We have just had a quote for renewing our medical insurance policy. We have several workers aged over 65 and if we cover them too, the overall cost increases substantially. Can we exclude these workers from the insurance?
First, a practical point – many group insurance schemes do not have any age criteria, so the problem may be solved simply by changing insurers. Otherwise, the legal implications of excluding older workers need to be considered.
Withdrawing any contractual benefit without the employee’s consent amounts to a breach of contract, which could result in constructive and unfair dismissal claims. However, employment contracts often state that certain benefits are discretionary and, where the wording permits, they can usually be withdrawn or changed without the employee’s consent.
Withdrawing benefits from staff aged over 65 will be discriminatory under the Employment Equality (Age) Regulations 2006, unless this can be objectively justified as ‘a proportionate means of achieving a legitimate aim’.
It is unclear whether cost considerations alone can comprise a legitimate aim to justify discrimination. Case law suggests that it can only be considered along with other justifications (if there are any). The government’s Coming of Age (July 2005) consultation suggested that while factors such as business needs and efficiency may be legitimate, discrimination is not justified merely because it may be more expensive not to. Hopefully, case law will clarify this question.
If you do withdraw insurance benefits for older workers, the recent tribunal case of Bloxham v Freshfields Bruckhaus Deringer illustrates the need to consult thoroughly and document the reasons for doing so. You must consider whether other, less discriminatory steps can be taken – weighing up all available options and then documenting a comparative analysis of the costs of providing the benefit to all employees against other options, such as different insurance providers, or even withdrawing the benefit from all employees.
If the benefit is contractual and you decide to withdraw it, you will need your employees’ agreement. Paying staff to buy their own insurance privately appears attractive, but it risks claims of indirect age discrimination from older workers whose private insurance will cost more than that of their younger colleagues.
Laurence Rees, partner, Reed Smith Richards Butler
