11th March, 2022

A question of business need?

The Claimant was employed by the Respondent social housing provider for over 20 years. The contract of employment contained a PILON clause entitling the Respondent to make payment in lieu of notice for the whole or part of the contractual notice period. At the time with which the Tribunal was concerned, the Claimant was approaching her 55th birthday. As a member of the Local Government Pension Scheme, she would have been eligible for enhanced pension benefits if dismissed on grounds of redundancy when aged 55 or over. The Respondent restructured its internal IT resource. The exercise impacted upon the whole team (including the Claimant) and was not intended to generate any redundancies. The Claimant acknowledged the purpose and basis of the restructure but resisted any change to her own role. However, and with the express agreement of the Claimant, the Respondent proceeded to implement the necessary changes and the allocation of revised duties to everyone else within the team.


The Claimant maintained her objection to the revised duties and made clear that she did not wish to remain in that role. The Respondent proceeded to recruit to the revised post. By this stage. several months had passed during which the adjustments to the team had been largely implemented. Thereafter, the Respondent accepted the Claimant's role had become redundant. Following a further short period of consultation, the Respondent gave notice of termination on grounds of redundancy. In doing so, the Respondent relied upon a PILON provision; thereby bringing forward the effective date of termination. At the time of dismissal, the Claimant was weeks away from attaining her 55th birthday and the significant pension benefits under the occupational pension scheme. In these circumstances, the Claimant contended the use of the PILON constituted both direct and indirect discrimination on grounds of the protected characteristic of age. In support of her claim, the Claimant suggested that there was an obvious need for her to serve her notice period given her former role within the undertaking and - as she saw it - the need for handover to her successor. At the time of the decision to dismiss, the revised role previously offered to the Claimant had been filled. The Respondent resisted the claim. As part of its defence, the Respondent relied upon the legitimate aim directed: "...to preserve the financial and operational interests of the Respondents and its limited resources for application to purposes for which they were provided namely: the provision of social housing for those most in need of protection on account of financial disempowerment or other social inequalities..."


In support of that position, the Respondent adduced evidence of other cases in which the PILON clause had been relied upon and provided detailed witness evidence as to why the Claimant was not operationally required to work out her notice period. It was not disputed that the Respondent's managers were aware of -and had in mind- the potential pension strain liability. However, the Tribunal accepted that this was simply part of the oversight required for financial management which might have been taken into account had there been a need to do so. The business reality did not require it to be considered. In the words of the Tribunal: "Although [the witness] was aware of this factor, and had it in mind, the tribunal was satisfied that it played no role in any decision making process...." The Tribunal went to conclude that the Claimant had no reasonable grounds to perceive that she had been subjected to a detriment for reasons connected with her age. It also found there was no 'business case' for the Claimant to work her notice period and rejected the Claimant's assertion that the use of the PILON caused group disadvantage for the purposes of her indirect discrimination claim. There are many circumstances in which employers will wish to rely upon PILONs. The judgment provides a helpful illustration of the fact-sensitive and commercial nature of those considerations and the scrutiny which the Employment Tribunal will apply to them.


Ed Morgan QC was instructed to represent the Respondent.


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