In Cook v Gentoo the Employment Appeal Tribunal (EAT) found that an Employment Tribunal should not have dismissed a direct age discrimination claim resulting from a decision to hurry through the redundancy process for an employee, in order to avoid making an enhanced pension payment.
Those employers who have a Local Government Pension Scheme open to future accrual of benefits will know that redundancy of an active member over the age of 55 can be expensive. This is because the LGPS Regulations 2013 permit an active member aged 55 or over to take their pension early where they are dismissed on redundancy or business efficiency grounds, which requires a strain payment to be made by the employer into the pension scheme. Strain payments can be significant, increasing the cost of the redundancy and eating into any cost savings the employer is trying to achieve.
The right to take an early unreduced pension was challenged in this case where it was alleged that a redundancy process was rushed through to avoid the employee reaching age 55. Mr Cook was employed as head of compliance and was a long-standing employee. Following a restructure, Mr Cook’s role was made redundant. Under the rules of the LGPS, of which Mr Cook was a member, he was entitled to an immediate payment of his pension without actuarial reduction if he was made redundant after the age of 55.
A decision was made to curtail the redundancy process meaning Gentoo did not obtain Board approval and ran a quick redundancy process, dismissing Mr Cook without notice just short of his 55th birthday. Had the redundancy procedure not been cut short, Mr Cook would have been made redundant after his 55th birthday and Gentoo would have been obliged to make a payment of around £80,000 into the pension scheme. One of the considerations of the employer in making the decision to affect the redundancy at the time it did, was a previous regulatory assessment which found that the Board had exercised weak controls when agreeing severance payments to outgoing executives.
Mr Cook brought claims of unfair dismissal and direct age discrimination. The ET found that the dismissal was unfair due to the speed of the process and the fact that Gentoo had made no attempt to seek Mr Cook alternative employment.
The ET however rejected the age discrimination claim as they did not consider appropriate comparators had been identified and that in any event, any age discrimination would have been justified as a proportionate means of achieving a legitimate aim.
MMr Cook appealed and the EAT accepted that Gentoo wanting to save costs was a legitimate aim, however the Tribunal had failed to carry out a detailed analysis as to whether the rushed dismissal was a proportionate means of achieving that aim and failed to consider hypothetical comparators.
The EAT did not make a finding of discrimination, instead it has sent the case back to the Tribunal to consider the point again.
This case highlights the importance of considering pension scheme implications as early as possible in a redundancy or restructure planning process. Any potential enhanced pension costs should be identified at an early stage and accounted for/considered when preparing the business plan.
For further advice on redundancy process and or the LGPS, please contact Employment Team.