The Central London Employment Tribunal gave
its eagerly anticipated judgement in the Age discrimination case
brought by former Partner Peter Bloxham against international Law
Firm Freshfields Bruckhaus Deringer.
The tribunal concluded that the introduction of a new pension
arrangement with transitional provisions had meant that Peter
Bloxham, 54 at the time, was less favourably treated than a 55 year
old under the terms of the scheme as he was to receive pension
benefits with a 20% discount whereas a 55 year old at the same time
would not.
However unanimously rejecting the discrimination claim the Tribunal
were satisfied that the less favourable treatment was justified in
that:-
- there was a legitimate aim for the changes
- the manner in which the changes were introduced were
proportionate
Freshfields pension arrangements, funded out of annual profits,
allowed those aged 55 or over to retire with full benefits. It also
allowed those aged between 50 and 54 to retire early but with a
discount. For example, a 54 year old retiree would have a 20%
discount, a 53 year old a 25% discount and so on.
Disadvantage
Freshfields wanted to change the old scheme primarily because it was
littered with “intergenerational unfairness”. Unusually the scheme
provided for pension payments out of annual profits. This meant that
active partners were paying for the retirement fund of retired
partners with the next generation of partners to pay for the active
partners pensions when they retired. As the number of retired
partners was rising year on year so to the cost of funding the
pensions out of profits meaning that younger partners were paying
more to sustain the level of pensions for retired partners.
There was also to be a cap of 10% of profits to be applied in or
about 2018 which would mean that the young partners, now paying
more, would suffer a further disadvantage when they retired as they
would receive a capped pension. The Tribunal accepted that the
purpose behind the change was a legitimate aim – ie addressing the
imbalance the scheme created between generations.
The imposition of the change was also proportionate in that
Freshfields had conducted a thorough review of its options
(exploring options that would have the least impact with expert
assistance), it had consulted extensively with those affected and it
had proceeded with the change following a majority vote. At the same
time it put in place transitional arrangements designed to mitigate
the impact that an immediate change to the scheme would have on
those close to retirement.
Speaking of the case, Employment Associate Oliver McCann said
“Whilst complicated the case provides useful guidance to Employment
Lawyers (and ultimately businesses) on how the Age discrimination
legislation is to be applied especially where an employer is faced
with trying to balance conflicting interests between different
generations”.
“It is important to recognise that the significant changes
introduced by Freshfields followed a very detailed review of its
options (with expert advice), detailed consultation with those
affected and a significant majority approval by those affected for
reform with measure in place to mitigate the impact of the
provisions” continued Oliver.
Employers (and in this case Partnerships) need to conduct a complete
review of their contracts, terms, policies and pensions to ensure
that they do not fall foul of the Age discrimination legislation. As
the Age Discrimination legislation covers all ages inevitably there
will be one age group that can see a disadvantage in a particular
term or condition. The key is to spot these terms and determine
whether you can justify them in accordance with the legislation”.
Copyright 2006 - 2010 Taylors Solicitors
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