In the recent case of Air Products Plc v Cockram, the Court of Appeal confirmed that a long term incentive plan (LTIP) containing ”good leaver” provisions applying on retirement will not amount to age discrimination.
The respondent had forfeited his unvested LTIP awards when he resigned from Air Products at age 50. Under the LTIP, the general rule was that unvested awards would be forfeited on termination of employment except in certain situations including retirement “on or after the customary retirement age”. The customary retirement age for UK employees of Air Products was 55 and the respondent argued that this amounted to age discrimination.
The Court of Appeal stated that the Air Products’ flexibility to determine the age of retirement under the LTIP was objectively justified because it was a proportionate means of achieving a legitimate aim. The legitimate aims in this instance were i) incentivising employees to stay with the company longer and ii) ensuring intergenerational fairness and consistency (as the respondent was one of the few employees able to draw a pension at 50, under a defined benefit scheme no longer open to younger workers).
This case gives encouragement to employers that the inclusion of retirement as a “good leaver” provision in their incentive plans can be justified.
Pett, Franklin & Co. LLP are experts in employee share schemes, executive incentives and share valuation. To find out more about how we can help you or your client, please call 0121 281 5798 or email email@example.com.