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Tags: age discrimination, Pelter v Buro Four Project Services Ltd
Categories: Employment Law
The Background:
The Equality Act 2010 says that an employer can cease to offer insurance or a related financial service (e.g. permanent health insurance (PHI)) to employees at (i) age 65 or (ii) the state pension age, whichever is the greater.
The facts:
The employee, Mr Pelter, was a director of Buro Four Project Services Ltd (Buro). His contract entitled him to participate in the company’s PHI scheme, subject to the scheme rules. The rules included that membership would cease on an employee reaching ‘terminal age’ which was 65 and that, once a member was incapacitated, the terms and conditions of the policy immediately prior to their incapacity would determine their benefit.
At the time that the PHI scheme commenced, the state pension age was 65. For men this increased from 65 to 66 in 2012.
In 2011 (when Mr Pelter was 56) he became incapacitated for work. Buro submitted a claim under the PHI scheme, which was accepted in 2013.
In 2019, Buro gave Mr Pelter notice of termination of employment, to expire at the end of 2020, when he was 65. He stopped receiving PHI benefits when he was 65.
Mr Pelter brought an employment tribunal (Tribunal) claim for direct age discrimination against Buro. He argued that Buro should have updated the PHI policy to comply with the Equality Act 2010 so that benefits could be extended to his 66th birthday (the current state pension age). He also argued that Buro should have transferred him to a PHI policy which would pay beyond his 65th birthday.
Tribunal decision
The Tribunal dismissed Mr Pelter’s claim. It said that, while the ‘terminal age’ was potentially discriminatory, at the time the PHI scheme was entered into, the employee’s state pension age was 65. Therefore the scheme, at that date, fell within the exception contained in the Equality Act. Therefore the employer had fulfilled its contractual obligations to Mr Pelter and his treatment did not amount to unlawful discrimination on grounds of age.
Mr Pelter appealed to the EAT.
EAT decision
The EAT dismissed the appeal. It agreed that the employer had fulfilled its contractual obligation to provide access to PHI, which it had done in a non-discriminatory manner.
In particular, the EAT agreed that the important date was that at which Mr Pelter entered into the PHI scheme. At that time it was lawful for Buro to cease payment of the PHI benefits at the age of 65, as this was the date then provided under the exception Equality Act.
Furthermore, it was the insurer’s decision to cease payments at age 65 in accordance with the terms of the policy, and not Buro’s, which was only responsible for providing “access” to the PHI scheme. From the time Mr Pelter had been accepted onto cover by the PHI insurer, his entitlement to PHI had crystallised and payments under the scheme were a matter for the insurer.
However, the EAT noted that if Mr Pelter had still been in employment in 2012 (when the state retirement age increased from 65 to 66) there would have been a much stronger argument for him to have been transferred to a scheme entitling him to receive benefits until he was 66.
Implications:
This is a helpful case for employers, as it confirms that they may successfully defend claims of age discrimination which challenge the termination of cover at a specified age. However, this does depend on the employer’s contractual obligations being very carefully drafted and it is important that this, as well as the terms of benefits and the extent of insurance protection, are kept carefully under review. Changes do occur and, in particular employers may well want to seek new insurance when the state pension age rises, or at least assess the risks of not doing so. As the EAT pointed out, if Mr Pelter had been employed at the time the retirement age increased, and Buro had not sought new insurance, it would have been much harder to defend a claim.
5.0/5