The Court of Appeal has allowed an appeal by industrial gas and chemical retailer Air Products, finding that the organisation can objectively justify retirement at a specific age as a good leaver reason within its long-term incentive plan.
The case, Air Products v Cockram, regards employee Michael Cockram, who resigned from Air Products at the age of 50. Cockram held unvested long-term incentive plan awards with the organisation, however under the plan rules, these were forfeited upon his resignation. Cockram claims that this amounted to unlawful direct age discrimination, as employees who left Air Products at age 55 were entitled to keep their unvested long-term incentive plan awards, as per the plan rules.
Air Products’ long-term incentive plan includes a default good leaver provision, which applies to employees who left employment on or after age 55, which was the minimum pension age set in the UK in 2010. This provision enabled these employees to keep their unvested awards, compared to employees who fell below this age specification.
The Employment Tribunal (ET) initially ruled in favour of Air Products, finding that the organisation could objectively justify the long-term incentive plan’s good leaver provision. The Employment Appeal Tribunal (EAT) disagreed the ruling to progress the case to the Court of Appeal, however the Court of Appeal has agreed that the good leaver provision is lawful and restored the ET’s dismissal of the age discrimination complaint.
Direct age discrimination can potentially be objectively justified depending on whether the provision concerned is a proportionate means of achieving a legitimate aim. In the case of direct age discrimination, this aim will only be legitimate if it accords with a social policy aim.
The Court of Appeal maintained that the good leaver provision could be objectively justified as it worked as a retention tool to keep employees with the business until the age of 55. After this age, it then acted as an incentive for retirement in order to create opportunities for younger employees. The Court of Appeal found that age 55 was also suitable in this context as it tied in with the minimum pension age set in 2010.
The Court found that this reasoning was legitimate as it correlated to the social aim of intergenerational fairness. This aim can cover facilitating access to employment by young people, enabling older people to remain in the workforce and sharing limited opportunities to work in a particular profession fairly between generations by promoting diversity. The Court of Appeal held that the retention element of the good leaver provision provided balance between encouraging the retention of older employees as well as ensuring a mix of generations of staff.
An additional aim of the good leaver provision was to achieve consistency between members of Air Products’ defined contribution (DC) and defined benefit (DB) pension schemes.
Lord Justice Bean, who ruled over the case, said in the court documents: “We note that intergenerational fairness is in principle a legitimate aim. It is a broad objective, which may be manifest in different ways, depending on the circumstances.”
A spokesperson at Freshfields Bruckhaus Deringer, the law firm that represented Air Products, said: “Following the introduction of age discrimination legislation in 2006, employers have been taking a variety of approaches to retirement in their incentive plans. Some have removed references to retirement completely from their good leaver provisions, leaving it to the discretion of the remuneration committee as to whether an employee should keep their awards when they retire.
“This case gives encouragement to these employers that there is certainly scope to justify including retirement as a specific good leaver provision.”