Analysis of key international cases

German survivor's pension claim rejected

The EU directive covering age discrimination cannot be relied on to challenge a domestic law where the act complained of pre-dated the deadline for implementing the directive and the measure attacked was not introduced to implement an EU law.

Mr Bartsch worked for BSH in Germany. He died in May 2004. Under the terms of BSH’s occupational pension scheme a survivor’s pension was not payable to a surviving spouses who was more than 15 years younger than the former employee.

Mrs Bartsch was 21 years younger than her husband and, therefore, not eligible for a survivor’s pension.

Her claim was rejected by the European Court of Justice as the German laws implementing the EU directive which outlawed age discrimination were not in force in 2004 and the deadline for implementing them had not passed.

The ECJ distinguished this case from the Mangold case (see below) because the German measure which was successfully challenged in Mangold had been specifically introduced to implement EU law.

This decision effectively limits greatly the potential impact of the Mangold decision.

Birgit Bartsch v Bosch and Siemens Hausgerate Altersfursorge GmbH, ECJ C427/06

Virgin Blue discriminates in Australian cabin crew recruitment

The Anti-Discrimination Tribunal of Queensland upheld complaints by eight woman over the age of 35 that they had suffered age discrimination when they applied for, but were refused, employment by Virgin Blue Airlines.

Click here for a fuller report on this case

Spanish retirement challenge

When can service-related pay be justified?

In general, employers do not need specifically to justify using length of service to calculate pay, according to the European Court of Justice (ECJ) in Cadman v Health and Safety Executive (Case C-17/05, 3.10.06). An employer will only have to justify using this system for a particular job if a worker can provide evidence raising serious doubts that this is an appropriate way of rewarding experience.

This case was about equal pay – that is, sex discrimination in pay. However, it is also very relevant to age discrimination, as the main issue was whether using length of service as a criterion is objectively justified. Using length of service in workplace policies is a prime example of potential indirect age discrimination, as older workers will tend to have longer service than younger workers.

The case

The female claimant brought an equal pay complaint comparing her pay with that of four male comparators. Her employer explained the discrepancy in pay on the basis that it operated a differential remuneration system, where pay increased according to length of service. The system tended to disadvantage women, who had shorter service than men in the relevant part of the organisation. The employee claimed that this system indirectly discriminated against women, and so needed to be objectively justified by the employer. She also claimed that the employer had failed to provide this justification.

The claimant was successful before the employment tribunal. However, the Employment Appeal Tribunal decided - on the basis of previous decisions of the ECJ - that there was no need for an employer to provide specific justification where length of service was used as a criterion.

On appeal, the Court of Appeal decided to refer the issue to the ECJ, on the basis that the previous case law was unclear. The decision of the ECJ in the Danfoss case [1989] IRLR 532 established that length of service was generally objectively justified, on the grounds that “length of service goes hand in hand with experience”, and so there was no need to look at the employer’s specific justifications on the facts of the case. But the Court of Appeal thought that a number of later cases suggested that the ECJ was having second thoughts about this principle.

The ECJ decided:

• As a general rule, use of length of service as a criterion is an appropriate way to reward experience which enables a worker to perform his or her duties better. The employer does not need to specifically justify why this is appropriate for a particular job.
• The employer can be required to specifically justify using this criterion if the worker can provide evidence which raises serious doubts that this is an appropriate way of rewarding experience for a particular job.
• Where an employer uses this kind of pay system, there is no need to show that each individual worker has actually acquired experience during the relevant period which enables them to carry out their duties better.

Implications

The question of whether use of length of service as a criterion is generally objectively justified is very important in the context of age discrimination. The Employment Equality (Age) Regulations 2006 contain special rules about basing certain benefits on length of service. However, where benefits are based on length of service over five years, the employer must show that this fulfils a business need. This will now be easy to do in most cases, as the ECJ has confirmed that using length of service is generally objectively justified because it rewards experience – which clearly meets a business need.

There are implications for many other areas where length of service may be taken into account by an employer and so result in indirect age discrimination, such as promotion systems based on length of service. Again, the ECJ ruling suggests that these will be not be difficult to justify in most cases.

Employers can, however, be challenged if an employee can produce evidence showing that this is not an appropriate way to reward experience in a particular case. The ECJ judgment does not comment on what such evidence might be. It may be that it will be more difficult to rely on a general rule about length of service where you are comparing employees with relatively long service. For example, is it right to assume that an employee with 20 years of service has more valuable experience than an employee with 10 or 15 years of service? If a younger employee can show that he or she actually has a lot more relevant experience than an older long-serving employee - and the employer has adopted a system that is entirely based on length of service without any other performance or actual experience criteria - this may be enough to require the employer specifically to justify applying the rule to that particular job.

Cadman v Health and Safety Executive ECJ (Case C-17/05, 3.10.06)

Cost alone won't justify discrimination

The financial cost to a private employer of avoiding an indirectly discriminatory provision will not, on its own, be a good enough justification. Cost will only be accepted as justifying discrimination were it is one of a number of other justifying factors.

Prior to 1971, British Airways set different contractual retirement ages for its male and female employees. Men could work until they were 60, whereas women had to retire at 35. These contractual retirement ages were subsequently standardised at 55, though men employed prior to 1971 were allowed to retain their later retirement age of 60.

A female employee complained that it was sex discrimination to require her to retire at 55 when some of her male colleagues could continue until 60. The Tribunal found that there was a potentially discriminatory provision, criterion or practice – that in order to continue working until 60, an individual had to have been employed prior to 1971 - and that, statistically, this had an adverse impact on more women than men.

However, the woman’s claim failed because the Tribunal held that BA could justify the indirectly discriminatory effect. Justification requires an objective balance between the discriminatory effect of the condition on the employee and the reasonable needs of the employer. BA argued that its ‘economic and organisation business interests’, which were to minimise costs and maintain the existing terms and conditions of employment relating to retirement and access to pensions, were legitimate and that retaining discriminatory retirement ages was a proportionate way of achieving their aim. Both the tribunal and the Employment Appeal Tribunal agreed.

The claimant’s argument that cost could never be a justification for discriminatory treatment was rejected. The EAT drew a distinction between the government, ‘with its notionally bottomless purse’, which can never be allowed to justify its own discriminatory conduct on grounds of cost and private employers which do not have unlimited resources. In the EAT’s view ‘as a matter of common sense’ and based on ECJ and other case law ‘economic justification such as the saving, or non-expenditure of costs … must be considered’. In their view, private employers can put cost forward as a justification, but not on its own. There must be other justifying factors.
(NB This case was appealed to the Court of Appeal on other grounds.)

Implications

The issue of whether, and if so to what extent, cost can be used as a justification for age discrimination is likely to be one of the most important questions for courts and tribunals. It seems quite clear that costs alone will not be enough, but this case will be used by any private employer seeking to argue it as one of a number of factors.

Cross and others v British Airways plc (EAT), 23.3.05.

Click here for a link to the judgment

German government falls foul of age discrimination Directive

A German law providing older fixed term workers with fewer legal protections than their younger counterparts was unlawful age discrimination. Although the German government had a legitimate aim – the vocational integration of unemployed older people – the way in which it had sought to achieve that aim (by excluding those over a particular age from certain legal protections) was not proportionate.

 Another important aspect of this decision was the ECJ’s ruling that the German government had acted illegally in implementing an age discriminatory law even though the deadline for implementing the age strand of the 2000 EC Anti-discrimination Framework Directive had not yet expired.

The case revolved around German laws which set restrictions on the length of fixed-term contracts and the number of times they can be renewed. These rules are relaxed where the contract is with a worker who is over a certain age, giving them less job protection. In 2001, German legislators changed the age at which these restrictions were relaxed from 60 to 52 (it will change again to 58 from the end of 2006) at the same time as they implemented the 1999 EC Fixed-term Work Directive into German law.

The ECJ upheld an argument that this was unlawful as it discriminated against older workers contrary to EU law. At first sight this might not seem that surprising. However, Germany, like the UK, has perfectly legitimately deferred implementation of the age strand of the Anti-discrimination Directive until the end of 2006. The ECJ was unconcerned that Germany had not yet implemented its age discrimination laws nor that the deadline for them to do so had not yet expired.
The German Government sought to argue that its fixed-term contract age limits were, in any event, compatible with the Anti-discrimination Directive. To succeed, it had to show:

• that the limits served to advance a legitimate aim; and
• they were a proportionate means of achieving that aim.

The ECJ accepted that Germany’s aim - ‘the vocational integration of unemployed older workers, in so far as they encounter considerable difficulties in finding work’ – was a legitimate ‘public-interest objective’ which was capable of justifying age discrimination.

However, the Court was not persuaded that the limits were ‘appropriate and necessary’ as required by the Directive. It was unhappy that the limits applied to all workers over age 52 ‘whether or not they were unemployed before the contract was concluded and whatever the duration of any period of unemployment’. In the Court’s view, this infringed the principle of proportionality (which requires a fair balance to be struck between the advantage to the employer of achieving its legitimate aim and the disadvantage to the employee of the discriminatory treatment).

The case is interesting partly because of the Court’s comments as to the potential for age discrimination to be justified; and partly because of the implication that age discrimination is potentially unlawful in EU member states regardless of the implementation of domestic age laws.

Justifying age discrimination
This case gives us a first glimpse of the ECJ’s likely approach to age discrimination claims. Worrying, too, it must be for the UK Government.

It seems certain to make it more difficult for employers to justify policies which treat people differently purely by reason of their age (such as pre-65 retirement ages, for example). It also calls into question some of the Government’s thinking, most notably the discriminatory national minimum wage rates for young people. The DTI’s stated aim (set out in its Coming of Age consultation document) of encouraging employers to take on young workers echoes ominously the arguments of the German Government that were thrown out by the ECJ.

Age discrimination laws in the EU

The ECJ gave the following two reasons for holding that age discrimination is potentially unlawful in EU member states, regardless of the implementation of domestic age laws:

• during the period of transposition of a Directive, member states must not take steps that derogate from its objectives; and
• the prohibition on age discrimination is ‘a general principle of Community law’ emanating from ‘various international instruments and in the constitutional traditions common to the member states’.

The first explanation is understandable, although the ECJ seemed to take a different view in a later Greek case, Adeneler v.Ellinikos Organismos Galaktos (C-212/04, 4 July 2006). In that case, the ECJ (which contained four of the same judges who made the decision in Mangold) held that Directives were effective only from the end of the transposition period (save, of course, where the Directive has direct effect).

It is the ECJ’s second explanation, however, that has caused European lawyers to scratch their heads and raise questions such as:

• What are these ‘general principles of Community law’? Does this mean there is now some form of EU ‘common law’? If so, what else might it include?
• Is the ECJ’s ruling restricted to cases where domestic law, which is inconsistent with a yet–to-be-implemented Directive, is introduced during the period for transposition? If so, its impact would be greatly limited.
• Does the ruling apply only to inconsistent domestic laws that derive from EU law, such as the rights of fixed-term workers to which the case related? That would mean, for example, that the UK’s unfair dismissal and national minimum wage laws – which are not based on EU directives – could not yet be challenged as age discriminatory.

The ECJ concluded: ‘it is the responsibility of the national court, hearing a dispute involving the principle of non-discrimination in respect of age, to provide, in a case within its jurisdiction, the legal protection which individuals derive from the rules of Community law and to ensure that those rules are fully effective, setting aside any provision of national law which may conflict with that law’.

On the face of this wording, individuals might potentially have been able to bring age discrimination cases in the UK before the UK Regulations came into force.

Mangold v Helm [2006] IRLR 143 (ECJ). Click here for a link to the judgment
Adeneler v Ellinikos Organismos Galaktos (C-212/04, 4 July 2006).

Unsuccessful challenge to Canadian mandatory retirement laws

Two university employees were made to retire at age 65 under a mandatory retirement policy. They claimed that the policy was discriminatory on the grounds of age and therefore unlawful under section 15 of the Canadian Charter of Rights.

Their claim was rejected on the basis that the Charter, which is part of the Canadian constitution, only applies to government laws and actions, not to agreements between private individuals. It was found not to apply to the employer's mandatory retirement policy, since that was a private matter.

As the Charter is part of the constitution, all other Canadian laws must be consistent with it. The employees in this case also argued that the Human Rights Act, which limits employment related age discrimination claims to those aged between 45 and 65, was contrary to the Charter. This claim was also unsuccessful (after appeal), on the basis that although the provision in the Human Rights Act does discriminate on the grounds of age that discrimination is justified under section 1 of the Charter.

Connell & Harrison v The University of British Columbia [1990].

Click here for a link to the judgment