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Age - Was an employer liable for direct age discrimination when PHI ceased at 60?

26 May 2016

In Smith v Gartner the EAT looked at whether an employer was liable for direct age discrimination when payments to an employee under a PHI scheme ceased at the age of 60 which, at the time she started to receive payments under the scheme, was the company’s compulsory retirement age.

Ms Smith had transferred to Gartner in 1996 under TUPE. She went off sick in 2002 and in 2003 started to receive payments under the PHI scheme. At that time the compulsory retirement age was 60. In 2007 Gartner sent an email to all employees stating that the age limit for benefits would increase in line with legislation (following the introduction of the Age Discrimination Regulations) and the pension plan. This meant the PHI scheme would be extended to cover up to age 65.

She received PHI payments until 2014 on reaching 60. She brought an unlawful deduction from wages claim and a direct age discrimination claim on the basis that she had a continuing contractual right to receive PHI until she retired at 65. She claimed that her employer had treated her less favourably than a person under 45 by not continuing her contractual PHI payments to 65 and this could not be justified.

Gartner applied to strike out the claim and the tribunal decided to make a decision on the papers following written submissions. The tribunal struck out the unlawful deductions claim as it found Ms Smith was bound by the terms of the scheme at the time she started to claim under it i.e. in 2003, which provided for payments to cease at 60. Gartner’s only contractual obligation was to take out insurance and not to make the payments. There was no direct age discrimination because the reason she wasn’t covered was because she didn’t meet the terms and conditions of the policy which required her to be working immediately prior to making a claim under it. Ms Smith appealed.

The EAT dismissed her appeal. The email sent in 2007 didn’t vary her contractual entitlement as she was already in receipt of benefits under the rules in place when she started claiming. There was no direct age discrimination by the employer because the reason the payments ceased was due to the terms of the insurance. It wasn’t discriminatory not to extend the PHI policy in 2007 as she was already claiming under the previously policy and didn’t meet the conditions of the new scheme.

Our practical points:

  • Employers should be cautious about relying on this case as, rather unusually, it was decided on the papers without hearing evidence and full argument
  • In addition, the EAT did not consider the arguments on indirect age discrimination as these had not been raised before the tribunal. In another case which had similar facts a tribunal upheld the indirect age discrimination claim. It found that the PCP of not allowing employees access to a more favourable PHI scheme unless they were actively at work put employees aged 45 and above at a particular disadvantage as they were more likely to suffer from ill health
  • In any event, employers should ensure that any liability for PHI payments is carefully worded so that it is determined by the rules of the insurance policy, rather than being the employer’s responsibility. This is important to ensure employers do not end up with any contractual liability for making the payments if the insurer ceases to make them.