In light of pay cuts imposed by constraints brought about by the pandemic, employers may welcome the thinking handed down in a recent judgment of the Court of Appeal. In Heskett v Secretary of State for Justice, it was concluded that whilst cost reduction alone cannot be used to justify discrimination, it may be the case if cost issues are coupled with other factors which constrain the employer in some way.

In the Heskett case, the Secretary of State for Justice operated a system with annual salary increments. In 2010, this increment was reduced significantly due to government austerity measures following union discussions. The claimant argued that since he was younger than most other employees, the latter had managed to benefit from the higher increments for much longer than he had, claiming that this constituted indirect age discrimination.

The claimant argued that the ‘costs alone’ principle(such as cost-cutting for the purposes of increasing profits)  was not sufficient to justify the alleged discrimination. However, the Court of Appeal enunciated that the ‘costs plus’ principle is an acceptable defence in this regard, wherein cost reasons combined with other factors (proportionately) may constitute a legitimate aim for discrimination.

In this case the respondent’s action was justified under the ‘costs plus’ principle, with the ‘plus’ part finding legitimate grounds in the fact that the increment reduction was imposed due to budgetary austerity limitations, and not for the purposes of increased profits for example.

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