Facts

Barking and Dagenham Borough Council operated a loyalty scheme in which workers would be paid an additional amount if they could satisfy two criteria relating to age and length of service. An employee needed to have 25 years of service and be over 55 years old to qualify.

As part of a large scale job evaluation (and prior to the coming into force of the Employment Equality (Age) Regulations (the “Regulations”)) the Council sought the closure of the scheme, recognising its potentially age discriminatory effect. The Council entered into negotiations with the relevant trade unions and agreed a system of “pay protection”. The scheme would be closed to new entrants and those already benefiting from it would continue to do so, but have their benefit frozen at their current level.

Mrs Pulham worked with the Council for over 25 years. She was not eligible for the additional benefits as she did not satisfy the age requirement, despite having longer service that some that did. Mrs Pulham (and 15 others) therefore claimed to have suffered unlawful age discrimination:

• during the period from when the Regulations came into force (1 October 2006) to when the scheme closed (30 March 2007); and,
• from 1 April 2007 when those that benefited from the scheme had their pay protected.

The Employment Tribunal hearing Mrs Pulham’s case considered the Council’s scheme was discriminatory, but that the pay protection arrangements were justified.

Mrs Pulham appealed to the Employment Appeal Tribunal. Mrs Pulham relied on the case of Redcar and Cleveland Borough Council v Bainbridge (2008) ICR 249. In this case, a sex discriminatory pay protection scheme was unjustifiable.

Decision

The Employment Appeal Tribunal first looked at whether the pay protection scheme was capable of justification. Mrs Pulham’s argument was that EU law requires that where discrimination has been “recognised” in the past, it must be eliminated in full and immediately. She argued that the scheme had been “recognised” as discriminatory at the time the pay protection measures came into force, so therefore the scheme was not capable of justification.

The Employment Appeal Tribunal rejected this argument, considering that this case could be differentiated from Redcar. In that case, the council had 30 years to comply with equal pay legislation and there were clear policy reasons as to why it should not get any more time, yet in this case the Council had been dealing with the age legislation for a much shorter period of time.

Therefore, the Employment Appeal Tribunal then looked at whether the scheme was in fact justified. Two aspects of the Employment Tribunal’s decision were troubling to the Employment Appeal Tribunal: the reliance placed upon the fact that the pay protection arrangements had been negotiated with trade unions, and the budget that the Council had set aside for dealing with job evaluation issues. Though the exact cost of continuing the scheme had not been calculated, the Employment Appeal Tribunal decided that an employer cannot seek to justify discriminatory actions on the basis that they have exhausted their budget. It is for the employer to decide how big to set the budget and whilst it can be a factor, an employer cannot limit the extent of their obligations by the budgetary choices they make.

Mrs Pulham therefore succeeded in her appeal. The Employment Appeal Tribunal found that the Employment Tribunal’s reasoning was legally flawed and Mrs Pulham’s case was remitted for a hearing before a fresh Tribunal.

The judgment is available here.

Pulham and others v London Borough of Barking and Dagenham (2009) UKEAT/0516/08.