shared characteristic at a particular disadvantage, it cannot just disadvantage one person.

The Employment Tribunal (ET) agreed with Mr Heskett that this was a prima facie case of age discrimination, as the changes in pay policy would disadvantage younger members of staff. However, the Ministry of Justice was able to successfully defend the claim using an objective justification argument. An employer can avoid liability in claims of direct and indirect age discrimination if it can show that it acted in a proportionate way to achieve a legitimate aim. The ET held that the policy changes were objectively justified as the Ministry of Justice had a legitimate aim of trying to ensure that they could 'break even' year on year.

The Appeal

Mr Heskett appealed the decision, arguing that this was a "costs alone" case. It is not possible to justify age discrimination solely on the grounds of cost. Costs can be taken into consideration, but there must be some other factor in addition which leads to the decision to implement the policy.

The Employment Appeal Tribunal (EAT) dismissed the appeal and confirmed that this was not a "costs alone" case. The EAT agreed with the ET that the Ministry of Justice policy was aimed at trying to ensure that they could 'break even' year on year by making difficult decisions about how to allocate funding. The EAT agreed that the Ministry of Justice were trying to spread the impact of funding cuts as fairly as possible and therefore, although costs had been a big part of their decision, there had been other factors taken into account when implementing this policy. It was not therefore a case where the Ministry of Justice had based their policy solely on a 'lack of means.'

Best Practice

This case does provide some comfort for employers facing budget cuts and making cost saving measures in both the public and private sector.

However, employers need to be mindful that a change to, or introduction of, a provision, criteria or practice which has a greater impact on the pay of some employees compared to others could potentially be discriminatory. In such circumstances it may be necessary to undertake a risk assessment before implementation.

For more information please contact Gemma Cawthray in our Employment Law team on 0117 314 5266, or complete the form below.


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