The claimants were pensioner members of the Ford Pension Scheme for Senior Staff. A decision had been taken by the trustees of the respondent's pension fund to implement the CPI basis, rather than RPI,  for increasing benefits payable resulting in lower payments. As a consequence of the threat of industrial action, the respondent agreed to make certain lump sum payments to existing employees. These were payments made by the respondent, not the pension fund. No such payments were made to former employees who were retired and in receipt of their pension, save that as a result of industrial pressure the payments to certain pensioners were increased by 0.4% to 2.1%. The claimants' complaint was that not making similar arrangements to recompense them for the likely reduced annual increases in their pension payments amounts to direct and indirect age discrimination. An EJ ruled that the ET does have jurisdiction under the EqA section 108 to hear the claims. The respondent appealed.

The EAT allowed the appeal. The EJ should have decided whether the complaints in the ET1s fell within the EqA section 108(1)(a) and 108(1)(b). The reason for the EJ's decision that there was jurisdiction to hear the claims was erroneous. The question under section 108(1)(a) was not whether there was a close connection between the claimants' relationship with the respondent as former employees and that as pensioners but whether the discrimination arose out of and was closely connected to a relationship which used to exist between them. Further, there appeared to have been no consideration of whether the allegations in the ET1s brought the claims within section 108(1)(b). Such claims must be of conduct which would have been contrary to the EqA if carried out whilst the claimant was in employment. It is only discrimination where there is no material difference between the circumstances of claimants' cases and those of their comparators which is potentially in breach of the EqA. The EJ did not consider and decide whether the allegations in the ET1s satisfied this requirement for a claim to fall within section 108(1)(b), or if he did, gave no reasons for such a decision.

________________

Appeal No. UKEAT/0327/14/MC

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

At the Tribunal

On 13 January 2015

Judgment handed down on 24 September 2015

Before

THE HONOURABLE MRS JUSTICE SLADE DBE

MR T M HAYWOOD

MS P TATLOW

FORD MOTOR COMPANY LIMITED (APPELLANT)

ELLIOTT & OTHERS (RESPONDENTS)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR IAN SCOTT (of Counsel)
Instructed by:
Lewis Silkin LLP
5 Chancery Lane
Cliffords Inn
London
EC4A 1BL

For the Respondents
MS ANDREA CHUTE (of Counsel)
Instructed by:
Liddell & Company Solicitors
Church House
46 High Street
Billericay
Essex
CM12 9BS

AGE DISCRIMINATION

On a Preliminary Hearing to determine whether the Employment Tribunal has jurisdiction to hear age discrimination claims by pensioners that they were not paid lump sums in respect of a change in the basis for pension increases which were made to current employees, the Employment Judge failed to consider whether the claims fell within both limits of the Equality Act 2010 section 108(1)(a) and (b). Further the Employment Judge erred in applying section 108(1)(a).

1. The Ford Motor Company Limited ("the Respondent") appeals from the Decision of an Employment Tribunal, Employment Judge Hallen ("the EJ"), sent to the parties on 30 June 2014. At a Preliminary Hearing EJ Hallen held that the Employment Tribunal ("the ET") had jurisdiction under section 108(1) of the Equality Act 2010 ("the EqA"), which provides for claims to be made by former employees if certain conditions are met to consider the Claimants' claims for direct and indirect age discrimination. Mr Elliott and other retired senior managers of the Respondent ("the Claimants") are pensioner members of the Ford Pension Scheme for Senior Staff ("FPSSS"). They claim that the failure by the Respondent to pay them lump sums which were paid to current employees at the time of a change from a Retail Prices Index ("RPI") to a Consumer Prices Index ("CPI") basis for calculating increases in their pension entitlement was an act of direct or indirect age discrimination. In paragraph 5.2 of their ET1s, each alleges age discrimination as "the employees who were offered such pay adjustments are younger than the Claimant and other multiple Claimants". As before the EJ, Mr Ian Scott appeared for the Respondent and Ms Andrea Chute for the Claimants.

1. A Preliminary Hearing was held on 3 April 2014 by Employment Judge Warren. No evidence was heard. The hearing became, in effect, a hearing for directions. EJ Warren summarised background facts, identified issues and ordered a Preliminary Hearing of the jurisdiction issue. The question on jurisdiction to be determined at a Preliminary Hearing was stated by EJ Warren to be:

"Does the Tribunal have jurisdiction to hear a claim by the Claimants (who are pensioners and deferred members of the Respondent's occupational pension scheme) under section 39 of the Equality Act 2010?"

As at the hearing before EJ Warren, EJ Hallen heard no oral evidence and made no findings of fact. He noted the background section of the Judgment of EJ Warren and reiterated that background summary the material parts of which are set out below.

1. Pursuant to their contracts of employment, many employees of the Respondent are entitled to membership of occupational pension schemes. The schemes contain a provision for inflation indexing of pension in payment in accordance with that provided by the criteria determined by the Secretary of State under the Pensions Act 1993. Until 1 January 2011 the pension increase provision was determined by reference to the RPI. On 1 January 2011 the Secretary of State changed the basis of the statutory increase from the RPI to the CPI. A CPI increase is generally lower than an RPI increase.

1. In February or March 2011 a decision was taken by the trustees of the Respondent's pension fund to implement the CPI basis for increasing benefits payable under the FPSSS. There were objections to this change. Similar changes were made to the pension provision of employees who were not senior staff. Those hourly paid employees were balloted on and some took industrial action. Their trade union representatives withdrew co-operation with the Respondent.

1. EJ Warren stated:

"9. As a consequence of the threat of industrial action, the Respondent agreed to make certain lump sum payments to existing employees. These are payments made by the Respondent, not the pension fund.

10. No such payments were made to former employees who were retired and in receipt of their pension, save that as a result of industrial pressure the payments to certain pensioners were increased by 0.4% to 2.1%.

11. The Claimants' complaint is that not making similar arrangements to recompense them for the likely reduced annual increases in their pension payments amounts to direct and indirect age discrimination."

1. The Respondent contends that the ET does not have jurisdiction under the EqA section 108 to hear the claims. EJ Warren considered that it would be appropriate to hold a Preliminary Hearing to determine that issue. In a Decision sent to the parties on 27 May 2014 EJ Warren set out a list of issues which had been agreed between the parties. The first section was headed JURISDICTION. Paragraph 1.1 recorded that the Claimants asserted and the Respondent denied that the ET had jurisdiction under the EqA section 108 to hear the claims. The list of issues then continued under the headings of DIRECT AGE DISCRIMINATION, INDIRECT AGE DISCRIMINATION and REMEDY.

1. The issues identified under DIRECT DISCRIMINATION and INDIRECT DISCRIMINATION included, with non material differences between the two:

"2.1. …

(b) The comparators relied upon by the Claimants are the Respondent's management employees in Leadership Level 6 and above who were members of the Respondent's pension fund, but still in work, on 29 July 2011.

(c) Does the comparator group form part of the Claimants' pleaded claim?

(d) Did the treatment amount to less favourable treatment of each Claimant?

(e) If so, was the reason for the less favourable treatment age?

(f) If so, is there any material difference between the circumstances relating to the comparators' cases and the Claimant's case within the meaning of section 23(1) of the Equality Act 2010?

2.2. If a Claimant was treated less favourably as outlined in 2.1 above, was the Respondent's treatment of that Claimant objectively justified? In particular:

(a) What was the Respondent's aim(s) in applying this treatment? The Respondent asserts that lump sum payments were made to employees to restore and maintain good industrial relations and motivate and incentivise employees, ensuring the continued operation of the Respondent's business and avoiding industrial action.

(b) Was that aim(s) legitimate?

(c) If so, was the Respondent's treatment of each Claimant a proportionate means of achieving that aim(s)?"

1. "13 Direct discrimination

(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.

…

*

19 Indirect discrimination*

(1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of B's.

(2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of B's if—

(a) A applies, or would apply, it to persons with whom B does not share the characteristic,

(b) it puts, or would put, persons with whom B shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it,

(c) it puts, or would put, B at that disadvantage, and

(d) A cannot show it to be a proportionate means of achieving a legitimate aim.

(3) The relevant protected characteristics are -

age;

…

23(1) On a comparison of cases for the purposes of Section 13, 14, or 19 there must be no material difference between the circumstances relating to each case.

…

39(2) An employer (A) must not discriminate against an employee of A's (B) -

(d) by subjecting B to any other detriment.

…

*

108 Relationships that have ended*

(1) A person (A) must not discriminate against another (B) if—

(a) the discrimination arises out of and is closely connected to a relationship which used to exist between them, and

(b) conduct of a description constituting the discrimination would, if it occurred during the relationship, contravene this Act."

1. At paragraph 11 the EJ set out the two statutory requirements in section 108(1)(a) and (b) which had to be satisfied for a claim to be brought by a former employee under the EqA sections 13 and 19. Having referred to the outline facts taken from EJ Warren's background summary, the EJ considered it material that at the time at which the dispute between the Respondent and the unions over the move from RPI to CPI for pension increase arose, the parties were not just concerned with current employees but "were also dealing with those employees that had retired and were in receipt of pensions." The EJ mentioned in particular three documents one of which was produced by the union representing hourly paid employees which stated:

"Unite has claimed the move will bring significant financial loss to employees, including those currently employed by Ford and a further 30,000 ex employees who draw a company pension."

1. The EJ set out in paragraph 12 the reasoning for his decision that the ET had jurisdiction to hear the Claimants' claims. He held:

"In relation to the documentation referred to above, the Tribunal was of the view that there was a close nexus and connection between the Claimant's relationship as former employees and current pensioners that brought them within the protection of Section 108 which was sufficient to allow them to argue either direct or indirect age discrimination. This was evidenced by the documents referred to above. The Tribunal heard no direct evidence to establish whether either of these claims was made out and this was a matter for the substantive hearing to determine as appropriate."

The EJ held at paragraph 13 that the question of whether the making of lump sum payments to current employees in the circumstances could not be determined without hearing oral evidence. Further the EJ held that the Claimants should be allowed to test at a substantive hearing on evidence whether the payments made to current employees were greater than the increases of between 0.4 and 2.0 per cent was either direct or indirect discrimination.

1. In paragraph 13 the EJ stated that he was satisfied that there was no restriction in section 108 that prevented pensioners or deferred members from bringing claims for direct or indirect discrimination nor was there a prescription that if they were to do so they must do so under a particular section of the Act.

1. Accordingly EJ Hallen held that the ET had jurisdiction under the EqA section 108 to consider the Claimants' claims for direct and/or indirect age discrimination.

1. Mr Ian Scott on behalf of the Respondent submitted that in considering the EqA section 108(a) the test which the EJ should have applied but did not was to ask whether the alleged age discrimination arose out of and was closely connected with the Claimants' former employment relationship with the Respondent. Counsel contended that the EJ failed to consider whether the alleged discrimination, the failure to pay to pensioners the lump sums awarded to current employees, can be said to arise out of and be closely connected to that former employment relationship. It is not whether there is a "nexus and connection" between the Claimants' former position as employees and their position as pensioners.

1. Further, it was submitted that the EJ failed to consider and/or make findings as to the application of the EqA section 108(1)(b). The EJ did not consider or make findings on whether conduct of a description alleged to constitute discrimination would, if it had occurred during the relationship, contravene the EqA.

1. It was contended that the series of lump sum payments in respect of which the Claimants claim age discrimination were made to all current employees of the Respondent to avoid any further disruption to the Respondent's business. The payments were conditional upon a return to normal working. It was submitted that the conduct complained of did not arise from the Claimants' previous employment with the Respondent nor was it closely connected with it. It was said that the payments had no relationship or common link with the Claimants' previous employment relationship with the Respondent. The lump sum payments were made to all employees of the Respondent whether or not they were members of the Respondent's occupational pension schemes. They were made to avoid disruption to their business by their employees. This was a condition of payment. The lump sum payments were not pensionable and they did not give rise to any change in the rules of the pension scheme. It was said if there had been such a change then the Claimants' complaints would have been within the scope of section 108(1)(a). Further, it is said that there would have been no discrimination in making the payments if they had been made during the Claimants' employment as payments were made to all employees regardless of their age.

1. Mr Scott further contended that the fact that payment of the lump sums to current employees was made by the Respondent and to pensioners by the pension fund was a material distinguishing feature.

1. It was contended that in any event the decision of EJ Hallen was not Meek compliant (Meek v City of Birmingham Council [1987] IRLR 250). Mr Scott submitted that the reasons given in his Judgment do not allow the Respondent to understand why and how the EJ reached the conclusion he did that the Claimants' claims of age discrimination could be pursued under section 108.

1. Ms Chute, counsel for the Claimants, submitted in her skeleton argument that it was apparent from paragraph 12 of his Judgment that the EJ had in mind that he needed to be satisfied "that both Claimant and Respondent had, in the past, a closely connected relationship, from which discrimination could arise." The EJ decided that it could but rightly did not decide that it had.

1. Ms Chute pointed out that the Claimants alleged that the answer to the question of why the Respondent paid current employees' lump sums and pensioners the uplift to their pension increase for 2011 was because of the move from RPI to CPI. Counsel said that not all material facts were agreed. It was not agreed that the lump sum payments were made to the management employees to ensure a cessation of industrial action. They had not been balloted and did not take industrial action.

1. Counsel accepted that the EJ was bound to apply the tests in both (a) and (b) of the EqA section 108(1). She pointed out that EJ Hallen set out both parts of section 108(1) in paragraph 11 of the Judgment and therefore had them both well in mind. It was submitted that the reasoning of the EJ in paragraphs 12 and 13 of his Judgment read against the background in paragraphs 2 and 8 to 10, showed that the EJ did consider section 108(1)(b) as well as section 108(1)(a) and, applying the latter, whether, the payment of the lump sums to their employees but not the Claimants would have amounted to discrimination contrary to the EqA if it had occurred during the pensioners' employment. Ms Chute contended that when one looks at the Judgment as a whole it is apparent that the EJ considered section 108(b) as well as section 108(a) and decided that the claims fell within it.

1. The EqA section 108(1) provides that a person whose employment has come to an end may bring a claim of discrimination if both:

a. The discrimination arises out of and is closely connected to a relationship which used to exist between them; and

b. Conduct of a description constituting the discrimination would, if it occurred during the relationship, contravene the EqA.

1. To fall within the scope of the EqA section 108(1)(a), the discrimination of which complaint is made in the sphere of employment must arise from or be closely connected to a previous employment relationship between the Claimant and the Respondent. To fall within section 108(1)(b), the discrimination must be of a nature which would be contrary to the provisions of the EqA if it occurred during the Claimant's employment. The scope of the two provisions is different. Both must be satisfied if a claim is to fall within section 108(1). To constitute a complaint which an Employment Tribunal has jurisdiction under section 108(1) to determine the allegations made by a former employee must, if they were to be established, satisfy both provisions.

1. EJ Hallen "was of the view" that the "close nexus and connection between the Claimant's relationship as former employees and current pensioners" brought them within the scope of section 108.

1. Mr Scott rightly said that in deciding the issue of jurisdiction the ET must consider the Claimants' case at its highest. He also rightly accepted that if former employees have a contractual entitlement to the same benefit as current employees, for example membership of a social club or a health insurance scheme, section 108(1)(a) may be satisfied if an addition to that benefit is given to current employees but not to former employees and the reason for the difference is age or is indirectly discriminatory. We do not accept that there is necessarily a distinction to be drawn between those examples and this case. It could be said that the ongoing pension benefits of the Claimants and of current employees are the same. They both have entitlements to the same pension increases under the scheme: in the case of employees to prospective pension payments and in the case of pensioners to pensions in payment. In our judgment if the lump sum payments to active members of the FPSSS were made in respect of the change from RPI to CPI and if it is argued that pensioners were given a smaller sum for the same reason, such an allegation could be said to be discrimination arising out of and closely connected to the Claimants' former employment.

1. At paragraph 8 EJ Hallen referred to documents from the time of the industrial action over the move from RPI to CPI and noted that the Respondent and the trade unions negotiating on behalf of employees were also dealing with pensioners. If the alleged reason for the payments to employees and pensioners was not materially different but the sums paid were, it could be said that the discrimination arose out of and was closely connected to a relationship which used to exist between the Claimants and the Respondent within the meaning of section 108(1)(a). However the EJ did not decide that the claims fell within section 108 on this basis. At paragraph 12 he made that decision on a different basis, that there was a close nexus and connection between the Claimants' relationship as former employees and as current pensioners. As Mr Scott observed, the Claimants would not have been members of the Respondent's pension scheme if they had not been employees.

1. We accept the contention of Mr Scott that the question to be considered under section 108(1)(a) is not, as the EJ directed himself, whether there was a close connection between the Claimants' relationship with the Respondent as former employees and that as current pensioners in which capacity they bring their claims. The question is whether the discrimination alleged, in this case the difference between the lump sum payments made to active employee members of the FPSSS, and the additional pension increase made in 2011 to pensioner members, arose out of and was closely connected to the employment relationship which used to exist between them and the Respondent. No Respondents' Notice was served on behalf of the Claimants seeking to uphold the Decision elaborating on what EJ Hallen had "noted" in paragraph 8 nor was argument developed orally to that effect.

1. We accept the contention of Mr Scott that the EJ did not consider or make a finding as to whether the allegations of discrimination in the ET1s are of conduct of a description which would, if it occurred during the relationship, contravene the EqA so as to bring the claims within section 108(1)(b). We reject the submission on behalf of the Claimants that the EJ must have considered section 108(1)(b) as he set out both section 108(1)(a) and (b) in paragraph 11. There is no other indication that section 108(1)(b) was considered by the EJ.

1. A complaint based on paying one employee £x and another older employee £x-5 would not constitute an allegation of discrimination contrary to the EqA if there were material differences between the circumstances relating to each case. Applying section 23(1), discrimination only contravenes the EqA if there is no material difference between the Claimant's case and that of the comparator. To fall within section 108(1)(b) the discrimination alleged must, if it took place whilst the Claimant was in employment, be such as to contravene the EqA. In our judgment the EJ failed to consider or make findings on whether the allegations made by them were such as to support a contention that there was no material difference between the cases of the Claimants and their comparators. Whilst the EJ recorded in paragraph 8 that the Respondent contended that there were material differences between the cases of the Claimants and their comparators, he did not decide whether the allegations in the ET1s, if established, showed that there were no such material differences.

1. No evidence was heard at the Preliminary Hearing. The EJ was not required to decide whether the Claimants' claims were established. However, the EJ erred in failing to consider and decide whether the allegations in the ET1s, if established, would show that the circumstances in which the payments to the Claimants and to their comparators were not materially different so as to found a claim of discrimination contrary to the EqA. Such a decision is necessary to determining whether the claims fall within section 108(1)(b). We reject the contention by Ms Chute that the EJ must have considered and reached a decision on section 108(1)(b). If he did, the EJ gave no reasons as to why the allegations in the ET1s would, if they had been of conduct when the Claimants were employees, have constituted discrimination contrary to the EqA when a necessary element of such conduct is that there is no material difference between the circumstances relating to the case of a Claimant and their comparator.

1. The EJ should have decided whether the complaints in the ET1s fell within the EqA section 108(1)(a) and 108(1)(b). In our judgment the reason for EJ Hallen's decision that there was jurisdiction to hear the claims given in paragraph 12 of his Judgment was erroneous. The question under section 108(1)(a) is not whether there was a close connection between the Claimants' relationship with the Respondent as former employees and that as pensioners but whether the discrimination arises out of and is closely connected to a relationship which used to exist between them. Further, there appears to have been no consideration of whether the allegations in the ET1s brought the claims within section 108(1)(b). Such claims must be of conduct which would have been contrary to the EqA if carried out whilst the Claimant was in employment. It is only discrimination where there is no material difference between the circumstances of Claimants' cases and those of their comparators which is potentially in breach of the EqA. The EJ did not consider and decide whether the allegations in the ET1s satisfied this requirement for a claim to fall within section 108(1)(b), or if he did, gave no reasons for such a decision.

1. The appeal is allowed and the decision that the Employment Tribunal has jurisdiction to hear the claims under the Equality Act 2010 section 108(1) is set aside.

1. EJ Warren referred at paragraph 22 of his Judgment to "the jurisdictional issue arising out of the interpretation of section 108". On the basis of the Judgment of EJ Hallen and the arguments before us it was not evident that the jurisdiction issue was to be resolved by statutory interpretation. However a Preliminary Hearing on jurisdiction must be held as the Order of EJ Warren remains in place. We urge the parties to agree the issues to be decided at such a hearing and to agree or seek from the Employment Tribunal directions for such a hearing.

1. The claims are remitted to a different Employment Judge, sitting with members, to determine whether the Employment Tribunal has jurisdiction under the Equality Act 2010 to hear the claims.

1. The parties were made aware that there would be a delay in the giving of this Judgment. They are thanked for their patience.