MacCulloch v Imperial Chemical Industries
The age regulations prohibit employers from paying workers differently on the grounds of their age (whether directly or indirectly), unless the employer can justify it. In MacCulloch v Imperial Chemical Industries (IDS 860), the Employment Appeal Tribunal (EAT) said that the more serious the discrimination, the more coherent the justification must be.
Basic facts
At the time of her dismissal Ms MacCulloch was almost 37 and had worked for ICI for almost eight years. The firm calculated that she was entitled to a redundancy payment of just over 55 per cent of her gross annual salary under the company’s enhanced redundancy scheme.
This was calculated using two main factors - length of service (up to a maximum of 10 years) and age. The variations were significant. For instance, someone aged between 50 and 57 with ten or more years’ service would receive 175 per cent of salary.
Ms MacCulloch alleged that the way the scheme was set up constituted both direct age discrimination (she would have been entitled to a higher payment if she had been older) and indirect discrimination (she would have received more if she had had longer service).
Tribunal decision
The tribunal said that to decide the issue of justification, it had to determine whether the scheme “could be treated as a proportionate means to achieve a legitimate aim”.
It accepted that it was legitimate for the company to encourage and reward loyalty and to give a larger financial payment to older workers who might find it more difficult than younger workers to find new jobs. It also accepted that the scheme was very popular and that it helped avoid compulsory redundancies, thus making it easier for the company to manage change.
The tribunal concluded that the scheme was, therefore, a proportionate means of achieving the company’s aims and was justified. Ms MacCulloch appealed, arguing that the tribunal had not addressed the issue of proportionality.
EAT decision
And the EAT agreed with her. It said that for an aim to be proportionate "an objective balance [has] to be struck between the discriminatory effect of the measure and the needs of the undertaking. The more serious the disparate adverse impact, the more cogent must be the justification for it."
In this case, the tribunal had not undertaken that analysis as it had not considered “the need to balance the reasonable needs of the business with the discriminatory effects on the claimant.”
As Ms MacCulloch was significantly adversely affected as a result of a scheme (she received 55 per cent of salary compared to her comparator who would get 175 per cent), the difference in pay was very significant.
The EAT concluded, therefore that “It cannot be assumed that because the scheme in broad terms achieves certain business objectives that this necessarily establishes the justification for those differentials. The principal features which the Tribunal appears to have considered in the context of the proportionality issue were the generosity and general acceptance of the scheme. These may well be relevant in helping to achieve the aims of the scheme, but they do not deal at all with the issue whether the difference in treatment was justified”.
The EAT did, however, state that:
- The tribunal was entitled to say that the employer's objective of rewarding loyalty by linking payments to length of service was a legitimate aim
It was also legitimate for employers to encourage older workers to leave as this can help blockages in recruitment
The generosity of the scheme was not a legitimate aim in itself, but the fact that it could ensure a stream of volunteers for redundancy (making planning easier) could be.