Good news for employers who want to harmonise terms and conditions of employment
Implementing changes in the workplace can be challenging for employers and varying terms and conditions of employment is often particularly problematic.
However, in a helpful decision for employers, in the case of Edie & others v HCL Insurance BPO Services Ltd the EAT has just upheld an Employment Tribunal decision that a requirement for older employees to accept less generous terms and conditions of employment as a condition of their employment continuing, could be justified.
HCL Insurance BPO Services (HCL) is an out-sourcing company which provides services to life insurance and pensions businesses relating to the administration of “closed book” policies, that is those which are no longer sold but where premiums continue to be paid.
Over a period of years, a series of TUPE transfers occurred, as HCL took over the administration of policies from or on behalf of other companies. This resulted in HCL employing different groups of employees with significant variations in their terms and conditions.
With the economic downturn and resulting in a decline in new business, HCL, along with many other employers, identified an urgent need to reduce staff costs. A review of employees’ terms and conditions was carried out and benchmarked against industry data. HCL concluded that the terms of various groups of employees were more generous than industry standard levels and that significant savings could be made by reducing those terms. In addition, HCL identified various terms for certain groups that were potentially indirectly discriminatory in favour of older employees because they included service related benefits and/or historic benefits only available to longer-serving employees.
Rather than making any reductions in basic salary HCL planned to introduce a new set of harmonised terms and conditions including holidays, hours of work, enhanced redundancy entitlement and sick pay.
Following full consultation with staff, the changes were implemented by issuing notices of dismissal to all employees, together with offers of re-engagement on the new terms and conditions. The vast majority of the employees accepted the new terms. However, 39 employees brought claims for unfair dismissal, automatic unfair dismissal under TUPE and indirect age discrimination, some of which had agreed to the new terms and conditions and were re-engaged.
Employment Tribunal and EAT decisions
The Employment Tribunal dismissed the claims for unfair dismissal and automatic unfair dismissal.
In respect of the indirect age discrimination claims, it found that HCL had applied a “provision, criterion or practice” (PCP) to the effect that, in order to remain in employment, employees had to agree to the new terms and conditions. This placed them and older employees generally at a particular disadvantage because older employees were disproportionately more likely to be losing valuable benefits. However, in introducing the changes, HCL had a legitimate aim, namely to reduce staff costs to ensure its future financial viability and to have in place market competitive, non-discriminatory terms and conditions. The means used by HCL were proportionate to that aim balancing the real needs of HCL against the discriminatory effect of the changes.
The claimants appeal to the EAT was dismissed and in the judgment given on 5 February 2015, it was held that:
(i) Dismissal and re-engagement in order to harmonise disparate terms and conditions inherited from historic TUPE transfers can constitute a “provision, criterion or practice” (PCP) for the purposes of an indirect discrimination claim even if the new terms and conditions do not of themselves place any group at a particular disadvantage;
(ii) However, the Employment Tribunal was entitled to find that the changes in this case were justified in order to meet the employer’s legitimate aim of reducing staff costs to ensure its future viability and to have in place market competitive, non-discriminatory terms and conditions;
(iii) In particular, it is as a minimum legitimate for an employer to seek to break even year-on-year and for a business to make decisions about the allocation of resources. Alternatives suggested by the claimants which would have delayed or reduced the savings would not have met that legitimate aim and so did not undermine the HLC’s justification.
Commenting on the judgment, Sarah Peacock, who had provided advice and support to HCL in relation to changing the terms and conditions of employment, collective consultation and throughout the whole process said.
“On the issue of justification, this case reiterates well-established principles and emphasises that alternatives which would involve modifying the employer’s aim rather than meeting it will not undermine the justification.
On the PCP issue, the case perhaps has wider implications, as authority for the proposition that a change in terms and conditions may constitute a provision, criterion or practice even where the new substantive terms do not of themselves place any group at a particular disadvantage.”
To read the case summary on Old Square Chambers website please click here.
To see the the full EAT Judgment you can down load here listed as UKEAT/0152/14/DM & UKEAT/0153/14/DM.
This release has been published as an article in Personnel Today here.