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Age Discrimination Battle Concluded

» Posted on: 25 October 2007
» Posted by: Oliver McCann
» Service area: Employment

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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:-

  1. there was a legitimate aim for the changes
  2. 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.

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”.

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