In an interim hearing, an Employment Tribunal finds that the test in Regulation 32(2) of the Employment Equality (Age) Regulations 2006 is a mix of objective and subjective tests.

Facts

This case concerned the pay and benefits of employees at the Ministry of Defence (“MOD”). The MOD uses a criterion of length of service for progression in its pay system and for the accrual of other benefits including holiday entitlement. Mr Harrison argued that this involves unlawful indirect discrimination contrary to the Employment Equality (Age) Regulations 2006 and specifically Regulation 32.  He argued that individuals are fully competent in their jobs well before reaching the maximum entitlement age but are paid less than their colleagues who have the maximum even though they are doing the same quality of work and have the same expectation as their co-workers who do benefit.

Regulation 32 permits an employer to provide benefits to employees by reference to their length of service. It states:

  1. Subject to paragraph (2), nothing in Part 2 or 3 shall render it unlawful for a person ("A"), in relation to the award of any benefit by him, to put a worker ("B") at a disadvantage when compared with another worker ("C"), if and to the extent that the disadvantage suffered by B is because B's length of service is less than that of C.
  2. Where B's length of service exceeds 5 years, it must reasonably appear to A that the way in which he uses the criterion of length of service, in relation to the award in respect of which B is put at a disadvantage, fulfils a business need of his undertaking (for example, by encouraging the loyalty or motivation, or rewarding the experience, of some or all of his workers).

So where B’s length of service is greater than five years, it must “reasonably appear” to A that the way in which the criterion is used fulfils a business need. This test of justification was the main subject of this Pre-Hearing Review: is it an objective test, a subjective test, or combination of both subjective and objective?

The arguments

Mr Harrison argued that in order for Regulation 32 to be compatible with Article 6(1) of the Framework Directive, the test must be objective. Regulation 32 is part of an Article 6(1) derogation and, as objective is the lowest standard set under Article 2(2) of the Directive, any other test would be inconsistent. Mr Harrison also argued that the Tribunal should reject any justification not connected adequately to social policy aims.

The MOD argued that whilst Article 6(1) is addressed to Member States in their capacity as States enacting legislation, this does not mean that private employers need adopt the same objective approach. The MOD directed the Employment Tribunal to the Rolls Royce v Unite case (summary available here) and dicta in that case which supports the argument that there should be a mixed test including both objective and subjective elements.

The MOD argued that the test in Regulation 32(2) is different from Regulation 3(1)(b) because of the description given by Arden LJ in Rolls Royce that it is drafted in a more “employer-centric way”. They argued that the test under Regulation 32(2) is a less arduous one.

The MOD suggested that the correct approach for an employer is to first justify the benefit in relation to a specified need of the business. This need does not have to be restricted to purely commercial considerations, but the benefit must appear to fulfil that need. This is the element of subjectivity which the MOD argued for.

In so far as the objective element is concerned, based on the word “reasonably” the MOD argued that the need of the business must be legitimate and not arbitrary, secondly that the employer should be motivated by enlightened self interest (purely cost as a consideration would not suffice) and thirdly the benefit must reasonably appear to fulfil that need in that it must be fit for the employer’s purpose.

The decision

The Tribunal gave a comprehensive summary of the Consultation process prior to the adoption of the Age Regulations. It looked at the whole process and heard evidence of the Policy Manager responsible for the process. The Tribunal eventually concluded that it was a genuine consultative process where the Government was seeking to strike a balance between competing interests.

With this in mind, and the persuasive dicta of Arden LJ and Wall LJ inRolls Royce, the Tribunal found for the MOD. It agreed with the MOD’s arguments and concluded that the test in Regulation 32(2) is a mix of objective and subjective tests and that such a less arduous test compared to Regulation 3(1) is compatible with Article 6(1) of the Framework Directive.

It will be open for a Tribunal to find that in the employer’s position it would have decided that the length of service criterion did not fulfil a business need. The decision of the employer that it did fulfil a business need was a reasonable one for him to reach, even if it may not be the least discriminatory option.

In relation to the other issues in this case, the Tribunal found:

  •  the burden of proof is on the employer to show each element of the Regulation 32 defence;
  •  an employer is not entitled to rely on any assumption that the use of length of service in determining pay or annual leave that it is proportionate and necessary to achieve a legitimate aim (for Regulation 3 purposes) or that it reasonably appears to the employer to fulfil a business need (for Regulation 32(2) purposes);              
  • the justification test in Regulation 32(2) must be fulfilled in relation to the award which must be justified, not just the use of length of service generally;
  • though Member States must establish a legitimate aim according to a high standard of proof, an employer relying on Regulation 32(2) need not establish an aim to the same high standard;
  • Regulation 32(2) is for the employer to justify, whereas Article 6(1) of the Framework Directive is for member states to justify; and,
  • Regulation 32(2) does not require the Tribunal to determine whether an employer’s grading systems reasonably categorise work of the same demands, effort, skill and decision making group.

The Tribunal declined to refer any questions of interpretation of EC law to the ECJ and the case will now continue to a full hearing.

The judgment is available here.

Mr R W Harrison -v- Ministry of Defence case number 2403651/2008, unreported