Smith v Department for Business & Skills UKEAT/0308/12/RN; Budgen v Ministry of Justice UKEAT/0309/12/RN
Appeal against a decision that the claimants, who were bringing age discrimination claims, were in materially different circumstances to the comparators and so the claim should be dismissed. Appeal allowed and the objectivity issue was remitted to the same Tribunal for determination.
The claimant's claims were for direct age discrimination. They challenged a specific aspect of the Civil Service Compensation Scheme that came into force in December 2010. Employees aged 60 or over, as were the claimants when they took voluntary exit or redundancy or were eligible to do so, had their severance pay capped at 6 months pay. Employees under the age of 60 were not subject to the same cap, and those employees under the age of 58 years and 9 months were eligible to receive up to 21 months severance pay, depending on their length of service (although their pension would be actuarially reduced because of the extra years they would be drawing it). This hearing was only to decide a preliminary point of whether the claimants were in the same or not materially different circumstances to their comparators, under section 23 of the Equality Act 2010 - the second issue, which would only be necessary to consider if the first was answered in the negative, of whether the rules of the scheme were a proportionate means of achieving a legitimate aim, was not addressed. The ET decided that they were in materially different circumstances to the comparators and dismissed the claim. The claimants appealed.
The EAT allowed the appeal. They did not accept the argument for the respondent that age was incidental and the key to the payment of increased compensation was not age, but liability to reduction in pension. Age was the real requirement. It was of no relevance that in other civil service pension schemes there were different retirement ages. The claimants were entitled to compare themselves to others in the same scheme. They were entitled to ask 'why am I getting less in compensation than my younger colleague?', and to assert that the answer is 'because he is younger'. Any explanation that such a person was getting a lesser sum in compensation because he was getting more in his pension was irrelevant at this stage. The matter was remitted to the same ET for determination of the question of whether or not the treatment was objectively justified.
Appeal No. UKEAT/0308/12/RN
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8AE
At the Tribunal
On 17 September 2013
Judgment handed down on 23 January 2014
THE HONOURABLE LADY STACEY
MR D BLEIMAN
MR T M HAYWOOD
MR A SMITH (APPELLANT)
(1) MR K BUDGEN
(2) MINISTRY OF JUSTICE AND OTHERS (RESPONDENTS)
MR K BUDGEN (APPELLANT)
(1) MR A SMITH
(2) MINISTRY OF JUSTICE AND OTHERS (RESPONDENTS)
Transcript of Proceedings
For Mr A Smith
MR S CRAMSIE (of Counsel)
Direct Public Access Scheme
For Mr K Budgen
MR D McILROY (of Counsel)
DAS Law Solicitors Ltd
For the Ministry of Justice and Others
MS I SIMLER (One of Her Majesty's Counsel)
MS M WHEELER (of Counsel)
Treasury Solicitor's Department
One Kemble Street
The Claimants were employed by the Respondent as civil servants. They were members of the Principal Civil Service Pension Scheme. The Respondent operated a compensation scheme whereby a lump sum was payable in respect of loss of office to the Claimants, who were leaving their posts on a voluntary basis. The amount payable depended on whether the Claimants were eligible to take a pension earned during employment with Respondent as at the date of termination, with no actuarial reduction. If so, the sum payable was 6 months salary. Other employees, who left before being entitled to pension immediately with no reduction, would be paid a lump sum equivalent to a maximum of 21 months salary, depending on the length of time between termination and their entitlement to full pension. The Claimants argued that entitlement to pension was dependent on their having reached the age of 60, which both had. They compared themselves to other employees, members of the same pension scheme, who were leaving, and who were younger and so were receiving higher compensation payments. The Employment Tribunal held a Pre Hearing Review on the preliminary point of whether the Claimants were in the same or not materially different circumstances to the comparators. It decided that they were in materially different circumstances and dismissed the claim. Held: the ET erred in law. The circumstances of Claimants and comparators were not materially different. The difference between them was age, which is the protected characteristic. It cannot found the difference between Claimant and comparator. Case remitted to the same Tribunal to proceed to the second question of objective justification.**THE HONOURABLE LADY STACEY****Introduction**
- This case is about age discrimination. We will refer to the parties as Claimants and Respondent. The Claimants are Mr Keith Budgen and Mr Allan Smith. The Respondents are respectively the Ministry of Justice and the Department for Business Innovation and Skills. Both Claimants were civil servants and the claims are in principle the same.
- The Claimants in these proceedings appeal against a judgment of an Employment Tribunal (ET), chaired by Judge Sigsworth, at London Central, sent to the parties with reasons on 13 March 2012. The Claimants represented themselves at the ET. Before this Tribunal they were represented by Mr McIlroy and Mr Cramsie respectively, both of counsel. The Respondent was represented at the ET by Ms Moore, of counsel and before us by Ms Simler QC and Ms Wheeler, both of counsel.
- Shortly after the hearing the Court of Appeal gave judgment in the case of [Lockwood v Department of Work and Pensions and Cabinet Office ]()** EWCA Civ 1195. The parties sought permission to make written submissions in light of it, which was granted. We have included the submissions received in our deliberations.
- The Claimants claimed that they had been discriminated against on grounds of age. The underlying facts were agreed. The matter arose in light of the terms of the Civil Service Compensation Scheme 1994, as amended. The Claimants as members of the Principal Civil Service Pension Scheme were and are entitled to draw a pension at 60 years of age. A compensation scheme was devised in respect of loss of office by persons leaving employment voluntarily. Under the compensation scheme, persons accepting a voluntary exit package are entitled to a lump sum in compensation. If the person is over 60 years of age, and therefore eligible to draw a full pension under the pension scheme, the maximum payable is 6 months salary. In respect of a person under 60 years of age, and therefore not eligible to draw a full pension, the maximum is the lesser of twenty one months pay or six months pay plus a sum calculated by taking in to account the number of months between the date of leaving and the date of reaching 60 years of age. In the case of a person leaving before reaching 60, (subject to his having reached the age of 50) any pension he had earned could be paid, but as he would be expected to draw his pension for a longer time due to his age at the start of his pension, the sum payable each year would be actuarially reduced. In the case of a person to whom an actuarial reduction was applied, the Respondent could, at its discretion, use a part or all of the severance pay to buy further pension provision, thereby buying out the actuarial reduction. The Respondent could top up the sum paid if the severance pay was insufficient to buy out the actuarial reduction.
- The claim was of direct discrimination on grounds of age. It was decided at a Case Management Discussion (CMD) that the case raised two issues. The first is whether there is a material difference, for the purposes of the Equality Act 2010, between a person who has reached pension age and a person who has not. The second question arises if the first is answered in the negative, and is whether the rules of the scheme are a proportionate means of achieving a legitimate aim. It was decided that the first question would be dealt with at a pre hearing review (PHR).
- The essential issue as defined by the Employment Tribunal was as follows:-
"1. The Claimant's claims are for direct age discrimination. They challenge a specific aspect of the Civil Service Compensation Scheme that came into force in December 2010. Employees aged 60 or over, as were the Claimants when they took voluntary exit or redundancy or were eligible to do so, had their severance pay capped at 6 months pay. Employees under the age of 60 were not subject to the same cap, and those employees under the age of 58 years and 9 months were eligible to receive up to 21 months severance pay, depending on their length of service.
2. The case has been listed today on the preliminary point of whether the Claimants were in the same or not materially different circumstances to their comparators, under section 23 of the Equality Act 2010. The case has not been listed to determine the issue of objective justification."**The judgment**
- The Employment Tribunal considered the pension and compensation schemes and at paragraph 6 made the following finding, defining the voluntary departure maximum (VDM) as drafted by the Respondent and not disagreed by the Claimants:-
(i) if a person is dismissed before reaching Pension Age he is (subject to (iii) below) entitled to a payment of a lump sum compensation of 21 months pay;
(ii) if a person is dismissed once he has reached Pension Age he is entitled to a lump sum compensation of 6 months pay
(iii) if a person is dismissed shortly before reaching Pension Age he is entitled to lump sum compensation of an amount tapering from 21 months pay to 6 months pay.
- The ET directed itself that s23 of the Equality Act 2010 provides that on a comparison of cases for the purpose of direct discrimination there must be no material difference between the circumstances relating to each case. They directed themselves that the comparison had to be on a 'like for like basis' and that a material difference is one that is significant and more than merely trivial.
- The ET directed itself that case law relevant to the claim includes Barry v Midland Bank Plc  ICR 859, Rhodes v Secretary of State for Justice and the Cabinet Office London Central Employment Tribunal, 26 May 2011, Lindorfer v Council of the European Union (Staff Regulations)  EU ECJ C-227/04, andIngeniorforeningen i Danmark (acting on behalf of Ole Andersen) v Region Syddanmark  1 CMLR35.
- The ET decided that the Claimants were in a materially different situation from any comparator of any age between 50 years and 58 years 9 months. They found that the Claimants were entitled to receive full pension so far as earned by them. In contrast the comparators were entitled to receive pension so far as earned by them, without actuarial reduction if and only if they made a sacrifice of some or all of the lump sum of up to 21 months pay. They held under the authority of the case of Barry that they were required, in assessing if there was a material difference, to look at the context and purpose of the enhanced payments to those under 60. They found that the context and purpose and aim of the lump sum compensation was to provide a financial cushion to employees who had lost their jobs. They concluded that there is a material difference between the Claimants and the comparators. The ET said at paragraph 19:
"1. So far as Mr Budgen and Mr Smith are concerned, we conclude that they are in a different situation to the 56 year old comparator or indeed a comparator of any age between 50 and 58 years 9 months. Mr Budgen and Mr Smith were entitled to and did receive full pension, insofar as they had earned it, and they also received 6 months severance pay. Their comparators were only entitled to receive pension with no actuarial reduction if they made a sacrifice of some or all of the lump sum up to 21 moths. As was established in Barry, we have to look at the context and purpose of enhanced payments to those under the age of 60, in order to determine if there is a material difference in treatment. That context and purpose and aim of the lump sum compensation is to provide a financial cushion to employees who have lost their jobs prematurely (because of redundancy or reorganisation) until alternative employment is obtained or as bridge into retirement, (which may be earlier than planned).
2. We also comment that a younger person is likely to have to carry on working and find another job, and therefore needs a greater severance payment to take them up to the age of 60 and retirement age; the so called cushion argument. Therefore, someone who is say, 50 and who chooses not to take their pension because of the financial sacrifice this would entail, may get up to 21 months pay which will assist them until they obtain further employment. For someone who is say 57 years old, the greater severance pay may be required as a bridge to retirement and receipt of full pension. The Claimants on the other hand, are entitled to immediate full pension, to the extent they have earned it, and require no bridge to retirement. Further, they can choose to work or not as they wish, but do not need that cushion to further employment in the same way as does the younger comparator.
4. We therefore conclude that there is a material difference – a significant and not a trivial difference – between the position of the Claimants and that of their comparators in the context of the claims in this case. The cases are not like for like. The tribunal therefore has no jurisdiction to hear the claims and they are dismissed."**Claimant's case**
- Mr McIlroy of counsel appeared for Mr Budgen. He submitted that at paragraph 19(1) the ET found that there was a material difference between the Claimant and the comparators because the comparators were not entitled to full pension. He submitted that the rules of the scheme, which were accurately set out by the ET, had not been fully analysed. He argued that, in addition to pension entitlement, the pension scheme is a defined benefit scheme. Those over 60 get full pension, while those over 50 can get a pension in which there is an actuarial reduction. There is an option for those over 50 but under 60 where they can buy out the actuarial reduction, funding it from the lump sum and in certain cases having it partly funded by the employer.
- Mr McIlroy's submissions had two limbs as follows: (1) a material difference founded on age is impermissible; and (2) if the ET was entitled to find that a difference between Claimants and comparators existed, the difference is so small that it does not amount to a material difference. He referred to the case of James v Eastleigh Borough Council  IRLR 572, which dealt with the provision of benefits by the local authority at pension age, at a time when there were different pension ages for men and women and when there was a fixed retirement age. He referred to the speech of Lord Bridge at page 563 and at page 566E. As the retirement age for women was 60 and for men 65, benefits such as free entry to council amenities available to persons of retirement age, were being made available in a fashion which was discriminatory. His Lordship found the test to be discriminatory. Mr McIlroy relied on the following passage:
"The expression 'pensionable age' is no more than a convenient shorthand expression which refers to the age of 60 in a woman and to the age of 65 in a man. In considering whether there has been discrimination against a man 'on the ground of his sex' it cannot possibly make any difference whether the alleged discriminator uses the shorthand expression or spells out its full meaning."
- Counsel argued that in the present case the words "pensionable age" are used as shorthand for being 60. While it might be argued that the essential requirement was that a person be entitled to a full pension, that meant that they had to be at least 60 years of age. Thus age was the key to eligibility.
- Counsel referred to the case of Wakeman v Quick Corporation  IRLR 424, a discrimination on grounds of race claim. A Japanese company with premises in the UK employed Japanese people in the UK on secondment. They were paid more than the employees recruited and working in the UK, who were not on secondment. The Court of Appeal found that there was no discrimination on grounds of race because the secondees were paid according to their status as secondees, not according to their race. Thus a comparison with a person who was not a secondee was not a comparison with a person in circumstances not materially different. The case was an illustration of the court looking for the characteristic which governed the availability of the benefit. In that case it was not race; it was status as a secondee. In the present case it might be argued by the Respondent that the characteristic was eligibility for full pension; but that was inextricably linked to age, and was in fact a proxy for age.
- Counsel referred to the case of Ingeniøforeningen i Danmark (acting on behalf of Ole Andersen) v region Syddanmark  1 CMLR 35. This related to a scheme described by counsel as 'particularly convoluted' relating to people who joined a pension scheme before they were 50. If employment ended after they were 60, then they were entitled to a pension but no severance pay. A 63 year old employee sought a severance allowance, which was refused on the basis that he was entitled to draw a pension financed by his employer. The Court of Justice held that:
"Entitlement to an old age pension was subject to a minimum age requirement which in A's case was set under a collective agreement at 60 years. That provision was thus based on a criterion which was inextricably linked to the age of employees."
- Counsel argued that the import of the case was that one cannot use the protected characteristic – that is, age – as the factor which makes the claimant and the comparator different from each other. He referred to Advocate General Kokott's opinion at AG33/34 to the following effect:-
"On the face of it, such a distinction according to the existence or non existence of a redeemable pension entitlement indicates only an indirect difference in treatment, since, by referring to such a pension entitlement the provision …seems to be based on a neutral criterion only the practical effects of which are borne predominately by older workers.
However, that view, which was taken in particular by the Danish government and the Commission in this case, is too restrictive. It disregards the fact that direct discrimination may also occur where a difference in treatment is based on a criterion which appears to be neutral at first sight but is in reality inextricably linked to the ground for differentiation prohibited by the EU legislature."
- Counsel argued that that the present case is on all fours with this case.
- Counsel submitted that the case of Odar v Baxter Deutschland GmbH C-152/11 ECJ, was relevant. Mr Odar was entitled to severance pay based on a complex formula which included age, service and pay. If over 54, a tapering provision reduced compensation by the use of a formula related to the number of months between the current age and the earliest possible pension. Mr Odar was registered as 50 per cent disabled. For that reason his normal retirement age was reduced from 65 to 60. Counsel argued that this case is another illustration of the principle that the protected characteristic about which a complaint of discrimination is made cannot be used to establish a difference between claimant and comparator.
- Counsel referred to the case of Barry v Midland Bank PLC  ICR 859 on which he understood the Respondent to rely. The claimant had worked full-time and then had changed to part time work. She was made redundant when she was working part-time. Her redundancy pay was worked out on the basis of her part-time salary. She made a claim in respect of indirect discrimination on grounds of sex, and a claim for equal pay. Her claims were dismissed. The House of Lords held that there was no discrimination in that all employees were treated in the same way, as all of them had compensation calculated on the basis of the salary earned at the time of termination. It was held that it was necessary to consider the purpose of the scheme when deciding if there was differential treatment. The purpose was found to be the provision of support for lost income during the period immediately following redundancy. The employee needed to be cushioned against the loss of her part-time income.
- Turning to the case of [Lockwood v DWP]() UKEAT/0094/12, in his oral submissions before us Mr McIlroy argued that the EAT decision is based on a misreading of the case of Barry and in any event was *wrongly decided. In his written submissions following the decision of the Court of Appeal, he argued that it was now clear that the case had been wrongly decided. Lockwood* concerns a scheme whereby those under 35 years of age were paid smaller sums in compensation for loss of office than those over 35. Miss Lockwood was 26. Rimer LJ stated:-
"36. Ms Lockwood's age of 26 did not make the relevant circumstances of her case materially different from that of the comparator. Her case was that it was because of her age that she was being discriminated against. Just as a comparison between a black claimant and a white comparator is not invalidated because of their differences in race, so the comparison between the 26 year old Ms Lockwood and the 36 year old comparator was not invalidated either. On the contrary, the comparison was relevant valid and essential for the purposes of answering the question whether or not Ms Lockwood had suffered less favourable treatment the ground of her age.
37. Second, once the comparison was made there was only one answer to the question had she suffered such less favourable treatment, namely yes. That is because, upon leaving her employment, she was paid substantially less money than was or would be paid to someone whose circumstances, age apart, were identical. The ET however rejected this straightforward conclusion. It instead approached the case by bringing into account in its assessment of the relevant circumstances the fact that because Ms Lockwood was younger than the comparator and belonged to a generation whose members could adjust more easily and rapidly to the loss of jobs than their colleagues in their late thirties, her circumstances were materially different from those of her comparator.
38. Those considerations were, however, nothing more than features of being 26 rather than 36. …"
- Lewison LJ expressed his opinion thus:
"When she left her job Ms Lockwood received less money than a 36 year old would have received. Why? The answer is: because she was younger. The ET said that the statistics showed that someone like Ms Lockwood would be able to react more easily and rapidly to losing her job than a 36 year old. Why? The answer again is because she was younger. They also said that someone like Ms Lockwood would be less likely to have heavy financial responsibilities than a 36 year old. Why? The answer yet again is: because she was younger. Accordingly all the suggested reasons for concluding that Ms Lockwood did not suffer age discrimination turn out to be factors consequent on her age. They are therefore not legitimate differences for the purpose of deciding whether discrimination has taken place."
- Mr McIlroy relied on the case of Lockwood. He argued that the Court of Appeal decision made clear that where age was the protected characteristic, a difference which related only to age could not found a difference between claimant and comparator.
- Mr McIlroy addressed the case of Lindorfer v Council of European Union C-277/04P ECJ which relates to a civil servant transferred from civil service of the Government of Austria to that of the EU. The question was whether her pension transfer treatment was based on her sex. The Court answered that in the negative. In Attorney General Sharpston's opinion at paragraph 112.21 (page 20) the familiar principle that equal treatment, or prohibition of discrimination, requires that comparable situations must not be treated differently, and different situations must not be treated in the same way, unless such treatment is objectively justified, is set out. In the next paragraph there is reference to a two stage test, in which the first stage comprises deciding if situations are the same, or are different; the second stage is to consider, if need be, if such treatment as is found to exist can be objectively justified. In the next paragraph the AG observes that there may be some
"blurring between the assessment of characteristics which differentiate situations and the assessment of objective justification for differentiated treatment of otherwise comparable situations (or uniform treatment of otherwise different situations)."
- Mr McIlroy argued that in both Barry and Lindorfer the material difference found was not a proxy for, nor was it inextricably linked to, the protected characteristic.
- Mr McIlroy reminded us that it is absurd if there is no proper comparator, a proposition he extracted from the case of Spicer v Government of Spain  ICR 213. He then, in anticipation of the argument for the Respondent addressed the idea that a person immediately entitled to a non actuarially reduced pension could be said to be in a materially different situation from a person not immediately so entitled. He argued that any difference was not material. Both are entitled to a pension. Somebody who is, say, 56 when he retires will lose the chance to pay into his pension for longer, but Mr McIlroy argued that this is not sufficient to amount to a material difference. He referred to the case of Shamoon v Chief Constable of the Royal Ulster Constabulary  ICR337 and the case of [Hewage v Grampian Health Board]()  IRLR 870. He argued that the decision on whether circumstances of claimant and comparator were materially different was a matter of fact and degree.
- Counsel argued that there was no evidence for the findings made in paragraph 19(2) of the ET judgment. Ms Simler objected to any such argument on the basis that if the Claimant wished to make such an argument, he should have sought a review. We decided to hear Mr McIlroy's submission. The decision at the CMD was clear; the first question, that is whether there exist circumstances materially different, was what was to be decided and any question of objective justification was to be left over. We accepted that the context in which the scheme had been set up and operated was a legitimate consideration in that first question, as in any legal argument there will always be a need to consider context. It did look on the face of the judgment as though matters apparently related to objective justification had been considered. Mr McIlroy argued that the ET had collapsed the two stages; while context will always be relevant in legal decisions, the ET had relied too heavily on matters which were properly for the discussion of objective justification.
- Mr McIlroy turned to a further difference that he anticipated would be ascribed to the younger leavers. They could have a pension, if over 50, but would have the sum payable each year actuarially reduced. It would therefore be said that they had to sacrifice their lump sum in order to buy out the reduction. He submitted that it was not truly a sacrifice because the pension that is actuarially reduced is the same value as the one that is not; it is spread out over a longer period. He used an analogy of saying that the pension pot can be seen as quantity of jam; if it is spread over a larger piece of bread, then the jam is thinner. So if a pension pot is required to last for a longer number of years, it will have to be paid at a lesser amount each year.
- Mr Cramsie adopted Mr McIlroy's arguments. Very helpfully, while he had produced a skeleton argument, he did not repeat arguments which had just been made. He reminded us that the legal principle is that if the differences are inextricably linked to age, and that is the protected characteristic in question, then it cannot be relied on as the factor which makes a difference. Counsel argued that the matter was of importance, and the Claimants had represented themselves at the ET. It would be unfortunate if this decision, made when the Claimants were unrepresented, was not reconsidered. In his additional submissions on the case of Lockwood, he adopted the submissions of Mr McIlroy. He argued that the cases were strikingly similar and that the arguments rejected in Lockwood should also be rejected in this case.
- On behalf of the Respondent it was contended that the Claimants are entitled to immediate full pension, whereas the comparators are not. Thus the Claimants are not comparing like for like. The question whether situations are comparable is a question of fact and degree for the Tribunal, as set out by Lord Hope of Craighead in Hewage v Grampian Health Board. Counsel reminded us that it was agreed that this question would be dealt with at a PHR. The Claimants were unrepresented, but they agreed to that course of action. The EAT could interfere with the decision in the Tribunal below only if there was an error of law. In her submission no error of law had been identified. Mr McIlroy had argued that any difference between the Claimants and the comparators was not material. He was hinting at a perversity argument, but not going far enough. If the ET found there was a difference, the Claimants could not succeed in arguing that there was an error in law by arguing that the difference was insufficient; it required to be argued that the ET had acted perversely by finding a difference.
- Counsel submitted that there was common ground between the parties that the question of whether something is comparable is a question of fact and degree. That must be assessed by reference to the purpose of the impugned conduct looked at in context, not in a vacuum. She cited the case of Barry as authority for that proposition. Counsel argued that three factors are relevant: (1) level of salary, (2) number of years' service, and (3) whether or not there is any entitlement to immediate full pension. The pension pot is substantially employer-financed, a consideration counsel argued was relevant. In the scheme there is a normal pension age, 60, which is the age at which an employee can take his pension without an actuarial reduction. There is also a minimum age for getting a pension at all, that is 50. It is common ground that the purpose of the compensation scheme was to provide a proportionate cushion against sudden cessation of salary. The cushion recognises years of service, and it is there to replace the income that is lost and so is linked to income. Thirdly, and importantly, those who do have access to non-actuarially reduced pensions, as a logical consequence, have less need for a replacement income because they have income of their own. In discussion about why a lump sum of 6 months salary was provided to those able to take full pension, counsel referred to the case of Loxley v BAE Systems Land Systems Ltd  ICR 1348. She submitted that a windfall benefit was not prohibited, and was a feature of many schemes. Counsel outlined the nature of the scheme and pension provision in the civil service. There are different schemes, namely Classic, Premium and NOUVOS. Each has differing provisions. There are about 600,000 workers in the civil service, and the general assumption is that pension will be about 50 per cent of leaving salary. There are two features that are different for early leavers, as follows: (1) pensions are actuarially reduced; and (2) the opportunity to pay into pension is reduced. Thus the person who leaves at for example age 55, has lower monthly pension payments due to actuarial reduction, and does not get salary between ages 55 and 60, nor does he have the opportunity to make pension contributions.
- Therefore the compensation scheme looks at the type and amount of compensation necessary. We asked counsel if these matters were relevant to the first question to be decided, that is the difference or lack of it in claimant and comparator, as opposed to the second stage at which objective justification would be considered. Counsel indicated that these matters were discussed at the ET. She referred to the case of Rhodes, a tribunal case which has resulted in a finding that:
"The conclusion of the Tribunal is that there is a fundamental difference between Mr Rhodes, who had reached pension age and was entitled to a full pension, and an employee who had not reached pension age and therefore was not entitled to his pension immediately without any actuarial reduction to reflect early payment. It is therefore the unanimous judgment of the Tribunal that a person who has reached pension age is not in materially the same circumstances as a person who has not reached pension age for the purposes of comparison."
- Counsel referred to the case because we were aware of it and asked her to do so, not because she regarded it as an authority. She referred to the inevitable blurring between the comparator argument and the justification argument as noted by AG Sharpston in the case of Lindorfer.
- Counsel addressed us on the point of the scheme. It exists to provide a cushion for those who are losing their employment. In considering the cushion necessary, one has to consider the replacement income which the early leaver will have. The actuarial reduction means that the monthly payment obtained on leaving is lower than those whose pensions are not actuarially reduced. The early leaver will have less replacement income in the months after dismissal to tide him over. There are two sources of employer-funded income interrelated by the scheme, being the pension and the compensation. The employer is balancing one against the other. An early leaver can sacrifice 21 months' lump sum to buy out the actuarial reduction. There may not be enough in the lump sum to do so. In that case, the employer will top it up. In the buyout cases, the employee will never be in as good a position as the 60-year-old who gets his full pension and the lump sum as well. Counsel emphasised that the scheme looked at what the early leaver needed to tide him over.
- Counsel's submission was that in order to answer the question of how much a person will be paid from the compensation scheme, it is necessary to identify the person's age, but that is just happenstance. Age is of no consequence. Counsel argued that the real question was whether a person was entitled to a full pension or not. In discussion we asked if it was not linked to age. Counsel agreed that it was linked to age, and made clear that she did not suggest otherwise. Her position was that the decisive criterion is not age, but is the point at which a person becomes entitled to a non-actuarially reduced pension. Counsel submitted that not all 60-year-olds are treated the same. In some schemes operated by the Civil Service, 65 is the normal retirement age. In such a scheme, a person leaving at 60, would get compensation of 21 months salary, because he would not get the non-actuarially reduced pension. Thus the criterion is not age, but eligibility for a non actuarially reduced pension.
- Counsel then turned to a separate argument, to the effect that it is dangerous to argue cases about age discrimination by looking at other types of discrimination. There is legislative recognition of age as different from sex and other types of protected characteristic. Age discrimination is capable of objective justification whereas other types of discrimination are not. Counsel referred to in section 61 and schedule 9 of the Equality Act 2010 and to the Equality Act (Age Exceptions for Pension Schemes) Order 2010 and the Equality Act (Age Exceptions for Pension Schemes) (Amendment) Order 2010. Her purpose in so doing was to show that Parliament has provided that differentiation by age in pension schemes is not unlawful. By section 61 (8) of the act it is provided:
"It is not a breach of a non-discrimination rule for the employer or the trustees or managers of the scheme to maintain or use in relation to the scheme rules, practices, actions or decisions relating to age which are of a description specified by order by a Minister of the Crown."
- Counsel then went on to show that under the regulations, rules which include age-related benefits may not be unlawful. We do not go into detail on counsel's submission because she did not suggest that there was any statutory provision which was directly relevant to the question before us.
- The submission was that this is not the same situation as in the case of James where entitlement was governed by age. In the present case, we should bear in mind two points: (1) a link to age does not make it unlawful; and (2) a provision relating to pension age in a pension scheme does not make it unlawful.
- Counsel submitted that the cases are fact specific and in the Barry case, it is clear that that one must look at context, and that it is a question of fact and degree. No assumptions had been made in this case about people not working if they did not wish to give up work; people could carry on working if they wanted to. However, it provides for a person who is leaving early to have replacement income.
- Dealing with the argument that the Tribunal was not entitled to make the findings it did at paragraph 19(2), counsel repeated her objection that if the Claimants wanted to argue that it could not, because there had been no evidence, then they should have done so by seeking Notes of Evidence and arguing that the Tribunal had made a finding that it was not entitled to do. They did not do that.
- Counsel argued that the arguments put by the Claimants failed to take account of the early leavers having an actuarial reduction. She submitted that the scheme cannot take account of everybody's individual circumstances and it had simply been decided that if there was no actuarial reduction, a person would get six months compensation. A young leaver would in fact get less than a person aged 60, because he has less chance to accrue pension and he also loses out in getting actual pay, as well as suffering an actuarial reduction in his pension payment. Therefore, the higher compensation payment and even the top-up do not put the younger person in a better position.
- Counsel addressed us on the cases which had been put in argument. The submission was that there had been no error in law made by the Tribunal. We mean no disrespect to counsel's argument if we do not rehearse it fully. We came to the view that the cases referred to particularly Barry were not concerned with the first question alone, as we are. In the case of Lockwood, counsel argued that there were differences other than age. She referred to the case of Wakeman at paragraphs 33, 58 and 61 and invited us to interpose it to the facts of the present case. Ms Simler relied on the Advocate General's remarks in the case of Lindorfer. *She argued that in the case of Danmark* it was recognised that receipt of a pension before normal retirement age made a person different from another who got his full pension at normal retirement age.
- In her written submission on the decision of the Court of Appeal in the case of Lockwood, counsel argued that the present case was not so clear-cut on the facts as in the case of Lockwood. She repeated her submission that age itself was of no consequence and that an appropriate comparator, a person of a different age, with an immediate entitlement to pension, would have been treated the same.
- Mr McIlroy replied by reminding us that the question is: are these Claimants entitled to compare themselves to a 56-year-old subject to the same rules? He argued that comparison had to be made with people in the same pension scheme; comparisons with people in different schemes had no relevance.
- He accepted that age is treated differently from other protected characteristics, in that it may be objectively justified. He reminded us that in such a situation the burden of proof lies on the Respondent. He argued that the careful placing of a burden of proof has a coach and horses drawn through it by the approach taken by counsel for the Respondent. He argued that Barry is concerned with a second stage, objective justification. He argued that Loxley is second-stage case, not a first stage material-difference case. If everything was drawn into the first point – that is, looking at whether there was a material difference – then the employer never had to shoulder the burden of proof.
- Mr Cramsie endorsed the submissions of Mr McIlroy and said that Loxley is a model of objective justification. Barry is not a vehicle for bringing all the objective justification into the first part of the exercise. Lord Nicholls was definitely minded not to go down that road. In this case one should look at the first decision alone. He said that it was incorrect to look at other pension ages and one should look only at people in the same scheme. It is clear that eligibility for pension is dependent on age; age is the key to getting the pension. He submitted that the case should be looked at in three stages: stage one, is there favourable treatment of younger people; stage two, what is the reason; and stage three, is there justification for it? In the case of James the statutory provisions were lawful but only for the purposes of fixing a pension age; it did not make it lawful to give concessionary benefits to younger people. He referred to Wakeman at paragraph 61 and said that we could replace race with age. The case of Danmark is concerned with justification, not the first question and is therefore irrelevant.
- The relevant provisions of the legislation are sections 5, 13 and 23(1) of the Equality Act 2010, which provide that age is a protected characteristic and that a person discriminates against another if because of a protected characteristic he treats that other less favourably than he treats or would treat others. For the purpose of direct discrimination, there must be no material difference between the circumstances relating to each case. The terms of the legislation are as follows:-
(1) In relation to the protected characteristic of age –
(a) a reference to a person who has a particular protected characteristic is a reference to a person of a particular age group;
(b) a reference to persons who shared a protected characteristic is a reference to persons of the same age group.
(2) A reference to an age group is a reference to a group of persons defined by reference to age, whether by reference to a particular age or to a range of ages.
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.
23. Comparison by reference to circumstances
(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."
- The legal principles to be applied appear to be as follow. All law must be looked at in context and we agree with the ET that it required to look at the scheme with which it was dealing. This was a PHR to decide the first question only. We were of the view that the appeal should succeed because we held that the ET had erred in law in deciding that the comparators were not valid. The ET had found them so by reference to the protected characteristic itself. The decision in the case of Lockwood came out before our decision was completed. We considered submissions made in light of that case. We found that the decision of the Court of Appeal fortified us in our view.
- In that case, the claimant was employed by DWP as an civil servant in 1999. She was 18. In 2007 her post was declared surplus. She applied to enter a voluntary redundancy scheme. As she was under 50 she was entitled to compensation calculated under a compensation scheme. Her employment ended when aged 26. The scheme gave one month's pay for each year and the lesser of one month's pay for each year after 5 years, or one month for each year's service after age 30 and one month for each year after age 35. The effect of the scheme was that her compensation would have been increased by over £17,000 had she been over 35. The Claimant made a claim of direct discrimination against her on grounds of age, in breach of the Employment Equality (Age) Regulations 2006.
- The relevant provisions are regulations 3 and 7:
"3. Discrimination on grounds of age.
(1) For the purposes of these regulations, a person ("A") discriminates against another person ("B") if-
(a) on grounds of B's age, A treats B less favourably than he treats or would treat other persons or
(b) A applies to B a provision, criterion or practice which he applies or would apply equally to persons not of the same age group as B, but-
(i) which puts or would put persons of the same age group as B at a particular disadvantage when compared to other persons, and
(ii) which puts B at that disadvantage
And A cannot show the treatment or as the case may be the provision criteria or practice to be a proportionate means of achieving a legitimate aim.
(2) A comparison of B's case with that of another person under paragraph (1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other.
(3) In this regulation-
(a) age group means a group of persons defined by reference to age whether by reference to a particular age or range of ages; and
(b) the reference in paragraph (1) (a) to B's age includes B's apparent age."
- The ET found that the scheme provided compensation for those leaving early due to reorganisation. All service was rewarded irrespective of age, though not always equally, and the trigger was age on departure. The unions had agreed this scheme, which it was accepted had to have clear rules. Evidence was led to the effect that younger people found it easier to get jobs, including statistical evidence.
- The ET concluded that in the language of regulation 3, the claimant had not been treated less favourably than any comparator over the age of 35 because her circumstances were materially different from his. There was therefore no discrimination against her on the grounds of age. It also decided it was objectively justified, had such a decision been needed.
- The EAT agreed that the circumstances of the claimant were materially different from employees over 35, so no question of objective justification arose. It held that the question was whether the difference between the claimant and comparator was material for the purpose in hand, and referred to dissent of Lord Nicholls in Barry and AG Sharpston in Lindorfer. It also held that the comparator question is one of fact and degree, based on Hewage v Grampian Health Board. The EAT also gave its view on objective justification, accepting that it was made out.
- Before the Court of Appeal counsel for the claimant argued that the ET was wrong on both counts, i.e. that the claimant did suffer less favourable treatment; and the ET had used irrelevant material and left out relevant material in looking at justification. He argued that the comparator had to be in similar circumstances except for the protected characteristic, which is age. The argument is quoted thus:
"The ET's error was to factor into the comparison exercise considerations that were either directly related to Ms Lockwood's age or were consequent upon, linked or connected to her age, then to treat those considerations as part of the 'relevant circumstances' for the regulation 3(2) comparison purposes. ….."
- It was accepted that consideration of evidence about younger employees may be relevant to the objective justification exercise, but were not relevant to the first question.
- For the Respondent it was argued that the case of Lindorfer was relevant for the opinion of AG Sharpston as follows:-
"21 The general principle of equal treatment or prohibition of discrimination has consistently been defined as requiring that comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified.
22. That definition implies a 2 stage analysis. First are the situations comparable so that they call for the same treatment or are they different so that their treatment should be differentiated? Second, if the two situations are not treated as indicated by the answer to the first question, is there objective justification for the divergence?
23 In practice, however there may be some blurring between the assessment of characteristics which differentiate situation and the assessment of objective justification for differentiated treatment of otherwise comparable situations (or for uniform treatment of otherwise different situations.)"
- Counsel also relied on the case of Barry. **
- The Court of Appeal was thus favoured with arguments very similar to those before us. The statutory provisions are equivalent. We are of the opinion that the present case cannot be distinguished from that of Lockwood, which is a binding authority. We respectfully agree with the reasoning in Lockwood. We agree that we have to make a comparison between the treatment received by the Claimant and that which was, or would have been, received by an actual or hypothetical comparator. For the purposes of the comparative exercise, the "relevant circumstances" must be "the same, or not materially different." In the case of Shamoon -v- Chief Constable of the Royal Ulster Constabulary Lord Scott of Foscote said at paragraph 110: –
"In summary, the comparator required for the purpose of the statutory definition of discrimination must be a comparator in the same position in all material respects as the victim save only that he, or she, is not a member of the protected class."
- We can put it no better than it is put at paragraph 34 by Rimer LJ in the following terms:
"In a race discrimination case, that means that if a black complainant is alleging discrimination at work on the ground of his race, the comparator will usually be a white person who is otherwise in the same, or a not materially different, position. It is obvious that once such a comparator has been identified, the tribunal cannot hold the "relevant circumstances" of the two cases to be different on the ground that the comparator is white and the complainant is black and so regard the comparison as invalid. The whole purpose of the comparison is as an aid to seeing whether or not the way in which the comparator was, or would have been, treated in the relevant circumstances supports the Claimant's allegation that he was subjected to less favourable treatment on the ground of the protected characteristic."
- Then at paragraphs 36 to 38 his Lordship found: –
"First, Ms Lockwood's age of 26 did not make the relevant circumstances of her case materially different from that of the comparator. Her case was that it was because of her age that she was being discriminated against. Just as a comparison between a black Claimant and a white comparator is not invalidated because of the difference in race, so the comparison between the 26 year old Ms Lockwood and 36 year old comparator was not invalidated either. On the contrary, the comparison was relevant, valid and essential for the purposes of answering the question of whether or not Ms Lockwood had suffered less favourable treatment of her age.
37. Second, once the comparison was made, there was only one answer to the question of whether she had suffered such less favourable treatment, namely yes. That is because, upon leaving her employment, she was paid substantially less money than was would be paid to someone whose circumstances, age apart, were identical. The ET, however, rejected this straightforward conclusion. It instead approached the case by bringing into account in its assessment of the relevant circumstances the fact that, because Ms Lockwood was younger than the comparator belonged to a generation whose members could adjust more easily and rapidly to the loss of jobs than their colleagues in the late thirties, her circumstances were materially different to those of the comparator.
38. Those considerations were, however, nothing more than features of being 26 rather than 36. The ET's reasoning appears to have been that, because a 26 year old leaver can be assumed not to need as much money as a 36 year old leaver, there was no less favourable treatment in giving the former a lower severance payment than the latter. Even if the premise was correct, the conclusion was self-evidently wrong. The premise, if right, may have provided grounds for justifying the disparity of the treatment between the different age groups. But that was a different question. There was, however, no question that Ms Lockwood suffered less favourable treatment than her comparator. The ET ought so to have found, and the EAT was wrong in failing to correct its error."
- At paragraph 57 Lewison LJ gave his judgment by asking questions of why it was that the claimant was going to get less money at the age of 26 than somebody at the age of 36 and found that the answer was because she was younger. He said: –
"Accordingly the suggested reasons for concluding that Ms Lockwood did not suffer age discrimination turn out to be factors consequent upon her age. They are, therefore, not legitimate differences for the purpose of deciding for the discrimination has taken place."
- In the present case we do not accept the argument for the Respondent that age is incidental and the key to the payment of increased compensation is not age, but liability to reduction in pension. We agree with both counsel for the Claimants that age is the real requirement. It is of no relevance that in other civil service pension schemes there are different retirement ages. The Claimants are entitled to compare themselves to others in the same scheme. They are entitled to ask 'why am I getting less in compensation than my younger colleague?', and to assert that the answer is 'because he is younger'. We are of the view that any explanation that such a person is getting a lesser sum in compensation because he is getting more in his pension is irrelevant at this stage. We are of course dealing only with the first stage and we have no view as to the success or otherwise of arguments that may be put at the second stage.
- We are therefore of the view that this appeal must succeed. We were asked by counsel should we allow the appeal, to remit to the ET for determination of the question of whether or not the treatment is objectively justified. We remit to the original Tribunal to do so. We can see no reason why the original Tribunal should not be entrusted to carry out that exercise, and it will have the advantage of having knowledge of the terms of the scheme.
Published: 27/01/2014 12:00