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URL: http://www.bailii.org/ew/cases/EWCA/Civ/2018/346.html
Cite as: [2018] EWCA Civ 346

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Neutral Citation Number: [2018] EWCA Civ 346
Case No: A2/2015/4217

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
(LADY STACEY, MRS C BAELZ, MS G MILLS CBE)
UKEAT/0122/15/LA

Royal Courts of Justice
Strand, London, WC2A 2LL
2nd March 2018

B e f o r e :

LORD JUSTICE BEAN
and
LORD JUSTICE LEGGATT

____________________

Between:
AIR PRODUCTS PLC
Appellant
- and -

MICHAEL COCKRAM
Respondent (Claimant below)

____________________

Daniel Stilitz QC and Andrew Blake (instructed by Freshfields Bruckhaus Deringer LLP) for the Appellant
James Laddie QC (instructed by Bindmans LLP) for the Respondent (Claimant)
Hearing date: 13 February 2018

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Justice Bean:

  1. The Claimant Michael Cockram brought various claims including one for age discrimination against his employer Air Products plc in the employment tribunal. He alleged unfair constructive dismissal, detriment by reason of protected disclosures and age discrimination. The unfair dismissal claim was struck out and an appeal to the Employment Appeal Tribunal against the decision to strike it out failed: Cockram v Air Products plc [2014] ICR 1065. The other two claims then proceeded to a hearing on the merits before an employment tribunal at London South (EJ Zuke and two lay members) where by a judgment promulgated on 2 January 2015 both were dismissed.
  2. Mr Cockram appealed against the tribunal's rejection of his age discrimination claim to the EAT, which allowed his appeal and remitted the case for re-hearing by a freshly constituted tribunal. With permission of Christopher Clarke LJ Air Products plc (to whom I shall refer as "the company" or "the Appellants") appeal to this court, seeking to restore the decision of the tribunal. Mr Cockram cross-appeals against the order for remission, contending that he should have won outright.
  3. The age discrimination claim related to unvested Long Term Incentive Plan ("LTIP") awards, which the Claimant forfeited when he resigned his employment with the Appellants at the age of 50. As a general rule, under the company's LTIP all unvested awards are forfeited on termination of employment. However, the LTIP contains a retirement exception under which participating employees who leave employment "on or after a customary retirement age for the Participant's location" are permitted to retain their awards. Since the customary retirement age for employees of the company in the UK was fixed at 55, the Claimant did not fall within the retirement exception, and therefore forfeited his unvested LTIP awards. He contends that this amounted to unlawful direct age discrimination.
  4. Before the tribunal, the company accepted that the effect of the customary retirement age provision in the LTIP was directly discriminatory, in that an employee who was aged over 55 (unlike the Claimant) would have benefited from the retirement exception. However, the tribunal accepted the company's arguments that the discriminatory effect was objectively justified, in that applying the retirement exception only to employees aged 55 or over was a proportionate means of achieving a legitimate aim.
  5. The LTIP sets out its purposes in clause 1:
  6. "(i) to provide long-term incentives to those executives or other key employees who are either in a position to contribute to the long-term success of and growth of Air Products and Chemicals, Inc. ("the Company") and Participating Subsidiaries, or who have high potential for assuming greater levels of responsibility or who have demonstrated their critical importance to the operation of their organizational unit;
    (ii) to assist the Company and Participating Subsidiaries in attracting and retaining nonemployee directors ("Eligible Directors"), executives and other key employees with experience and ability."
  7. Under the LTIP, the general rule is that unvested awards are forfeited on the termination of employment. The exceptions to this general principle are terminations by death, disability or retirement at or after the customary retirement age.
  8. The retirement exception

  9. Retirement is defined in the LTIP as:
  10. "in the case of an employee Participant, separating from service with the company or a subsidiary on or after a customary retirement age for the Participant's location, with a fully vested right to begin receiving immediate benefits under a retirement income plan sponsored or otherwise maintained by the company or a subsidiary for its employees, or, in the absence of such a plan being applicable to any Participant as determined by the Committee in its sole discretion." [emphasis added]
  11. On 6 April 2010, UK pension law changed and 55 became the earliest age at which people could draw a pension unless they had a protected pension age of less than 55. The Claimant and a number of other employees of the company - all of whom are members of the company's defined benefit ("DB") pension scheme, which closed to new entrants in 2005 - have a protected pension age of 50. Since 6 April 2010 the company has interpreted the "customary retirement age" of its staff in the UK for the purposes of the LTIP as meaning retirement at or after the age of 55. The Claimant challenged this interpretation and, in response to this challenge, the issue was referred to the Management Development and Compensation Committee of the board of the Appellant's holding company in the USA, Air Products and Chemicals Inc. A Memorandum to the Committee stated that:
  12. "We believe that 55 is now the 'customary retirement age' in the U.K., notwithstanding that some benefits under our pension plan are grandfathered, and we want treatment to be consistent for employees in the defined benefit scheme and the defined contribution scheme."
  13. The Committee authorised the signing on 8 March 2013 of a document described as a Consent resolving that "Retirement under the LTIP for UK employee participants occurs upon separation from service on or after attaining age 55".
  14. The retirement exception runs counter to the LTIP's aim of incentivising employee retention, as it permits employees to keep their LTIP awards even if their employment terminates before the vesting date and the rights have not yet accrued or vested. The Appellant argued at trial that one purpose of the retirement exception is to ensure that there is no disincentive for employees who have reached customary retirement age to retire, so that they create space for more junior employees to be promoted.
  15. The Claimant argued that the retirement exception should apply to him at age 50. The company considered that the minimum age to bring a retiring employee within the retirement exception under the LTIP should be 55 because it wished to achieve fairness between the generations and treat employees consistently, and it believed that permitting the sub-set of employees who have a protected pension age of 50 to benefit from the retirement exception from that age would be unfair to the predominantly younger employees in the defined contribution ("DC") pension scheme, all of whom have a retirement age of 55. It also took the view that a retirement age of 50 for all participants in the LTIP would be too low to achieve the retention aims of the Plan.
  16. The legislation

  17. Section 13 of the Equality Act 2010 ("EA 2010") provides:
  18. "(1) A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.
    (2) If the protected characteristic is age, A does not discriminate against B if A can show A's treatment of B to be a proportionate means of achieving a legitimate aim."
  19. Section 39 of the EA 2010 provides that an employer (A) must not discriminate against one of its employees (B): (i) as to B's terms of employment, (ii) in the way A affords B access, or by not affording B access, to opportunities for receiving any other benefit or (iii) by subjecting B to any other detriment.
  20. Seldon

  21. In the leading case of Seldon v Clarkson, Wright and Jakes [2012] ICR 716 Baroness Hale of Richmond JSC said:-
  22. "50. What messages, then, can we take from the European case law?
    ……(2) If it is sought to justify direct age discrimination under article 6(1), the aims of the measure must be social policy objectives, such as those related to employment policy, the labour market or vocational training. These are of a public interest nature, which is "distinguishable from purely individual reasons particular to the employer's situation, such as cost reduction or improving competitiveness" (Age Concern, Fuchs).
    (3) It would appear from that, as Advocate General Bot pointed out in Kücükdeveci, that flexibility for employers is not in itself a legitimate aim; but a certain degree of flexibility may be permitted to employers in the pursuit of legitimate social policy objectives.
    (4) A number of legitimate aims, some of which overlap, have been recognised in the context of direct age discrimination claims:
    (i) promoting access to employment for younger people (Palacios de la Villa, Hütter, Kücükdeveci);
    (ii) the efficient planning of the departure and recruitment of staff (Fuchs);
    (iii) sharing out employment opportunities fairly between the generations (Petersen, Rosenbladt, Fuchs);
    (iv) ensuring a mix of generations of staff so as to promote the exchange of experience and new ideas (Georgiev, Fuchs);
    (v) rewarding experience (Hütter, Hennigs);
    (vi) cushioning the blow for long serving employees who may find it hard to find new employment if dismissed (Ingeniørforeningen i Danmark);
    (vii) facilitating the participation of older workers in the workforce (Fuchs, see also Mangold v Helm, Case C-144/04 [2006] 1 CMLR 43);
    (viii) avoiding the need to dismiss employees on the ground that they are no longer capable of doing the job which may be humiliating for the employee concerned (Rosenbladt); or
    (ix) avoiding disputes about the employee's fitness for work over a certain age (Fuchs).
    (5) However, the measure in question must be both appropriate to achieve its legitimate aim or aims and necessary in order to do so. Measures based on age may not be appropriate to the aims of rewarding experience or protecting long service (Hütter, Kücükdeveci, Ingeniørforeningen i Danmark).
    (6) The gravity of the effect upon the employees discriminated against has to be weighed against the importance of the legitimate aims in assessing the necessity of the particular measure chosen (Fuchs).
    (7) The scope of the tests for justifying indirect discrimination under article 2(2)(b) and for justifying any age discrimination under article 6(1) is not identical. It is for the member states, rather than the individual employer, to establish the legitimacy of the aim pursued (Age Concern).
    56. Two different kinds of legitimate objective have been identified by the Luxembourg court. The first kind may be summed up as inter-generational fairness. This is comparatively uncontroversial. It can mean a variety of things, depending upon the particular circumstances of the employment concerned: for example, it can mean facilitating access to employment by young people; it can mean enabling older people to remain in the workforce; it can mean sharing limited opportunities to work in a particular profession fairly between the generations; it can mean promoting diversity and the interchange of ideas between younger and older workers.
    59. The fact that a particular aim is capable of being a legitimate aim under the Directive (and therefore the domestic legislation) is only the beginning of the story. It is still necessary to inquire whether it is in fact the aim being pursued. The ET, EAT and Court of Appeal considered, on the basis of the case law concerning indirect discrimination (Schönheit v Stadt Frankfurt am Main, Joined Cases C-4/02 and C-5/02, [2004] IRLR 983; see also R (Elias) v Secretary of State for Defence [2006] 1 WLR 3213), that the aim need not have been articulated or even realised at the time when the measure was first adopted. It can be an ex post facto rationalisation. The EAT also said this [50]:
    "A tribunal is entitled to look with particular care at alleged aims which in fact were not, or may not have been, in the rule-maker's mind at all. But to treat as discriminatory, what might be a clearly justified rule on this basis would be unjust, would be perceived to be unjust, and would bring discrimination law into disrepute."
    60. There is in fact no hint in the Luxembourg cases that the objective pursued has to be that which was in the minds of those who adopted the measure in the first place. Indeed, the national court asked that very question in Petersen. The answer given was that it was for the national court "to seek out the reason for maintaining the measure in question and thus to identify the objective which it pursues" [42] (emphasis supplied). So it would seem that, while it has to be the actual objective, this may be an ex post facto rationalisation.
    61. Once an aim has been identified, it has still to be asked whether it is legitimate in the particular circumstances of the employment concerned. For example, improving the recruitment of young people, in order to achieve a balanced and diverse workforce, is in principle a legitimate aim. But if there is in fact no problem in recruiting the young and the problem is in retaining the older and more experienced workers then it may not be a legitimate aim for the business concerned. Avoiding the need for performance management may be a legitimate aim, but if in fact the business already has sophisticated performance management measures in place, it may not be legitimate to avoid them for only one section of the workforce.
    62. Finally, of course, the means chosen have to be both appropriate and necessary. It is one thing to say that the aim is to achieve a balanced and diverse workforce. It is another thing to say that a mandatory retirement age of 65 is both appropriate and necessary to achieving this end. It is one thing to say that the aim is to avoid the need for performance management procedures. It is another to say that a mandatory retirement age of 65 is appropriate and necessary to achieving this end. The means have to be carefully scrutinised in the context of the particular business concerned in order to see whether they do meet the objective and there are not other, less discriminatory, measures which would do so."
  23. Lord Hope of Craighead JSC said:-
  24. "73. As Lady Hale has demonstrated, the evolving case law of the ECJ and the CJEU has shown that a distinction must be drawn between legitimate employment policy, labour market and vocational training objectives and purely individual reasons which are particular to the situation of the employer. There is a public interest in facilitating and promoting employment for young people, planning the recruitment and departure of staff and the sharing out of opportunities for advancement in a balanced manner according to age. These social policy objectives have private aspects to them, as they will tend to work to the employer's advantage. But the point is that there is a public interest in the achievement of these aims too. They are likely to be intimately connected with what employers do to advance the interests of their own businesses, because that it how the real world operates. It is the fact that their aims can be seen to reflect the balance between the differing but legitimate interests of the various interest groups within society that makes them legitimate.
    74. It was submitted that the aims which were identified by the firm to justify the compulsory retirement age in this case were not social policy aims at all, when viewed objectively. Mr Allen QC for Mr Seldon said that the state had no interest in whether it was run in this way. It would make it all too easy for a prejudiced employer to avoid being held to be in breach of the regulation if it could rely on aims such as those that had been identified in this case. Like Lady Hale, I would reject these arguments.
    75. It is true that the aims which the Employment Tribunal accepted as legitimate – the retention of associates, facilitating the planning of the partnership and workforce and limiting the need to expel partners by way of performance management – were directed to what could be regarded as being in the firm's best interests. That in itself is not surprising, because firms such as Clarkson Wright and Jakes are in business and must organise their affairs accordingly. They are exposed to all the forces of competition in their chosen market. They are not a social service. This affects the way they choose to manage the partnership and other aspects of their workforce, just as much as it affects the way in which their business as a whole is conducted. But this does not mean that their aims cannot be seen, when viewed objectively, as being directly related to what is regarded as a legitimate social policy. I agree that the Employment Tribunal reached a sound decision on this point and that the aims which it identified were of a kind that, in terms of article 6 of the Directive, were legitimate.
    76. The question then is whether, as Mr Allen contended, the partners of the firm had to show that they had the legitimate public interests in mind at the time when the partnership deed was entered into in 2005, or at least that these were their only or main aims or objectives. I would answer this question in the negative. What article 6 requires is that the measure must be objectively justified. Just as it will not be sufficient for the partners simply to assert that their aims were designed to promote the social policy aims that the article has identified, it does not matter if they said nothing about this at the time or if they did not apply their minds to the issue at all. As it happens, no minute was taken of the reasons why clause 22 was framed as it was. But I regard this fact as immaterial, as the matter was one for the Employment Tribunal and not for the partners themselves to determine. Furthermore, the time at which the justification for the treatment which is said to be discriminatory must be examined is when the difference of treatment is applied to the person who brings the complaint."

    The decision of the employment tribunal

  25. The tribunal summarised the parties' positions on "legitimate aim" at [90]-[91] of its decision:
  26. "[90] The Respondent relies on three aims which it asserts are legitimate aims –
    (i) Intergenerational fairness and consistency; (ii) rewarding experience and loyalty; and (iii) ensuring a mix of generations of staff so as to promote the exchange of experience and new ideas.
    [91] Mr Tatton Brown [for the Claimant] did not accept that aim (i) is legitimate. He accepted that rewarding experience is a legitimate aim, but he did not accept that rewarding loyalty is a legitimate aim. He accepted that aim (iii) is a legitimate aim."
  27. On the question of intergenerational fairness and consistency as a legitimate aim, the tribunal made the following findings at [93]-[100]:
  28. "[93] Mr Stilitz made the following submissions about the Respondent's aim of intergenerational fairness. The Board of Directors wanted consistent treatment between employees in the defined benefit scheme and the defined contribution scheme …
    [94] All employees in the defined benefit scheme must have commenced employment before 31 December 2004, because on that date the scheme was closed to new members. The scheme provides a more generous pension that the defined [contribution] scheme which replaced it …
    [96] Members of the defined benefit scheme (which include the Claimant) are in a more favourable position than members of the defined [contribution] scheme because they can take their pension at age 50 rather than 55, and the pension itself is more generous. Members of the more generous scheme will generally be older than members of the defined contribution scheme.
    [97] Relying on those propositions, Mr Stilitz submitted that if members of the defined benefit scheme were able to retain their LTIP awards when they left employment before the age of 55, this would increase their advantage over members of the defined contribution scheme. That would increase the unfairness between the members of the two schemes, with increased advantage to the generally older employees. The aim of the Respondent's rule was to avoid increasing the unfairness. Its aim was to achieve intergenerational fairness …
    [99] We note that intergenerational fairness is in principle a legitimate aim. It is a broad objective, which may be manifest in different ways, depending on the circumstances. During submissions we discussed with Counsel whether the concept necessarily involves the division of resources between different age groups. For example, where there are limited opportunities for promotion, a provision designed to reduce opportunities for older employees in order to create more opportunities for younger employees might have the legitimate aim of intergenerational fairness. One generation's loss will be the other's gain. In the present case that factor appear[s] to be absent. If members of the defined benefit scheme take their LTIP benefits at below age 55, this does not affect the resource or financial benefit available to the members of the defined contribution scheme. As Mr Tatton-Brown put it, this is not a zero sum game.
    [100] However, we are persuaded by Mr Stilitz that this is not a necessary aspect of intergenerational fairness. The categories of intergenerational fairness are not closed – 'It can mean a variety of things' (see Seldon above). We accept that limiting the advantage enjoyed by one age group over another is a legitimate social policy aspect of intergenerational fairness. Our conclusion is that the Respondent's aim is a legitimate aim."
  29. As for the aim of rewarding loyalty, the tribunal made the following findings at [101]-[104] and [107]:
  30. "[101] On the question of whether rewarding loyalty is a legitimate aim, Mr Tatton Brown [who then appeared for the Claimant) referred to MacCulloch v ICI [2008] ICR 1334, where the Employment Appeal Tribunal accepted that encouraging and rewarding loyalty is a legitimate aim …
    [103] Mr Tatton Brown helpfully drew the attention of the Tribunal to the opinion of the Advocate General in HK Danmark v Experian [2014] ICR 27, that rewarding loyalty would in principle be a legitimate aim, but it was the national court to decide.
    [104] Mr Tatton Brown submitted that in the light of Seldon rewarding loyalty [could] no longer be regarded as a legitimate aim. We are not persuaded that this is so. In our view Seldon does not outlaw rewarding loyalty as a legitimate aim …"
  31. The Claimant submitted that the aims put forward by the company were not the aims that were in fact being pursued. The tribunal rejected that submission at [107], on the basis of the evidence given by the Appellants' employees as to the aims they had in mind:
  32. "[107] Mr Tatton-Brown submitted that there was an absence of evidence that the Respondent's aims were in fact being pursued. We prefer Mr Stilitz's submission that there is adequate evidence to show that the aims were being pursued. Ms Reese gave evidence that the purpose of the LTIP is to strike a balance between encouraging retention up to a point, and then providing some incentive to retire, in order to create opportunities for younger employees. The point was decided to be the age of 55, which became known as the customary retirement age."
  33. The tribunal went on to consider the question of proportionality at [109]-[120]:
  34. "[109] … We are satisfied that the legitimate aims meet a real need, and that the discriminatory provision is appropriate to achieving the aims. The provision means that all employees are treated in the same way with regard to the LTIP awards, whichever pension scheme they are in. We accept this achieves intergenerational fairness.
    [110] The provision gives an incentive to remain in the Respondent's employment until at least age 55. Thereafter there is no disincentive to retirement. We accept this strikes a balance between rewarding experience and loyalty and encouraging retention …
    [114] Mr Stilitz submitted that 55 was the only age which would achieve the legitimate aims. The minimum pension age for employees in the defined contribution scheme is 55. It cannot be reduced. Therefore the only way of achieving consistency between the members of the two schemes is to treat 55 as the customary retirement age for all employees.
    [115] The aims would be undermined by permitting the retention of LTIP awards by any employee who left at a minimum age of 50. Ms Patterson made the valid point in evidence that in today's world 50 is a young age for retirement. Indeed, save for those with a protected pension age it is now not possible in the UK to draw a pension below the age of 55. Furthermore, adopting the age of 50 might be seen as unfair to employees who left at a younger age. It would appear arbitrary to decide on 50. Why not 52, or 48?
    [116] There was a rational basis for choosing 55. It ties in with the pension age. It is the lowest customary retirement age for any country where the Respondent operates. Viewed in that context it cannot be unfair to employees in the UK, who enjoy the lowest customary retirement age in the world. Indeed, reducing the age might be perceived to be unfair by employees in other countries who have a higher customary retirement age …
    [118] In weighing up the Respondent's needs against the discriminatory effect on the Claimant, we had regard to the fact that the effect is not imposed by any action of the Respondent. It is triggered by the employee's decision to leave. In our view that is an important consideration, leaving aside the Claimant's unsuccessful contention that he was unfairly dismissed.
    [119] Mr Stilitz accepted that the financial loss to an employee who leaves below age 55, including the Claimant, can be significant, but he reminded us that some LTIP benefits are retained. Only unvested awards are forfeit.
    [120] Weighing up those factors, we are persuaded that the provision is a proportionate means of achieving the legitimate aims. Our unanimous judgment is that the complaint of age discrimination fails, and is dismissed."

    The decision of the Employment Appeal Tribunal

  35. The EAT's reasoning on whether the employment tribunal had erred in law was confined to just two paragraphs of its judgment, [34] and [35]:
  36. "[34] We find that the ET has erred in law in finding that the aim in this case was anything other than consistency between employees who were members of two different pension schemes. The ET has not given sufficient reasoning for its acceptance that the aim including intergenerational fairness; nor has it in its Reasons explained what the intergenerational fairness consisted of. We appreciate that assertions were made in evidence by the witnesses (Ms Reese and Ms Patterson) that intergenerational fairness was the purpose. Thus counsel for the Respondent is correct to say that it cannot be said that there was no evidence. It is not however sufficient for an ET to proceed in this case upon the basis of an assertion without explanation of why that assertion is accepted in the face of other evidence which could tend to contradict it. It is necessary for the ET to explain what it made of the evidence of the memorandum which refers to consistency; of the evidence that nothing was done by the Committee to amend the scheme when the new pension age was introduced with the new scheme in 2005; why nothing was done when the legislation was passed in 2010; and why the provision of 55 as the qualifying age could be said to be an incentive to employees to stay until then if the employees did not know of its existence.
    [35] The ET did not explain sufficiently its reasoning on proportionality. It did not make findings that the Respondent considered the loss sustained by the Claimant and compared that to the aim or aims of the Respondent. More importantly, it did not make findings itself of the loss and then compare that to the aim. We appreciate that the figure for loss was controversial and that a hearing on that would have been necessary had the ET decided in favour of the Claimant. It did not need to have a figure; while the disparity between the figures suggested by each side was large, it is clear that at best for the Respondent the sum is a significant sum. We do not find the case of Harrod in point. There is no question in this case of the aim and the means of achieving it legitimately shading into each other. While we respectfully that there is no need for the ET to 'cudgel its brains' there is a need for clear findings on the aim, why that is a legitimate aim, what steps are taken in implementation, and whether or not the steps are appropriate and reasonably necessary to achieve that aim, including a comparison of the loss caused with the aim. We do not find any such reasoning in this case."
  37. The EAT proceeded to make an order remitting the case to a differently constituted tribunal for re-hearing.
  38. The grounds of appeal to this court

  39. The employer sought permission to appeal to this court on these grounds: (1) The EAT erred in holding that the tribunal's decision was insufficiently reasoned; (2) the EAT substituted its own view for that of the tribunal; (3) the EAT acted perversely in remitting the matter to a different tribunal.
  40. On an appeal to this Court from the EAT the main focus is on the correctness or otherwise of the first instance decision of the tribunal. I will therefore turn next to Mr Laddie's criticisms of that decision.
  41. The aims of the retirement exception

  42. Mr Laddie argues that the true aim of limiting the retirement exception to employees who had reached the age of 55 was to achieve consistency of treatment between those in the DB scheme and those in the DC scheme: he described that, in the language of the Seldon case, as "an individual reason particular to the employer's situation [which] does not have any social policy component". He submits that it "has nothing directly to do with age or different generations of employee" and that the "aim of consistency of treatment would have applied irrespective of the ages of those in the two categories of employee".
  43. The employment tribunal had before them evidence from the employer's witness Ms. Reese that the aim of the policy was to strike a balance between encouraging retention up to the age of 55 and then providing some incentive to retire in order to create opportunities for younger employees. The tribunal accepted this evidence, as they were plainly entitled to do. Mr Laddie describes the evidence as hopelessly implausible. He notes that in other countries in which the appellants operated the customary retirement age for the purposes of the LTIP retirement exception was higher – 62 in France, 65 in Germany, Portugal, the Netherlands, Spain and the Czech Republic among others. He asks "what was it about the UK executives that meant they were perceived to be over the hill by the age of 55 in contrast to their continental counterparts who were perceived to be good for another decade's service?".
  44. This is a somewhat satirical description of the employer's argument which the employment tribunal accepted. The main purpose of the rule requiring employees to serve until the age of 55 before being allowed to take their unvested LTIPs on retirement was plainly to act as an incentive to retention up to that age. It was not in my view essential to the Appellant's case that there should also have been a wish to incentivise retirement as from the age of 55; but whether it was essential or not, the employment tribunal accepted it. They also accepted that there was a rational basis for choosing 55 as opposed to any other age, namely that 55 ties in with the minimum pension age laid down in the UK in 2010 and because it is the only way of achieving consistency between members of the DB and DC schemes. The employment tribunal accepted that this was in fact the reason why the age of 55 was chosen.
  45. Was there sufficient evidence for the tribunal's findings?

  46. Mr Laddie submits, and the EAT held, that the employment tribunal should not have accepted the mere "assertion" by Ms Reese that the aim of the provision was to incentivise retention up to the age of 55 and to disincentivise it thereafter. He reminded us of the emphasis placed in the authorities on the need for careful scrutiny of the evidence put forward by employers in cases such as Hardy & Hansons plc v Lax [2005] ICR 1565, CA where Pill LJ said that the tribunal must conduct a critical evaluation of the scheme in question (paragraph 33), and warned of the risk of superficiality (paragraph 34). I agree with those observations, but the detail and weight of evidence required will depend on what proposition the employer is seeking to establish.
  47. Mr Laddie referred us to MacCulloch v Imperial Chemical Industries PLC [2008] ICR 1334. In that case redundancy payments made under ICI's contractual scheme increased very sharply with age. The claimant was made redundant at the age of 36 after nearly eight years employment and received a redundancy payment of 55% of her gross annual salary, whereas an employee aged between 50-57 with ten years' service would have received 175%. It was conceded that the scheme was discriminatory. The employment tribunal accepted that the aims of the scheme, which included rewarding loyalty and giving older employees larger payments to take account of their vulnerability in the job market, were legitimate and held that the scheme was a proportionate means of achieving those aims. Although the findings that the aims were legitimate were plainly sustainable on the evidence, the EAT held on appeal that the tribunal had not grappled with the degree of difference in the payments made to the claimant and her comparator (55% as against 175% of annual salary), and had not properly considered whether that degree of difference in treatment had been justified as reasonably necessary to achieve the objectives of the scheme. The case was remitted to the tribunal for that issue to be resolved.
  48. But where the proposition is that a rule excluding retiring employees under the age of 55 from the right to take unvested options under a long term incentive plan tends to encourage them to stay with the company until the specified age, the proposition is surely so obvious that it barely requires evidence at all.
  49. Mr Laddie suggested that the company should have been in a position to place before the tribunal evidence of whether the customary retirement age clause in the LTIP had in fact led to a high retention rate; if they failed to do so the tribunal should have inferred from that omission that there was no evidence that the provision did in fact encourage retention. I do not consider that the employment tribunal should have required or expected the employers to adduce such evidence. It would be impossible to do so very soon after such a provision was introduced; and even at a later date the causative effect of a provision in the LTIP about customary retirement age would be difficult to isolate: employees in their early 50s make choices about whether to remain in the same employment, move jobs or take voluntary retirement for a whole variety of reasons.
  50. Were the aims legitimate as being aims of intergenerational fairness?

  51. I have already noted that Mr Laddie argued that the true aim of the minimum age of 55 to qualify for the retirement exception was to achieve consistency between the DB and DC schemes. This, he submitted, was not a social policy objective but an individual reason "particular to this employer's situation" without any social policy component. The tribunal had, and we have, no evidence of how common LTIP schemes with this type of retirement exception are but I do not consider that it matters whether this feature of the scheme is commonplace or unusual.
  52. As the judgment in Seldon of Lord Hope of Craighead JSC at [75] makes clear, steps taken in the employer's best interests may nevertheless be directly related to what is regarded as a legitimate social policy. The crucial finding of the employment tribunal in the present case at paragraph [100] is that "limiting the advantage enjoyed by one age group over another is a legitimate social policy aspect of intergenerational fairness". The Claimant and a small number of colleagues were members of the DB scheme which had been closed to new entrants in 2005. Although not all DB scheme members were older than all DC scheme members, they were clearly older on average. Quite apart from the LTIP element, the DB scheme members had access to more generous pensions than their DC scheme colleagues and had the right to draw them at an earlier age. Removing the additional right of this group to have the benefit of unvested LTIP options which would be denied to their mainly younger colleagues outside the privileged group was in my view a legitimate social policy aspect of intergenerational fairness. At any rate, the employment tribunal as judges of fact were entitled so to find and I do not consider that anything in the judgments in Seldon prohibited them from doing so.
  53. Proportionality

  54. The tribunal found at paragraphs [109]-[111] that the legitimate aims met a real need and that the discriminatory provision setting the minimum age to qualify for the retirement exception at 55 was appropriate to achieving those aims on the basis both of intergenerational fairness and of striking a balance between rewarding experience and loyalty and encouraging retention on the one hand and ensuring a mix of generations of staff on the other hand. Again, these are conclusions which the employment tribunal were entitled to reach, at least in relation to intergenerational fairness and the retention issue. Pointing (as Mr Laddie did) to the discrepancy between an employee of 54 who loses the unvested LTIPs on retirement and a 55-year-old who does not is not a convincing argument. Bright line rules are a common feature of benefits payable on retirement. And as Baroness Hale JSC observed in Seldon, "where it is justified to have a general rule then the existence of that rule will usually justify the treatment which results from it".
  55. Mr Laddie was on sounder ground in querying the use of the words "rewarding experience and loyalty" insofar as this differs from retention. An employee can qualify for an award under the LTIP scheme after a short period of service. As the tribunal pointed out at paragraph 112, an employee retiring at the age of 54 after 30 years' service would lose any unvested LTIP benefits whereas an employee retiring at 55 after 7 years' service would retain them. So it may be that the "experience and loyalty" point adds nothing to the "incentive to retention" argument. Nevertheless, it was only a minor component of the reasoning of the tribunal, who were clearly entitled to find that the provision was proportionate for all the other reasons they gave.
  56. The Claimant complains that he was only notified of the provision under scrutiny after he had given notice to leave and that notice had expired. Mr Stilitz is right to observe that most employees contemplating voluntary retirement who wish to know what benefits they would or would not receive enquire of their employer's HR department before giving notice. In any case it is difficult to see why the proportionality argument should be affected by whether or not Mr Cockram was aware of the rule when he gave notice.
  57. Conclusion

  58. The employment tribunal, chaired by a judge of great experience, gave a properly reasoned judgment which contains no error of law. The EAT should not have interfered with it. I would allow the appeal and restore the decision of the employment tribunal dismissing the complaint of age discrimination.
  59. Lord Justice Leggatt:

  60. I agree.


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