Natasha Meikle and Claire McKee: Discrimination cases on grounds of age a very big issue relating to pension schemes

Natasha Meikle,  Associate at Dentons
Natasha Meikle, Associate at Dentons
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As employment tribunal claim numbers rise across the UK, we look at the biggest issue on the topic of age discrimination facing the courts (not to mention public sector employers and their employees) in 2019.

The Court of Appeal held at the end of 2018 that the transitional provisions in two public sector pension schemes, designed to protect older workers, unlawfully discriminated against younger workers on the grounds of age. In both cases the government argued that the difference in treatment was justified, but this was rejected. The transitional protections concerned were in the pension schemes of judges and firefighters.

Claire McKee, Associate at Dentons

Claire McKee, Associate at Dentons

The judges were members of the Judicial Pension Scheme (JPS) until it closed on 31 March 2015. After that date, judges have accrued benefits in the New Judicial Pension Scheme (NJPS). It was not disputed that NJPS benefit accruals are considerably less valuable than those under the JPS. Transitional provisions were put in place, offering full, tapered or transitional protection depending on age. Some younger judges claimed they were directly discriminated against on the grounds of age.

Similarly, the firefighters were members of the Firefighters Pension Scheme (FPS) until 31 March 2015, and after that date accrued benefits in the New Firefighters Pension Scheme (NFPS). As with the NJPS, the terms of the NFPS are materially less favourable than the FPS. Similar full, tapered, transitional or no protection was offered, depending on the age of the firefighters, with a view to protecting those closest to retirement age. A group of firefighters claimed they were directly discriminated against on the grounds of age.

The Equality Act defines unlawful direct discrimination as treating one person less favourably than another because of a protected characteristic. In relation to direct age discrimination, differences of treatment on grounds of age will not constitute discrimination if it can be shown that the treatment in question is a proportionate means of achieving a legitimate aim, that is, an appropriate means of achieving that legitimate aim and reasonably necessary to accomplish it. Case law had previously determined that in order to be legitimate, the aim must accord with a social or employment policy aim such as promoting inter-generational fairness, cushioning older workers against the effects of redundancy or rewarding experience.

In both cases it was conceded that the younger workers had been directly discriminated against by reason of age but it was asserted that this was justified as a proportionate means of achieving a legitimate aim.

The government argued that for the judges the stated aim was to protect those closest to retirement from the financial effects of pension reform or, put another way, a “moral and political” aim of being fair to those closest to retirement who would have less time to prepare for the impact of pension reform than those further away from retirement. The Court of Appeal found that the real reason the government had incorporated transitional provisions was a desire for consistency: similar provisions had been agreed with trade unions for other public sector workforces. However, consistency requires like cases to be treated alike and, in the case of the judges, the position was different as, the older the judges were, the less adversely they were affected by the reforms. There was no rational explanation put forward to justify consciously treating a group, who were the least adversely affected, more favourably. The Court of Appeal found that the transitional provisions went beyond what was necessary either to achieve consistency or to protect those closest to retirement and was therefore not a legitimate aim.

Turning to the firefighters case, neither party was happy with the decision at lower level and both sides appealed to the Court of Appeal. Again, the court considered that no legitimate aim was established and that there had been unlawful discrimination.

There will be a raft of public sector and quasi-public sector schemes affected by the firefighters case. It is possible that it may be distinguished from the judges case and that an appeal to the Supreme Court may be successful.

Natasha Meikle and Claire McKee are Associates at Dentons