Employers can defend discrimination claims under the Equality Act if they can show that the treatment was required by law. In Heron v Sefton Metropolitan Borough Council (MBC), the Employment Appeal Tribunal (EAT) held that they cannot do so if the statutory scheme is, in fact, incorporated into the employee’s contract of employment.
Ms Heron started work for the Training and Enterprise Council in 1995 on terms that did not include the Civil Service Compensation Scheme (CSCS). In 2001 she transferred to another government department under the Transfer of Undertakings (Protection of Employment) Regulations 2006, when she joined the CSCS. Her employment was again transferred in April 2010 to Sefton MBC on very similar terms and conditions.
In July 2010 Sefton gave her notice of dismissal by reason of redundancy expiring on 30 September 2011 by which stage she had 10.5 reckonable years of service under the CSCS. As she was over 60, however, Sefton applied the cap in the CSCS rules to her pay which meant that she was only entitled to six months’ pay. This was half the amount she would have received, had she been under 60 at the date of dismissal.
Ms Heron complained of breach of contract and direct age discrimination. For its part, Sefton argued that its actions were not unlawful under paragraph 1(1) of schedule 22 to the 2010 Equality Act and that, as it was a proportionate means of achieving a legitimate aim, it was justified under section 13(2).
Paragraph 1(1) of schedule 22 states that it is not a breach of the age provisions in the Equality Act to do something pursuant to a requirement of an enactment (in other words, something required by law).
Section 13(2) states that employers can justify discrimination if they can show that the treatment is a proportionate means of achieving a legitimate aim.
The tribunal held that, as the CSCS was a statutory scheme, the Council had no discretion when calculating the lump sum to which she was entitled. It therefore did not constitute less favourable treatment under the Equality Act as it constituted “a requirement of an enactment”.
However, the EAT disagreed. It held that, once Ms Heron’s employment transferred over to Sefton, the terms of the scheme were incorporated into her contract. “From that moment onward, the terms became contractual not statutory so that even if the scheme must be interpreted as requiring Sefton to pay no more than six months pay, any requirement in relation to the Claimant was not a requirement of an enactment. It was a requirement of a contract which incorporated the terms of an enactment”.
The EAT also made short shrift of Sefton’s argument that it was justified in treating Ms Sefton differently as it was a proportionate means of achieving a legitimate aim. It found that the Council’s evidence was “sketchy” and nowhere near identifying, let alone justifying, the “legitimate aim” required for the defence of justification under section 13(2).
This case is a useful reminder that employers must properly identify and then justify their legitimate aim if they seek to defend discrimination claims on grounds of justification. Moreover, the EAT emphasised the general litigation point that “parties must deploy their best argument first time round and not seek a second bite at the cherry when their chosen argument fails”.