O'Dwyer (Represented by Mary Honan BL, instructed by Darach Connolly, Solicitors) AND Coillte Teoranta (Represented by Sile O'Kelly BL, instructed by Dockrell Farrell, Solicitors)
1. DISPUTE
1.1 This dispute concerns a claim by Mr Peter O'Dwyer that he was discriminated against by Coille Teoranta on the ground of age, contrary to the provisions of the Employment Equality Act 1998, when he was offered a less favourable Early Retirement/Voluntary Parting Scheme (ER/VPS) package than a younger colleague. He also contended that he was subjected to discriminatory treatment in relation to access to the ER/VPS, his conditions of employment, employment practices operated by the respondent and a breach of the equality clause in his contract. He claimed further that his treatment arose from a collective agreement which was discriminatory on the grounds of age, but this aspect of his claim was withdrawn at an early stage.
1.2 On behalf of the complainant, Darach Connolly, Solicitors, referred a claim to the Director of Equality Investigations on 1 August 2002 under the Employment Equality Act 1998. In accordance with her powers under section 75 of that Act, the Director then delegated the case on 13 January 2004 to Anne-Marie Lynch, an Equality Officer, for investigation, hearing and decision and for the exercise of other relevant functions of the Director under Part VII of the Act. Submissions were sought from both parties and a joint hearing was held on 29 October 2004.
2. SUMMARY OF THE COMPLAINANT'S CASE
2.1 The complainant said that the respondent introduced an ER/VPS on 15 January 2002, with a closing date of 31 March 2002. The Scheme was available to all eligible employees, but the complainant said that only limited options were available to those aged 60 years or over. He said that employees aged less than 60 years could avail of either element of the Scheme, that is they could opt for either Early Retirement or Voluntary Parting, while those aged 60 or over could only avail of the former package.
2.2 The complainant said there were three basic elements to each package:
(i) pension;
(ii) lump sum; and
(iii) severance gratuity.
He said that pension and lump sum calculations were the same under both packages, but there was a significant difference in the way the severance gratuity was calculated depending on age. Under the terms of the ER package, the maximum gratuity available to an employee aged 60 or over (after 40 years' service) was 27 weeks, or six months. Under the VP package, the maximum severance gratuity available was 1½ times salary, or 18 months.
2.3 The complainant said the less favourable treatment of the older group of employees could be seen in the following comparison of the severance gratuity available to him retiring at age 60 and a comparator retiring at age 59:
Complainant Comparator
Age at retirement 60 years 59 years
Salary €44,569 €46,352
Service 41.226 years 40.7 years
Severance €23,062 (27 weeks based on max 40 years' service) €69,528 (3 weeks' pay per year of service up to a max of 1½ years)
The complainant said that, if he had not been excluded from the VP scheme on age grounds, he would have been entitled to a severance gratuity of €66,854. He was therefore at a loss of €43,792.
2.4 The complainant submitted that he had been discriminated against in respect of his terms and conditions of employment in that he had been denied full access to the Scheme on the ground of age. He submitted further that the discrimination breached a term of his contract implied pursuant to section 30 of the 1998 Act. Without prejudice to this, the complainant submitted that he was being discriminated against on the age ground in respect of remuneration, in breach of section 29 of the 1998 Act, and that such discrimination breached a term of his contract implied pursuant to section 29 (1) of the 1998 Act.
2.5 The complainant submitted that the facts in his complaint were in essence the same as in the Equality Officer decision in Perry v The Garda Commissioner (DEC-E2001-029) in which the claim related to a Voluntary Retirement package containing four elements: pension, lump sum, redundancy payment and severance gratuity. The Equality Officer concluded in Perry that the aspects of the package that did not deal with pension rights were within the ambit of the 1998 Act, and specifically that the severance gratuity was a proper matter for consideration under the 1998 Act.
2.6 The complainant referred to section 34 (3) of the 1998 Act, which states that
Nothing in this Part or Part II shall make unlawful discrimination on the age ground or the disability ground in circumstances where it is shown that there is clear actuarial or other evidence that significantly increased costs would result if the discrimination were not permitted in those circumstances.
The complainant submitted that the "costs" referred to must be the costs of non-discriminatory alternatives available to the respondent at the time the impugned decision was made. He said that no evidence was available as to what alternatives, if any, were considered and costed by the respondent at the relevant time.
2.7 The complainant suggested that to interpret the relevant "costs" as referring to the costs of remedying the discrimination in a particular way meant a respondent could simply cite those costs as a basis for escaping liability, when it may have had cheaper alternatives available when it chose the impugned scheme. He submitted that such an interpretation would provide no incentive to employers to choose non-discriminatory alternatives, which would undermine the effectiveness of the legislation, and would permit a respondent to take advantage of changed circumstances at the time the claim is investigated, such as having incurred losses in the meantime. The complainant also submitted that logically, "increased" in the subsection could not refer to the costs of redress since while such costs may be awarded, they were not being increased.
2.8 Regarding the non-discriminatory options the respondent might have chosen, the complainant cited a previous scheme it introduced in 1997 which calculated severance gratuity on the basis of three weeks' pay per year of potential service to age 65, subject to a maximum of 27 weeks. The complainant suggested that the respondent also had the option of offering a flat rate of severance to all participants, which would treat everyone equally.
2.9 The complainant disputed the assertion that calculation of the severance gratuity was proportionate or bore a rational relation to income foregone. He submitted details of an exercise he carried out in respect of 23 employees aged over 60 years who availed of the Early Retirement package. Service gratuity as a proportion of income foregone varied from 11.7% to 102.2%. The complainant's exercise demonstrated that if the severance gratuity had been calculated on the basis of a sliding scale which took account of potential service to age 65, the gratuity as a proportion of income foregone would have varied from 29.5% to 30.7%.
3. SUMMARY OF THE RESPONDENT'S CASE
3.1 The respondent said that the facts stated by the complainant regarding the composition of the ER/VPS were correct. It said that the primary purpose of the Scheme (introduced under the title Coillte Alternatives) was to address the question of organisational efficiency (in particular focussing on management and corporate overhead costs) by effecting a reduction in overall staffing. However, the respondent disputed the claim that the terms available to those aged 60 or over constituted less favourable treatment of that group compared to those aged less than 60 years. It also did not accept that the complainant was at the loss of €43,792 as claimed.
3.2 The respondent cited section 34 (3) of the 1998 Act and said that if the additional severance gratuity were to be paid to the complainant, it would undermine the entire purpose of the Scheme and result in the anomaly of the respondent paying considerably more to induce the complainant to retire early than if he had continued in employment. The respondent submitted material from its actuary to illustrate this. The actuary noted that payments to the complainant arose from three distinct sources: severance gratuity of €23,062, payments of €65,200 in respect of a four year temporary contract and immediate payment of pension amounting to €22,285 per annum. For the purpose of the exercise, it was assumed that the complainant continued in service to age 65, that future pension or salary payments increased at 4% per annum and future potential payments were capitalised at an assumed discount rate of 7% per annum.
3.3 The actuary calculated that by virtue of availing of the Scheme, the complainant had foregone salary of €181,840. Conversely, he received payments of €175,599 in terms of severance, pension and contract. On this basis, the difference between the current value of payments receivable and those foregone was €6,241 and therefore the two income streams were broadly similar. The actuary concluded that the payment of the €43,792 claimed by the complainant would mean he would receive more in payments as a result of leaving than he could reasonable have expected to receive had he remained in employment to the age of 65.
3.4 The actuary undertook a comparable exercise in respect of a colleague of the complainant who was aged 59 years when he availed of the Scheme. This comparator received a severance gratuity of €69,528, a four year temporary contract amounting to €65,200 and pension of €23,176 payable at age 60. The actuary calculated that the comparator had foregone salary of €237,771, the payments received amounted to €237,417 and the difference between the two amounts was €354. The actuary concluded that relative to potential income foregone in the period to age 65, the complainant and the comparator received broadly comparable compensation.
3.5 The respondent submitted that this evidence met the requirements of section 34 (3) that increased costs be significant, which it said was highlighted in the Equality Officer decision in the case of McGarr v Department of Finance (DEC-E2003-036). It said the gross value of severance gratuities paid had been calculated at €1,801,000. It had estimated that the extra cost associated with the payment of the additional severance gratuities to all the relevant employees would amount to €1,073,247, representing an increase of almost 60%. It submitted evidence of its calculations, as well as verification of the data by a firm of chartered accountants.
3.6 The respondent claimed that the impact of such a large additional cost factor would indeed be significant, both in the context of the viability of the Scheme, as a vehicle for reducing overheads in line with competitors, and in light of its present financial situation. It said a payment of such magnitude would be a serious drain on cash resources, resulting in borrowing entitlement being reduced to a level where, if two or three large debtors were to delay payment, it could face a cash crisis.
3.7 The respondent suggested that it was circumstances other than age that prevented the complainant from reaping greater value from the early retirement arrangement. Specifically, because of his completed service (41.2 years), he could not benefit from additional years of pensionable service generally available under the Early Retirement element of the Scheme.
3.8 The respondent argued in its initial written submission that the ER/VPS in its entirety did not come within the definition of remuneration, but was rather a "gratuity or allowance" as envisaged by section 44 of the Forestry Act 1988. However, it subsequently accepted that the severance gratuity was remuneration for the purposes of the 1998 Act. The respondent also argued that the transitional provisions of section 34 (6) could be relied upon. This section states
Where immediately before the relevant day, arrangements are in force in any employment for age-related remuneration, it shall be a sufficient compliance...if those arrangements are brought to an end within the period of 3 years beginning on the relevant day.
The relevant day is described in section 34 (8) as the day appointed for the coming into operation of section 29, in this case 18 October 1999. The respondent said that the Alternatives package at issue in this claim was introduced on 15 January 2002, with a closing date of 31 March 2002. It claimed that the package represented a continuation of a series of similarly structured cost saving packages that had been made available to staff on a regular basis since January 1989.
4. INVESTIGATION AND CONCLUSIONS OF THE EQUALITY OFFICER
4.1 In reaching my conclusions in this case I have taken into account all of the submissions, both oral and written, made to me by the parties.
4.2 The complainant alleged that the amount paid to him in the context of the Early Retirement Scheme discriminates on the ground of age, contrary to the provisions of the Employment Equality Act 1998. Section 6 of the Act provides that discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated, on one of the discriminatory grounds, which include age. The Act also provides at Part IV
28.-(1) For the purpose of this Part, "C" and "D" represent 2 persons who differ as follows:
...(e) in relation to the age ground, C and D are of different ages...
29.-(1) It shall be a term of the contract under which C is employed that, subject to this Act, C shall at any time be entitled to the same rate of remuneration for the work which C is employed to do as D who...is employed to do like work by the same or an associated employer.
No argument was made by the respondent that the complainant and his proposed comparator were not carrying out like work, and I am satisfied that this is not a point in dispute.
Matters for consideration
4.3 The complainant's references to discrimination in the context of access to the Scheme, conditions of employment and other matters referred to at 1.1 and 2.4 above, were stated to be arguments "in the alternative" to the claim under section 29 of the Act. As the parties are agreed that the severance gratuity constitutes remuneration for the purposes of the Act, I am satisfied that what I need to consider is: (i) whether the calculation of the severance gratuity is discriminatory on the ground of age; (ii) if so, whether the respondent can rely on the transitional provision of section 34 (6); or (iii) alternatively, whether it can rely on the exception provided for in section 34 (4).
Whether discriminatory on the ground of age
4.4 It will be seen from the provisions of the Scheme that pension and lump sum calculations were the same for both Early Retirement and Voluntary Parting. Severance gratuity, however, was calculated more favourably for the Voluntary Parting package. Deferral of pension, an integral part of Voluntary Parting, was only available to age 60. The comparator named by the complainant deferred his pension for some six months, and received a severance gratuity equal to three times that received by the complainant. The only option available to an employee aged 60 or over was Early Retirement. Since the only difference between the complainant and the comparator was their ages, I am satisfied that length of service had no impact on the calculation of severance gratuity, and that the ER/VPS was discriminatory on the ground of age.
Section 34 (6)
4.5 I note the respondent's argument that the ER/VPS was very similar in composition to several such cost saving packages made available to staff since 1989. I note, however, that each of the previous packages had start- and end-dates. I cannot accept, therefore, that this Scheme was anything other than a offer which became available on 15 January 2002 and ceased to be available on 31 March 2002. Accordingly, it was not in effect on 18 October 1999 and the respondent cannot rely on the transitional provision of section 34 (6).
Section 34 (4)
4.6 Section 34 (4) of the Act provides that discrimination on the age ground is not unlawful where it can be shown that there is clear actuarial or other evidence that significantly increased costs would result if the discrimination were not permitted. The respondent provided a significant amount of data in relation to this aspect, much of it disputed by the complainant. Although different figures were submitted at different times, it was agreed at the hearing that the figures used by the actuary (at 3.2 - 3.4 above) were correct.
4.7 In looking at the costs argument, I have disregarded the four year contract taken up the complainant and the comparator as it was not an element of the ER/VPS. I am satisfied that the complainant forewent salary of €181,840 and received €113,985 (severance gratuity of €23,062 and pension of €90,923). The comparator forewent €237,771 and received €175,803 (severance gratuity of €69,528 and pension of €106,275). This resulted in the complainant receiving 62.68% of foregone income and the comparator receiving 73.94% of foregone income. By the same token, and contrary to the respondent's assertion, an additional payment of €44,569 to the complainant would not result in him being paid more than if he had stayed in employment.
4.8 The respondent argued that significant costs would result from paying the enhanced severance gratuity to all staff aged 60 or over. 24 retirees were in the same position as the complainant: they were aged over 60, had 40 years' service and received severance gratuities amounting to 27 weeks' pay. The respondent said that paying these 25 retirees the enhanced severance gratuity would cost €1.07 million. From evidence provided by the complainant (including the respondent's annual report for 2003) it appears that staff costs for that year amounted to €53.6 million, the company had a profit of €25.5 million (an increase of 36%) and a turnover of €172 million.
4.9 An Equality Officer decision dealing with the provision of reasonable accommodation for people with disabilities, An Employee v A Local Authority (DEC-E2002-004), said that the test for nominal cost was a cost relative to the size and financial turnover of the employer. It seems to me to be logical that a similar approach should be taken in evaluating whether increased costs are significant in the context of section 34 (3). Taking into account all of the relevant factors, on balance I am satisfied that the costs were significant. The once-off cost of €1.07 million would represent 1.9% in terms of staff costs, and would amount to 4% of annual profit in the relevant period.
5. DECISION
5.1 Based on the foregoing, I find that Coillte did not discriminate against Mr Peter O'Dwyer on the ground of age, contrary to the Employment Equality Act 1998.
__________________
Anne-Marie Lynch
Equality Officer
2 September 2005