DEC-E2014-019

The Equality Tribunal

Employment Equality Acts 1998 – 2011

Decision No: DEC-E/2014/019

PARTIES

Dolores O’ Sullivan

(Represented by SIPTU)

v

St. Michael’s Hospital/HSE

(Represented by HSE Corporate Employee Relations Services)

Date of Issue: 8 April 2014

File No. EE/2011/452/457

Keywords: Employment Equality Acts - discriminatory treatment - age - voluntary redundancy scheme - prima facie case - objective justification – EU Directive 2000/78/EC

1. Dispute and delegation

1.1 This dispute concerns a claim by Ms. Dolores O’ Sullivan (hereafter "the complainant") that she was subjected to discriminatory treatment by St Michael’s Hospital/HSE (hereafter "the respondent) in relation to a voluntary redundancy scheme on grounds of her age, in that, she was treated less favourably on account of her age vis a vis younger employees who received a much more enhanced redundancy package.

1.2 The complainant referred a claim of discrimination to the Director of the Equality Tribunal on 18 May 2011 under the Employment Equality Acts. On 27 August 2013, in accordance with his powers under section 75 of the Acts, the Director then delegated the case to Valerie Murtagh - an Equality Officer - for investigation, hearing and decision and for the exercise of other relevant functions of the Director under Part VII of the Acts on which date my investigation commenced. As required by Section 79(1) and as part of my investigation, I proceeded to hearing on 25 February 2014.

2. Summary of Complainant’s case

2.1 The complainant commenced employment with the respondent in the catering department in January 1982. In November 2010, the HSE put in place a targeted Voluntary Early Retirement Scheme (VER) and a targeted Voluntary Redundancy Scheme (VRS). The purpose of the two schemes was to achieve a permanent reduction in the numbers employed in the public health sector from 2011 and to facilitate public reform. The complainant enquired about both schemes but was particularly interested in the VRS. The VRS provided for the payment of (i) 3 weeks gross pay per year plus (ii) the statutory redundancy entitlement of 2 weeks gross pay per year of service plus a bonus week. The VRS stated that the terms of the VRS will apply to all age groups up to age 60 and will provide for 2 weeks pay per year of service plus the statutory entitlement of 2 weeks pay per year of service (subject to a cap of €600 a week) subject to a maximum of 2 years pay; for people over 50 the terms will be an overall maximum severance payment of 2 years pay or 50% of their potential earnings to age 60, whichever is the lesser. On receipt of documentation from the respondent regarding estimated calculations in relation to the VRS, the complainant discovered that her payment was significantly smaller than that of her colleagues who were under the age of 50. The complainant contends that the scheme allowed for employees under the age of 50 to have their years of service calculated into the payments but the complainant had her payment reduced due to the fact that she was 58 years of age. The complainant argues that not only was her 28 years of service not taken into account but the 5 years from age 60 to the compulsory age of 65 was also omitted from the calculations simply due to the fact that the complainant was 58 years of age. The complainant cites the following calculations which she received from the respondent in relation to the VRS in support of her claim for discriminatory treatment on grounds of age.

Application of VRS to 2 Full-time employees of different ages and same service at 31/12/2010

2.2 The complainant submits that the Labour Court in O’ Dwyer v Coillte Teoranta held that the settling of different ages in respect of the benefits of the scheme constitutes prima facie evidence of discrimination on grounds of age. The complainant also cites the decision of the European Court of Justice (ECJ) in Ingeniorforeningen i Danmark acting on behalf of Ole Andersen v Region Syddanmark (C-499/08). This case concerned a Danish law which granted a severance allowance to workers employed in the same undertaking for at least 12 years. However, the allowance was not paid to workers who, on termination of the employment relationship, could draw an old age pension under the occupational pension scheme even if the person concerned intended to continue working. The complainant argues that the ECJ clearly applied a firm test of objective justification. The complainant further submits that the employer or entity which intends to treat an employee differently on grounds of age must clearly identify the objective to be achieved for this difference in treatment and demonstrate that the means adopted achieve the objective. The complainant contends that in this jurisdiction, when it comes to redundancy packages, age specific restrictions are considered discriminatory. The complainant cites the decision in Ruddy v An Post (DEC-E2007-020) where a substantial award was made to an employee who was offered a less favourable redundancy package because he was over the age of 60. It was found that the employer discriminated against the complainant on grounds of age when it refused him access to an owner-driver scheme as part of the employer’s overall restructuring programme.

3. Summary of Respondent’s case

3.1 The respondent submits that the complainant commenced employment with it on 25 January 1982. She was subsequently appointed to the post of deputy catering manager on 18 February 2002. She retired from her post on 29 February 2012. The respondent states that, on foot of a Government decision, it issued Circular 7/2010 dated 1 November 2010 setting out the provisions for a targeted Voluntary Early Retirement Scheme (VERS) and a targeted Voluntary Redundancy Scheme (VRS) for management/administrative grades and support staff in the public health service. The purpose of the VER and VRS schemes was to achieve a permanent reduction in the numbers employed in the public health sector from 2011 onwards and to facilitate health reform. There was a cap of €400m on the costs of the schemes. The VRS comprised two elements (a) redundancy payment and (b) preserved pension and lump sum payable at age 60/65. The VRS applied to those employees in the target categories who were under the relevant preserved pension age at 19 November 2010 (60/65 years) and who had already accrued entitlement to preserved superannuation benefits under a public health service superannuation scheme (2 calendar years’ reckonable service) at that date.

3.2 The respondent submits that the age at which the preserved pension and lump sum is payable to applicants under the VRS (60 or 65 years) is determined by whether the employee is deemed to be a “new entrant” as defined by the Public Service Superannuation (Miscellaneous Provisions) Act 2004. This Act came into effect on 1 April 2004 and provided for (i) the removal of compulsory retirement ages for new entrant public servants and (ii) the increase in the minimum age at which pension is payable to 65 years for new entrant public servants. Subject to certain provisions of the 2004 Act, a “new entrant” means a person who is not serving in a public service body on 31 March 2004 but becomes a public servant on or after 1 April 2004. In the case of employees who are deemed to be “new entrants” under the provisions of the 2004 Act, the preserved pension age for the purposes of the VRS is 65 years. For employees who were not “new entrants”, the preserved pension age for the purposes of the VRS is 60 years. The respondent submits that the complainant was eligible to apply for the VERS and VRS and submitted applications for both schemes. She withdrew her application for the VERS in December 2010. At the time of her application for the VRS, the complainant was 58 years of age and had nearly 29 years’ service (she reached a total of 29 years’ service on 21 January 2010).

3.3 The respondent submits that the complainant’s ex gratia redundancy payment was reduced to reflect the fact that she had a significant number of years’ service (nearly 29 years). The cap would also apply to a younger employee (e.g. 48 years) who had the same amount of service as the complainant. The respondent contends that under the terms of the VRS, the complainant’s redundancy payments were calculated on the basis of her full service, nearly 29 years. She was entitled to retain the full amount of her statutory redundancy payment. The cap on her redundancy payment applied to the ex gratia payment only. The cap on the ex gratia payment was determined by an employee’s length of service and their proximity to preserved pension age. As the complainant was not a “new entrant” as defined in the 2004 Act, her preserved pension age is 60 years. The respondent contends that once the complainant reached 60 years, she would be entitled to the second element of the VRS; the preserved pension and lump sum benefits. The respondent submits that the calculation of the statutory element of the redundancy payment for applicants was based on service only and was not age-related. The gross ex-gratia payment was adjusted to take account of the proximity of the employee’s age to preserved pension age (60/65 years). The respondent contends that the complainant was entitled to retain the full amount of her statutory redundancy payment (€35,442). However, her gross ex gratia payment (€8,172) was adjusted so that she would not exceed the overall limit provided for under the scheme. This adjustment in her ex gratia payment reflected the fact that she had only 2 years’ potential service before reaching her preserved pension age of 60 years and had accrued nearly 29 years’ service. Her actual ex gratia payment therefore amounted to €4,572. She was also entitled to an additional €3,600 for payment in lieu of notice. The net redundancy payment to which she would have been entitled if she availed of the VRS amounted to €43, 614.

3.4 The respondent submits an example of two employees, one aged 48 years and one aged 58 years, both on the same grade with the same amount of service and a preserved pension age of 60 years; Employee B who is aged 48 years, has to wait 12 years until reaching his/her preserved pension age of 60 years and therefore the annualized value of the overall redundancy payment to the employee, up to the date on which the preserved pension and lump sum benefits are payable, is significantly less (€93,924 divided by 12 = €7827). In the case of Employee A (aged 58 years), the annualised value of the overall redundancy payment, up to the date on which the preserved pension and lump sum benefits are payable, is much higher (€46,962 divided by 2 = €23,481). The respondent acknowledges that the calculation of the ex gratia element of the redundancy payment was adjusted to take account of the proximity of an employee’s age to the preserved pension age (60 years in the complainant’s case). However, the respondent contends that this provision does not constitute discriminatory treatment on the age ground under the Employment Equality Acts and Article 6 of Directive 2000/78/EC. The respondent contends that the VRS is an occupational benefit scheme within the meaning of section 34 (3) of the Employment Equality Acts. The respondent also contends that the application of a cap on the ex gratia amount payable to applicants based on the employee’s length of service and proximity to preserved pension age is not discriminatory on age grounds and refers to the exclusion under section 34(3)(a) of the Acts

“In an occupational benefits scheme, it shall not constitute discrimination on the age ground for an employer –

(a) to fix ages for admission to such a scheme or for entitlement to benefits under it,”

3.5 The respondent states that Article 6 of Directive 2000/78/EC provided for justification of differences of treatment on grounds of age as follows; 1. Notwithstanding Article 2(2), member states may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary. The respondent contends that the objective of the VRS was to provide for lump sum payments as an inducement for employees to voluntarily terminate their employment with the public health service. The aim of the scheme was to achieve a reduction in payroll costs which, over time, would justify the initial cost of the scheme. The inducement was to provide a financial incentive to employees to cover the period from the date of exit until the date that they became eligible to receive their preserved pension and lump sum benefits. The respondent submits that the potential loss of income for applicants under the VRS was greater for younger employees as they would have longer to wait until reaching their preserved pension age. The respondent also states that it should be noted that employees who availed of the VRS are prohibited under the terms of the Department of Health Circular (7/2010) from “re-employment in the public health sector or in the wider public service or in a body wholly or mainly funded from public moneys for a period of 7 years, after which time any re-employment will require the approval of the Minister for Finance” (section 5 of the Circular). The respondent contends that while this prohibition applies to all employees who avail of the VRS, it may be more onerous on a younger employee who has longer to wait until s/he is eligible to receive their preserved pension and lump sum benefits.

3.6 The respondent submits that it was reasonable for it to target the funding available under the VRS to those employees with longer remaining potential service in employment to justify the initial outlay. The respondent contends that the provision under the scheme whereby account is taken of the period between the age of the employee and preserved pension age (i.e.60/65 years) when calculating the ex gratia element of the redundancy pay constitutes a legitimate objective and does not contravene the Employment Equality Acts or Article 6.1 of the Directive. The respondent refers to the Labour Court decision in the case of Eircom Ltd and Raymond McGovern (EDA 1114) which concerns an employee who alleged that his exclusion from the employer’s voluntary redundancy scheme by virtue of being over 60 years constituted age discrimination. The Labour Court found that:

“In that regard, it was manifestly reasonable for the respondent to direct the funding available under the scheme to those employees with longer remaining tenure in employment and to exclude those whose remaining potential service would be insufficient to realise sufficient savings so as to justify the initial outlay. In the Court’s view, that constituted a legitimate objective the attainment of which required the imposition of some cut-off point related to the age, and consequently the remaining tenure, of employees.”

The Court concluded that the employer did not breach the provisions of the Employment Equality Acts or Article 6.1 of the Directive in this case. The respondent argues that the cap on the ex gratia redundancy payment was service-related and applied to all employees who availed of the VRS. The cap mainly affected those employees with a significant number of years’ service who were close to their preserved pension age (60/65 years). An employee who was close to his/her preserved pension age but with less service than the complainant (29 years) would not necessarily be affected by the cap. In conclusion, the respondent reiterates that the provision under the scheme whereby account is taken of the period between the age of the employee and preserved pension age (i.e. 60/65 years) when calculating the ex gratia element of the redundancy pay constitutes a legitimate objective and in no way contravenes the employment equality legislation.

4. Conclusions of Equality Officer

4.1 The issue for decision by me is whether or not the respondent discriminated against the complainant on grounds of age, in terms of section 6(2) of the Employment Equality Acts, 1998 and 2008 and contrary to section 8 of those Acts in relation to the application of the Voluntary Redundancy Scheme (VRS) for the public health sector which was implemented in 2010. I have considered all the evidence both written and oral presented to me. Section 85A of the Employment Equality Acts sets out the burden of proof which applies in a claim of discrimination. It requires the complainant to establish, in the first instance, facts from which it may be presumed that there has been discrimination in relation to her. If she succeeds in doing so, then, and only then, is it for the respondent to prove the contrary. The Labour Court has held consistently that the facts from which the occurrence of discrimination may be inferred must be of “sufficient significance” before a prima facie case is established and the burden of proof shifts to the respondent. In deciding on this complaint, therefore, I must first consider whether the existence of a prima facie case has been established by the complainant. In a recent Determination the Labour Court[1], whilst examining the circumstances in which the probative burden of proof operates, held as follows –

"Section 85A of the Acts provides for the allocation of the probative burden in cases within its ambit. This requires that the Complainant must first establish facts from which discrimination may be inferred. What those facts are will vary from case to case and there is no closed category of facts which can be relied upon. All that is required is that they be of sufficient significance to raise a presumption of discrimination. However, they must be established as facts on credible evidence. Mere speculation or assertions, unsupported by evidence, cannot be elevated to a factual basis upon which an inference of discrimination can be drawn. Section 85A places the burden of establishing the primary facts fairly and squarely on the Complainant and the language of this provision admits of no exceptions to that evidential rule.”

4.2 The VRS provided for the payment of:

(a) a severance payment of 3 weeks’ pay per year of actual service plus statutory entitlement under the Redundancy Payment Acts, or the equivalent, subject to an overall limit of:

(i) 2 years pay; or if less,

(ii) one-half of the salary payable to preserved pension age.

and

(b) preserved pension and lump sum payable on attaining preserved pension age (60 or 65, as appropriate).

The core of the respondent's case is that the approach it adopted is lawful in terms of section 34(3) of the Employment Equality Acts, 1998 to 2008 and that this provision in turn, is consistent with Article 6 of the Framework Directive[2]. Section 34(3) of the Employment Equality Acts, 1998 to 2008 provides as follows-

"(3) In an occupational benefits scheme it shall not constitute discrimination on the age ground for an employer -

(a) to fix ages for admission to such a scheme.....

(d) to provide different rates of severance payment for different employees or groups or categories of employees, being rates based on or taking into account the period between the age of an employee on leaving the employment and his or her compulsory retirement age."

Section 34(3A) of the Acts defines "occupational benefits scheme" and "severance payment" for the purposes of section 34(3) as follows -

"(3A) 'occupational benefits scheme' includes any scheme (whether statutory or non-statutory) providing for benefits to employees or any categories of employees on their becoming ill, incapacitated or redundant but does not include any occupational pension scheme providing for pensions, gratuities or other allowances payable on retirement of death.

'severance payment' means a sum paid voluntarily by an employer to an employee otherwise than as pay when the employee leaves the employment.' .

4.3 I have examined all the evidence in relation to the case in hand and taken into consideration the relevant caselaw, in particular, the findings of the Labour Court in the case of Hospira v Roper & Others (EDA1315) which arose as a result of the complainants receiving less in their redundancy packages than younger workers received. In that case, the Court did not accept the principle that age discrimination must be objectively justified on a case by case basis by any employer but found that the objective justification was provided by the Oireachtas in enacting the legislation. The Court found that the Oireachtas, in enacting section 34(3)(d) of the Act, has made provision for a difference in treatment based on age in respect of severance payments. The Court stated that:

“..[T]he underlying rationale for this provision is that workers close to retirement age are in a substantially different position than those who have longer periods in which they could have expected to remain in the active labour force and that, as a matter of social and labour market policy, this difference can be legitimately reflected in constructing redundancy packages. A worker who is made redundant many years before their expected retirement date loses the expectation of a continuing income up to that date and the redundancy pay that they receive is unlikely to fully compensate them for the loss which they may suffer in consequence of losing their employment. Furthermore, such a worker will be entitled to receive social security payments while seeking alternative employment but the continuance of these payments is now limited to a period of nine months. By contrast, a worker who is made redundant at a time in close proximity to their retirement date and who receives a redundancy payment equal to the earnings that he or she could have expected up to that date suffers no pecuniary loss”.

4.4 The Labour Court said that the Oireachtas considered it reasonably and objectively justifiable, within the meaning of Article 6 (1) of the Directive, to provide for the differences in treatment allowed for by section 34(3)(d) of the Act. “The Court cannot see any basis upon which it could be held that the Oireachtas was precluded from reaching that conclusion by a provision of Directive 2000/78/EC as interpreted in the jurisprudence of the CJEU.” In the above case, the Court concluded that the differences in redundancy payments made to the complainants as compared to their comparators is saved by section 34(3)(d) of the Act. In a recent decision of the ECJ in Odar v Baxter Deutschland GmbH (C-152/11), the Court had to consider if a redundancy payments scheme in Germany which differentiated between workers on grounds of age offended against Article 6 of Directive 2000/78/EC. The Court considered that the arrangements in issue were objectively justified on the basis, inter alia, that they allowed for a fair distribution of limited financial resources as between younger and older workers. The ECJ held that reducing compensation for workers aged over 54 by taking into account the earliest date from which they could receive a State pension was not unlawful age discrimination. Having examined all the information in relation to the case in hand and factoring in the above jurisprudence, I find that the respondent has succeeded in demonstrating, that its actions, insofar as the treatment of the complainant is concerned in relation to the provisions of the VRS, can be objectively justified and the complainant therefore fails in her claim.

5. Decision of Equality Officer

5.1 I have completed my investigation of this complaint and make the following Decision in accordance with section 79(6) of the Employment Equality Acts, 1998-2008. I find that –

(i) the respondent did discriminate against the complainant on grounds of age in terms of section 6(2) of the Employment Equality Acts 1998 to 2008 and contrary to section 8 of those Acts in relation to the application of the VRS in the manner in which it calculated the complainant’s entitlements as regards the Voluntary Redundancy Package.

(ii) the respondent has objectively justified its actions in terms of section 34(3) of the Employment Equality Acts 1998 to 2008 and Article 6 of the Framework Directive.

____________

Valerie Murtagh

Equality Officer

8 April 2014

Footnotes:

[1] Arturs Valpeters v Melbury Developments [2010] 21 E.L.R. 64.

[2] Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation

DEC-E2014-019