It is unlawful discrimination to apply a provision, criterion or practice which puts someone with a particular characteristic, such as age, at a particular disadvantage, unless the employer can justify it. In Fasano v Reckitt Benckiser Group and Reckitt Benchiser Health, the EAT held that it was not unlawful discrimination to change the rules of a long-term incentive plan so that only employees still in employment at the date of the change could benefit from it.
Basic facts
Mr Fasano, a senior employee at Reckitt Benckiser Health Ltd (RBH), which was wholly owned by Reckitt Benckiser Group plc (RBG), was eligible to participate in RBG’s long-term incentive plan (LTIP). In December 2016, he was awarded shares under LTIP but “vesting” (which would give him full rights to them) depended on how those share options performed from 2017-2019. Although Mr Fasano retired in June 2019, he remained entitled under the rules to a pro-rated amount of the 2017 award which was due to vest at the end of 2019.
However, when it became clear that none of the 2017 awards would vest at the end of 2019 because of poor performance of RBG’s shares, the company decided to change the criteria to incentivise senior staff to remain in employment. It, therefore, decided that 50 per cent of the award would vest, whatever the performance of the shares over the relevant period, as long as the employee was still working for the company on 18 September 2019.
This new term excluded Mr Fasano and he brought a claim for indirect age discrimination under section 19 of the Equality Act 2010 against both RBH and RBG.
Relevant law
Section 19 states that it is indirect discrimination for an employer to apply a provision, criterion, or practice (PCP) if it puts someone with a particular characteristic (such as age) “at a particular disadvantage” compared with someone without that characteristic and the employer cannot show that it is “a proportionate means of achieving a legitimate aim”.
Tribunal decision
The tribunal held that RBG, acting as an agent for RBH, had imposed the PCP of having to be employed on 18 September 2019 in order to benefit from the amended vesting terms.
Although Mr Fasano had been put “at a particular disadvantage” because of his age, it was a proportionate means of achieving the legitimate aim of retaining staff and was therefore justified.
Mr Fasano appealed against the justification point and the two companies appealed against the decision that RBG had acted as agent for RBH.
EAT decision
With regard to the PCP, the EAT disagreed with the tribunal, holding that it was not a means (let alone a proportionate means) of achieving the legitimate aim of retaining staff since the employees who were excluded by the PCP (such as Mr Fasano) had already left employment and could not, therefore, be retained. Instead, the real aim was to save money by avoiding having to make unnecessary payments to staff, such as Mr Fasano, who had already left. RBG could not rely on this as a justification as its case had not been based on a legitimate aim of not wanting to make unnecessary payments to staff who had already left.
However, the EAT then went on to hold that it was “fanciful” for the tribunal to have categorised RBG as RBH’s agent in relation to the LTIP, not least because RBH had no control over RBG’s actions or decisions in relation to the LTIP. Although Mr Fasano had an entitlement under his contract of employment to participate in the LTIP, that in itself did not make RBG the agent of RBH when it was making the changes to the LTIP rules and imposing the PCP. As such, Mr Fasano’s claim failed.