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“Costs-Plus” and Indirect Age Discrimination

A claim for indirect discrimination can be successfully defended if an employer is able to show that it was acting in a way which was “a proportionate means of achieving a legitimate aim”.  Whilst cost alone cannot amount to a justification for otherwise discriminatory practices, cost plus other factors (known as the “costs-plus” justification) may.

The Court of Appeal recently considered the “costs-plus” justification in the case of Heskett v Secretary of State for Justice.

The Facts

The Ministry of Justice (“MOJ”) changed its pay structure due to budget cuts and created a system whereby pay progression would take much longer than before. Mr Heskett claimed that this practice put him and others under the age of 50 at a disadvantage in comparison to older colleagues, who had been able to progress under the more generous system. He alleged that this amounted to indirect age discrimination. The MOJ sought to justify any disadvantage experienced by younger workers on the basis that the new pay progression measures were temporary and were introduced in response to a need for the MOJ to “live within its means”.

The Employment Tribunal and Employment Appeal Tribunal considered this and concluded that living within the employer’s means was a legitimate aim, distinguishable from the aim of solely avoiding costs.

Mr Heskett appealed, claiming that the need to “live within the employer’s means” was, in essence, a justification based on cost and nothing more. The Court of Appeal disagreed concluding that the MOJ ‘balancing its books’ by introducing a new pay progression scheme was a legitimate aim and that its actions were proportionate as the scheme was kept under review and was intended to be a short-term practice.


The Court of Appeal confirmed that whilst reducing costs alone is not a legitimate aim reducing costs in order to balance the books can be. In Mr Heskett’s case, proportionality was achieved by the MOJ by ensuring the practice was intended to last for a short time only. Employers seeking to rely on costs implications to justify otherwise discriminatory practices will need to be mindful of the fact that the action taken must be proportionate to the aim the employer is seeking to achieve. The proportionality of a particular act must be considered at every stage and relevant records should be kept.

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