In what may a sign of an increasing trend, another case of dismissal to avoid paying a pension has been heard. In Woodcock v Cumbria Primary Care Trust an employment tribunal has held that the unlawful dismissal of an employee in order to avoid paying an enhanced retirement pension was discriminatory on the grounds of age but was justified as a proportionate means of achieving a legitimate aim.

Following a restructuring exercise, Mr Woodcock's position as chief executive of North Cumbria Primary Care Trust was no longer required. He was informed in September 2006 that he was at risk of redundancy. He was invited to a meeting to start the redundancy consultation process by a letter on 30 March 2007. However, due to scheduling problems, the meeting was not held until 6 June 2007. If he had still been in employment on his 50th birthday (17 June 2008), Mr Woodcock would have become entitled, under the terms of the pension scheme, to an enhanced pension costing the Trust between £500,000 and £1m. Seeking to avoid the increased cost, the Trust wrote to Mr Woodcock on 23 May 2007 giving him 12 months' notice of the termination of his employment with the Trust, unless alternative employment could be found for him. Consultation regarding the redundancy had therefore not commenced before Mr Woodcock was served with notice.

The tribunal found that the Trust's decision to terminate his employment in order to avoid paying the enhanced pension payment amounted to less favourable treatment on the grounds of age. However, it went on to hold that that treatment was justified as being a proportionate means of achieving a legitimate aim. The Trust's legitimate aim had been to effect the redundancy dismissal before becoming liable for the additional costs of providing an enhanced pension. In reaching this conclusion the tribunal relied on principals already established by the EAT that:

• whilst cost cannot in itself be a legitimate aim, it can be put into the balance with other justifications (Cross v British Airways plc); and
• a discriminatory act to avoid an employee receiving a windfall is a permissible feature of a redundancy scheme (Loxley v BAE Systems).

In the tribunal's view, the dismissal was a proportionate way of achieving that aim because Mr Woodcock had been aware of the possibility of redundancy for some time. He knew of the original intention to effect all the redundancies by 30 June 2007 and had therefore received an extra year's employment by the date of his dismissal and a generous redundancy payment. Further, as he would not accept any role other than that of Chief Executive, consultation would have been meaningless.

Impact on employers

• This tribunal decision is not in line with the decision of the EAT in London Borough of Tower Hamlets v Wooster. However the employer in Wooster did not attempt to argue that the discrimination was justified and so the justification arguments in this case are new.
• It is questionable whether the tribunal's decision in this case is correct. From the facts, it appears that saving costs was the employer's only aim. In addition, the "windfall" which Mr Woodcock would have received was part of his pension entitlement and not a windfall from a redundancy scheme as in Loxley.
• Until such time as the EAT decides otherwise, employers should treat this case with caution and bear in mind that whilst costs can be taken into account, they cannot on their own amount to a legitimate aim. Employers should also continue to exercise caution when taking into account any age-related criteria in a redundancy exercise and ensure that they can show that any discriminatory action taken amounts to a proportionate way of achieving their identified aims.

17 November 2009

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