Air Products Plc v Cockram, Court of Appeal - Civil Division, March 02, 2018, [2018] EWCA Civ 346

Resolution Date:March 02, 2018
Issuing Organization:Civil Division
Actores:Air Products Plc v Cockram
 
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Case No: A2/2015/4217

Neutral Citation Number: [2018] EWCA Civ 346

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

(LADY STACEY, MRS C BAELZ, MS G MILLS CBE)

UKEAT/0122/15/LA

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 2nd March 2018

Before:

LORD JUSTICE BEAN

and

LORD JUSTICE LEGGATT

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Between:

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Daniel Stilitz QC and Andrew Blake (instructed by Freshfields Bruckhaus Deringer LLP) for the Appellant

James Laddie QC (instructed by Bindmans LLP) for the Respondent (Claimant)

Hearing date: 13 February 2018

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JudgmentLord Justice Bean:

1. The Claimant Michael Cockram brought various claims including one for age discrimination against his employer Air Products plc in the employment tribunal. He alleged unfair constructive dismissal, detriment by reason of protected disclosures and age discrimination. The unfair dismissal claim was struck out and an appeal to the Employment Appeal Tribunal against the decision to strike it out failed: Cockram v Air Products plc [2014] ICR 1065. The other two claims then proceeded to a hearing on the merits before an employment tribunal at London South (EJ Zuke and two lay members) where by a judgment promulgated on 2 January 2015 both were dismissed.

2. Mr Cockram appealed against the tribunal's rejection of his age discrimination claim to the EAT, which allowed his appeal and remitted the case for re-hearing by a freshly constituted tribunal. With permission of Christopher Clarke LJ Air Products plc (to whom I shall refer as ``the company'' or ``the Appellants'') appeal to this court, seeking to restore the decision of the tribunal. Mr Cockram cross-appeals against the order for remission, contending that he should have won outright.

3. The age discrimination claim related to unvested Long Term Incentive Plan (``LTIP'') awards, which the Claimant forfeited when he resigned his employment with the Appellants at the age of 50. As a general rule, under the company's LTIP all unvested awards are forfeited on termination of employment. However, the LTIP contains a retirement exception under which participating employees who leave employment ``on or after a customary retirement age for the Participant's location'' are permitted to retain their awards. Since the customary retirement age for employees of the company in the UK was fixed at 55, the Claimant did not fall within the retirement exception, and therefore forfeited his unvested LTIP awards. He contends that this amounted to unlawful direct age discrimination.

4. Before the tribunal, the company accepted that the effect of the customary retirement age provision in the LTIP was directly discriminatory, in that an employee who was aged over 55 (unlike the Claimant) would have benefited from the retirement exception. However, the tribunal accepted the company's arguments that the discriminatory effect was objectively justified, in that applying the retirement exception only to employees aged 55 or over was a proportionate means of achieving a legitimate aim.

5. The LTIP sets out its purposes in clause 1:

"(i) to provide long-term incentives to those executives or other key employees who are either in a position to contribute to the long-term success of and growth of Air Products and Chemicals, Inc. ("the Company") and Participating Subsidiaries, or who have high potential for assuming greater levels of responsibility or who have demonstrated their critical importance to the operation of their organizational unit;

(ii) to assist the Company and Participating Subsidiaries in attracting and retaining nonemployee directors ("Eligible Directors"), executives and other key employees with experience and ability."

6. Under the LTIP, the general rule is that unvested awards are forfeited on the termination of employment. The exceptions to this general principle are terminations by death, disability or retirement at or after the customary retirement age.

The retirement exception

7. Retirement is defined in the LTIP as:

"in the case of an employee Participant, separating from service with the company or a subsidiary on or after a customary retirement age for the Participant's location, with a fully vested right to begin receiving immediate benefits under a retirement income plan sponsored or otherwise maintained by the company or a subsidiary for its employees, or, in the absence of such a plan being applicable to any Participant as determined by the Committee in its sole discretion." [emphasis added]

8. On 6 April 2010, UK pension law changed and 55 became the earliest age at which people could draw a pension unless they had a protected pension age of less than 55. The Claimant and a number of other employees of the company - all of whom are members of the company's defined benefit (``DB'') pension scheme, which closed to new entrants in 2005 - have a protected pension age of 50. Since 6 April 2010 the company has interpreted the ``customary retirement age'' of its staff in the UK for the purposes of the LTIP as meaning retirement at or after the age of 55. The Claimant challenged this interpretation and, in response to this challenge, the issue was referred to the Management Development and Compensation Committee of the board of the Appellant's holding company in the USA, Air Products and Chemicals Inc. A Memorandum to the Committee stated that:

"We believe that 55 is now the 'customary retirement age' in the U.K., notwithstanding that some benefits under our pension plan are grandfathered, and we want treatment to be consistent for employees in the defined benefit scheme and the defined contribution scheme."

9. The Committee authorised the signing on 8 March 2013 of a document described as a Consent resolving that "Retirement under the LTIP for UK employee participants occurs upon separation from service on or after attaining age 55''.

10. The retirement exception runs counter to the LTIP's aim of incentivising employee retention, as it permits employees to keep their LTIP awards even if their employment terminates before the vesting date and the rights have not yet accrued or vested. The Appellant argued at trial that one purpose of the retirement exception is to ensure that there is no disincentive for employees who have reached customary retirement age to retire, so that they create space for more junior employees to be promoted.

11. The Claimant argued that the retirement exception should apply to him at age 50. The company considered that the minimum age to bring a retiring employee within the retirement exception under the LTIP should be 55 because it wished to achieve fairness between the generations and treat employees consistently, and it believed that permitting the sub-set of employees who have a protected pension age of 50 to benefit from the retirement exception from that age would be unfair to the predominantly younger employees in the defined contribution (``DC'') pension scheme, all of whom have a retirement age of 55. It also took the view that a retirement age of 50 for all participants in the LTIP would be too low to achieve the retention aims of the Plan.

The legislation

12. Section 13 of the Equality Act 2010 (``EA 2010'') provides:

``(1) A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.

(2) If the protected characteristic is age, A does not discriminate against B if A can show A's treatment of B to be a proportionate means of achieving a legitimate aim.''

13. Section 39 of the EA 2010 provides that an employer (A) must not discriminate against one of its employees (B): (i) as to B's terms of employment, (ii) in the way A affords B access, or by not affording B access, to opportunities for receiving any other benefit or (iii) by subjecting B to any other detriment.

Seldon

14. In the leading case of Seldon v Clarkson, Wright and Jakes [2012] ICR 716 Baroness Hale of Richmond JSC said:-

"50. What messages, then, can we take from the European case law?

......(2) If it is sought to justify direct age discrimination under article 6(1), the aims of the measure must be social policy objectives, such as those related to employment policy, the labour market or vocational training. These are of a public interest nature, which is "distinguishable from purely individual reasons particular to the employer's situation, such as cost reduction or...

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