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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> The Lord Chancellor & Anor v McCloud & Ors [2018] EWCA Civ 2844 (20 December 2018) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2018/2844.html Cite as: [2019] WLR(D) 1, [2020] 1 All ER 304, [2019] IRLR 477, [2019] ICR 1489, [2019] Pens LR 12, [2018] EWCA Civ 2844 |
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ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HONOURABLE SIR ALAN WILKIE
Strand, London, WC2A 2LL |
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B e f o r e :
THE RIGHT HONOURABLE SIR COLIN RIMER
and
THE RIGHT HONOURABLE SIR PATRICK ELIAS
____________________
Case No: A2/2018/0635 |
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1) THE LORD CHANCELLOR AND SECRETARY OF STATE FOR JUSTICE 2) THE MINISTRY OF JUSTICE |
Appellants |
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-and- |
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1) V MCCLOUD & OTHERS 2) N MOSTYN & OTHERS |
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Case Nos. A2/2018/0636, A2/2018/0505 & A2/2018/0647 |
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THE SECRETARY OF STATE FOR THE HOME DEPARTMENT, THE WELSH MINISTERS & OTHERS |
Appellants |
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-and- |
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R SARGEANT & OTHERS |
Respondents and Cross Appellants |
____________________
Mr Andrew Short QC and Ms Naomi Ling (instructed by Leigh Day) for the McCloud Group of Respondents in the first appeal
Mr Michael Beloff QC and Mr Ben Jaffey QC (instructed by Bindmans LLP) for the Mostyn Group of Respondents in the first appeal
Mr John Cavanagh QC, Ms Katherine Apps and Mr Raymond Hill (instructed by the Government Legal Department) for the Appellants (the Secretary of State and the Welsh Ministers) in the second appeal
Mr Adrian Lynch QC and Mr Christopher Parkin (instructed by Bevan Brittan LLP) for the Appellants (the London Fire & Emergency Planning Authority and the three other Fire and Rescue Authorities) in the second appeal
Mr Andrew Short QC and Ms Lydia Seymour (instructed by Walkers Solicitors) for the Claimants/Cross Appellants in the second appeal
Hearing dates: 5th, 6th, 7th, 8th & 9th November 2018
____________________
Crown Copyright ©
See Order at bottom of this judgment.
This is a judgment of the court:
Introduction
Background to both schemes
"The Commission's expectation is that existing members who are currently in their 50s should, by and large, experience fairly limited change to the benefits which they would otherwise have expected to accrue by the time they reached their current scheme NPA [normal pension age]. This would particularly be the case if the final salary link is protected for past service, as the Commission recommends. This limitation of impact will also extend to people below age 50, proportionate to the length of time before they reach their NPA. Therefore, special protections for members over a certain age should not be necessary. Age discrimination legislation also means that it is not possible in practice to provide protection from change for members who are already above a certain age."
"The Government accepts Lord Hutton's recommendations as a basis for consultation of public service workers, trade unions and others, recognising that the position of the uniformed services would require particularly careful consideration. The Government will set out proposals in the Autumn that are affordable, sustainable and fair to both the public sector workforce and the tax payer."
"I believe it is right that we protect those public service workers who, as of 1st April 2012, have ten years or less to their pension age. It is my objective that these people see no change in when they can retire, or any decrease in the amount of pension they receive at their normal pension age …"
"In addition, I have listened to the argument that those closest to retirement should not have to face any change at all. That is the approach that has been taken over the years in relation to increases to the state pension age and I think it is fair to apply that here too. I can also announce that Scheme negotiations will be given the flexibility, outside the costs ceiling, to deliver."
"9. …I have accepted your argument that there should be transitional protection. It is my objective to ensure that those closest to retirement should not have any detriment either to when they can retire nor any decrease in the amount of pension they receive at their current Normal Pension Age. Over and above the costs ceiling, the Government's objective is to provide this protection to those who on 1st April 2012 are within ten years of Normal Pension Age. Schemes and Unions should discuss the fairest way of achieving this objective, and for providing some additional protection for those who are just over ten years from their Normal Pension Age. I would be willing to consider tapering of transitional protection over a further three to four years. Full account must be taken of equalities impacts and legislation, while ensuring that costs to the tax payer each and every year should not exceed the OBR forecast for public service pension costs – i.e. those forecasts made before the further reform set out in this letter …
11. … the Government's offer is conditional on reaching agreement. If agreement has not been reached, we may need to revisit our current proposals."
The Changes in the Provisions in Respect of Judicial Pensions
a) An annual pension of an amount equal to one fortieth of the Judge's final "pensionable pay" multiplied by the aggregate length of service in a qualifying judicial office to a maximum of twenty years.
b) A lump sum of 2.25 times the annual rate of pension was payable on retirement.
c) The normal pension age (the date from which the pension could be taken as of right without actuarial reduction) was sixty five.
d) A surviving spouse's, or civil partner's, pension was paid at half the rate of the member's pension. There was also provision for pension in respect of a dependant child.
a) Pension is accrued at the rate of approximately 1/43rd of pensionable pay in each year on a career average basis (rather than a final salary basis). There is no limit to the period of service during which pension may be accrued or taken into account in calculating the annual pension.
b) No lump sum is payable in addition to the pension calculated in accordance with (a). Instead, a lump sum is available by commuting some of the annual pension entitlement.
c) Normal pension age is defined as the same as the State Pension Age (varying according to the member's date of birth) so as to be the higher of sixty five or the relevant State Pension Age attributable to the individual.
d) A surviving adult (spouse, civil partner or nominated partner) pension is paid at the annual rate of three eighths of the members' pension.
Tax Treatment of Judicial Pension Schemes
"I want you to be assured that the Government's objective, of enabling Judges to remain in an equivalent financial position in respect of their judicial pension benefits, is settled and clear. I am therefore writing to reassure you and your colleagues that positive steps are being taken to mitigate the effects of the changes on the value of the Judicial Pension. … I want to make it very clear that I consider it extremely important to maintain the attractiveness of the Judicial Pension for the Judiciary, as well as recognising the current entitlements and expectations of serving Judges."
In letters sent by David Staff, Head of Judicial Pay and Pensions at the then Department for Constitutional Affairs, in December 2005 and March 2006 to the Lord Chief Justice and copied to all serving members of the judiciary, it was stated that:-
"The Judicial Pension Schemes will fall outside the ambit of the new pension tax regime for registered pension schemes under the Finance Act …
This removes the prospect of the value of Judicial Pension benefits being reduced through the imposition of this new charge on Pension Benefits from Registered Pension Schemes."
The Lord Chancellor announced those arrangements to Parliament on 15th December 2005 and concluded by saying:-
"I am satisfied that these proposals are in accordance with the terms of the Finance Act 2004. They serve to maintain but not improve the overall remuneration package for the serving Judiciary and to protect the principle of judicial independence in so doing."
a) Those who were active members of the JPS before 1st April 2012 and were born on or before 1st April 1957 have full protection and remain entitled to continuing active membership of the JPS.
b) Those who were active members of the JPS before 1st April 2012 and were born between the 2nd April 1957 and 1st September 1960 are entitled to tapering protection. They have the option of remaining active members of the JPS until their tapered protection closing date, being a date between 31st May 2015 and 31st January 2022, whereupon they fall to be excluded from active membership of the JPS and become entitled to membership of the NJPS (they also had the option to transfer to the NJPS on 1st April 2015).
c) Those who were active members of the JPS before 1st April 2012 but were born after 1st September 1960 are not entitled to any protection and have been excluded from active membership of the JPS since 1st April 2015 on which date they were entitled to membership of the NJPS/PPA.
The Relevant Pension Legislation
"18. Restriction of existing pension Schemes
(1) No benefits are to be provided under an existing scheme to or in respect of a person in relation to the person's service after the closing date.
…
(4) The closing date is:-
…
(b) 31st March 2015 …"
"Exceptions to section 18(1) of the Act: full protection members of an existing scheme
8. (1) A person (P) is a full protection member of an existing scheme if sub-paragraph (2) … applies
(2) This sub-paragraph applies if –
(a) P was an active member of an existing scheme on 31st March 2012;
(b) P was an active member of that scheme on the scheme closing date; and
(c) unless P dies, P would reach normal pension age under that Scheme on or before 1st April 2022 …
PART 3
Exceptions to section 18(1) of the Act: tapered protection members of an existing scheme
12. (1) A Person (P) is a tapered protection member of an existing scheme if sub-paragraph (2) … applies
(1) This sub-paragraph applies if
(a) P was an active member of an existing scheme on 31st March 2012;
(b) P was an active member of an existing scheme on the scheme closing date; and
(c) unless P dies, P would reach normal pension age during the period beginning with 2nd April 2022 and ending with 1st September 2025."
EU Directive and the Equality Act 2010 Provisions
"Concept of discrimination
1. For the purposes of this Directive, the "principle of equal treatment" shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1."
"Justification of differences of treatment on grounds of age
1. Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary."
"(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 it can show A's treatment of B to be a proportionate means of achieving a legitimate aim."
"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 purpose 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;
…
race;
…
sex;
…"
"61 Non-discrimination rule
(1) An occupational pension scheme must be taken to include a non-discrimination rule.
(2) A non-discrimination rule is a provision by virtue of which a responsible person (A) - (a) must not discriminate against another person (B) in carrying out any of A's functions in relation to the scheme; …
(3) The provisions of an occupational pension scheme take effect subject to the non-discrimination rule.
...
(10) A non-discrimination rule does not have effect in relation to any occupational pension scheme in so far as an equality rule has effect in relation to it (or would have effect in relation to it but for Part 2 of Schedule 7."
67. Sex equality rule
(1) If an occupational pension scheme does not include a sex equality rule, it is to be treated as including one.
(2) A sex equality rule is a provision that has the following effect-
(a) if a relevant term is less favourable to A than it is to B, the term is modified so as not to be less favourable;
(b) if a term confers a relevant discretion capable of being exercised in a way that would be less favourable to A than to B, the term is modified so as to prevent the exercise of the discretion in that way.
(3) A term is relevant if it is-
(a) a term on which persons become members of the scheme, or
(b) a term on which members of the scheme are treated.
(4) A discretion is relevant if its exercise in relation to the scheme is capable of affecting-
(a) the way in which persons become members of the scheme, or
(b) the way in which members of the scheme are treated.
(5) The reference in subsection (3)(b) to a term on which members of a scheme are treated includes a reference to the term as it has effect for the benefit of dependants of members.
(6) The reference in subsection (4)(b) to the way in which members of a scheme are treated includes a reference to the way in which they are treated as the scheme has effect for the benefit of dependants of members.
…
(8) A relevant matter is
(a) a relevant term;
(b) a term conferring a relevant discretion;
(c) the exercise of a relevant discretion in relation to an occupational pension scheme.
…"
"Defence of material factor
…
(4) A sex equality rule has no effect in relation to a difference between A and B in the effect of a relevant matter if the trustees or managers of the scheme in question show that the difference is because of a material factor which is not the difference of sex.
(5) "Relevant matter" has the meaning giving in section 67.
(6) For the purpose of this section, a factor is not material unless it is a material difference between A's case and B's."
The Claimants' Claims
The appellants' aims
The Employment Tribunal decision
"29. Prior to the introduction of the NJPS there was no public notification of any intended change to the tax status of the judicial pension scheme with the result that applicants continued to seek appointment on the understanding that their terms and conditions, including those relating to the taxation of pensions, would remain as they had been. As Ian Gray, Deputy Director, Pensions and Judicial Reward at the second respondent, wrote in October 2012:-
"Switching off this tax advantage has very significant implications for serving judiciary that they could not have anticipated nor reasonably made revised arrangements for and requires this change to be handled differently from the standard pension reform being applied across the public service."
30. The JPS remains unregistered for tax purposes and members are therefore not subject to the annual allowance and lifetime allowance limits. The NJPS is a registered scheme so that the annual allowance and lifetime allowance limits apply with the result that, on transfer into the NJPS, many claimants incur very significant additional tax liabilities compared with their position as members of the JPS. The change from tax-unregistered to tax-registered status of their pension scheme affected judges uniquely amongst public servants because theirs was the only scheme which was previously unregistered. Furthermore, as Mr Scanlon explained, these losses have been increased still further by changes to the pension tax regime announced in the summer budget of 2015, after the making of the regulations of 2015 in February of that year. This serves to magnify the disparity between the unprotected and the protected judges.
31. The loss sustained by the unprotected and taper-protected judges, including these claimants, was very significantly greater than the loss sustained by other public servants whose pension schemes were reformed. There are two reasons for this. Firstly, the value of a judge's pension as a proportion of his or her overall remuneration is significantly greater than in the case of other public service employees. Adverse changes to a judge's pension therefore have a proportionally greater impact.
32. The second reason is that judges alone suffered the combined effect of significant adverse changes to their pension scheme in addition to a radical change to the tax treatment of their pensions. The valuation of the losses occasioned to a judge by the taxation reforms inevitably varies from individual to individual. I am not required in this judgment to compute the claimants' losses, and the figures for individual judges with which I have been provided are illustrative only and are not the subject of precise agreement. Nevertheless, it is clear that the high court judge claimants will incur losses running in many cases into several hundreds of thousands of pounds. It is agreed that the yearly capital investment required to provide a life annuity giving approximately the same benefits on retirement as those lost by the transfer to the NJPS is at least £30,000."
"36. Apart from the uniquely adverse effect on judges of the combination of changes set out above, there are further features which uniquely distinguish appointment as a judge from other public servants. Whilst it is accepted that all public servants accept office or employment on the basis of the terms and conditions offered at the time, and that those terms and conditions may be varied from time to time, in the case of the judiciary there had been explicit and strongly worded assurances from the then Lord Chancellor in 2004 to the effect that it was the government's settled view that there should be no change to serving judges' pensions. This assurance was in line with the scheme adopted on the coming into force of Part 1 of the Judicial Pensions and Retirement Act 1993 which established the JPS and was expressed in section 1 to apply "to any person who first holds qualifying judicial office on or after the appointed day". The changes made by the JPS compared with its predecessor scheme were thus prospective, affecting future appointees only."
"56. Based on this evidence I consider it proper to find that the government decided to incorporate the transitional provisions into the JPS for no reasons specific to the judiciary, but rather because similar provisions had been agreed with trade unions for other workforces and the government's preference was for a consistent scheme, and, to a lesser extent, because the state pension age consultation had led to the view that a period of ten years' notice was appropriate in that case. I found the further arguments based on those nearing retirement having less time to prepare for the effects of reform and having fixed retirement plans lacked cogency for the reasons set out above."
"78. … In a wider sense, the aim of the respondents, and of the government as a whole, was to establish public service pension arrangements which were, in the words of the terms of reference for Lord Hutton's commission:-
"Sustainable and affordable in the long term, fair to both the public service workforce and the taxpayer and consistent with the fiscal challenges ahead, while protecting accrued rights".
79. Those are matters which belong in the realm of public policy and finance for which the government of the day is responsible to the electorate. It is for the government to define its policy objectives, to identify its priorities and to determine what resources it will allocate to them. This tribunal must take particular care not to trespass into areas which are not its proper purview. I am concerned solely with the respondents' attempt to justify the disparate impact of the transitional provisions contained in Schedule 2 to the 2015 Regulations."
"I see no basis for saying that the government's broad discretion in matters of social policy extends beyond that public arena into the arena of private relations between employer and employee."
"86. The formulation of the respondents' aim which was most frequently canvassed in evidence and in submissions before this tribunal was taken from the case pleaded in their response to these claims: "the legitimate aim of protecting those closest [to] retirement from the financial effects of pension reform". This adds little to what the Chief Secretary wrote and might suggest that it was thought that the pension reforms would affect most adversely those closest to retirement and/or that they would be in particular need of protection from their financial effects. But it is quite clear from ample contemporary documentation and the unanimous evidence in this case, not only that the opposite is true, but that it was well known to be true long before the enactment of the 2015 Regulations. The older judges are, the less adversely are they affected by the reforms.
87. If an aim is to be described as a legitimate social policy aim, then it must in my judgment be something for which there is a rational explanation. The government has a wide discretion in such matters and its aim does not have to be one with which the tribunal agrees; but its aim may not be, for example, capricious or arbitrary, and it must be capable of being understood. To set out consciously to treat more favourably a group who, as was well known at the time, were the least adversely affected by the reforms appears counter-intuitive and at the very least calls for such a rational explanation. In the absence of such explanation it would be difficult to resist Mr Beloff's categorisation of the result as bizarre."
"In summary, my conclusions on the question of the legitimacy of the respondents' aims are as follows. Description of a group having 'ten years or less to their pension age', being 'closest to retirement' or having 'less time to adjust' all necessarily define that group by reference to the age of those in the group. In my judgment, an aim which amounts to an intention to treat one group more favourably and another less favourably, solely by reference to the age of those in the groups cannot, without further rational explanation of the reason for it, be legitimate. An aim thus expressed amounts to a declaration of intent to do precisely that which the statute prohibits. The respondents have failed to advance any such rational explanation of their reason. Mr Chamberlain's formulation in his closing submissions, 'whether … it was lawful for the respondents to introduce these limited and affordable transitional protections, whose aim was to identify a category of scheme members closest to retirement who would see no change at all', restates the question succinctly, but does not answer the question 'why?' The respondents have failed to adduce any evidence of disadvantage suffered by the fully protected and the taper-protected groups of judges which called for redress, or any social policy objective which was served by treating those groups more favourably and the claimant group less favourably. I accept that in implementing their pension reforms the respondents and the government as a whole were entitled in principle to pursue the aim of consistency, and that such consistency could, in a properly evidenced case, be conducive to a social policy objective. However, in my judgment, the respondents have failed to demonstrate beyond the level of 'mere generalisations' how consistency in the matter of transitional protection was capable of contributing to their social policy objective, especially since so much else in the JPS was inconsistent with other reformed pension schemes. I find accordingly that it has not been shown in this case that the aim of consistency is capable of justifying derogation from the principle of non-discrimination on the ground of age."
"116. I have asked myself whether the setting of the limit by the respondents represents a rational attempt to achieve the aim in question. That same question arises whether the aim is said to be to protect those closest to retirement or to achieve consistency across the public sector. In this case the ten-year criterion was "read across" from the other larger public sector schemes with some – albeit that I have found it to be inadequate – support from the state pension age consultation. There was no specific reference to the judiciary at all.
117. The nearest the evidence in this case takes me to an answer to the question why ten years was chosen is that it was what was necessary in order to do a deal with the trades unions in the other larger public sector schemes. There was no research or analysis, and nor was there any process of reasoning which led the respondents to consider that – making due allowance for the arbitrariness referred to above – approximately ten years would achieve the desired aim, whereas something like four or five years, for example, would be far too short and something like fifteen to twenty years, for example, would be far too long. I am not, of course, suggesting that any process of precise calculation should, or could, result in such a figure, but I would have expected to see evidence of some thought process which led the thinker to the view that ten years was about right. There was no such evidence and I am satisfied on all that I have heard that there was no such thought process. Rather, the ten-year figure was imported from discussions with trades unions in relation to other schemes where it may have had some rational basis of which I have naturally not heard in these proceedings.
118. The transitional provisions initially protected something of the order of 85% of serving judges, many if not most of whom suffered only minor adverse effects from the reforms, whilst leaving the unprotected judges, including the claimants, exposed to a severe adverse impact. In my judgment the balance described by Langstaff P in Seldon (No 2) has not been properly struck in this case. The respondents have failed to provide evidence that a shorter period, or lesser degree, of protection would not have enabled them to achieve their aim, whether of protecting those closest to retirement or of consistency; the respondents adduced no specific evidence – beyond the generalities already referred to – to explain why they chose to set the relevant age limits where they did. One returns repeatedly in this case to the importing of age limits from other schemes and the analogy of the state pension consultation. These transitional provisions were not a reasonably necessary means of achieving the government's aims because they go beyond what was necessary either to achieve consistency or to protect those closest to retirement."
The appeal to the Employment Appeal Tribunal
1) distinguishing measures pursuing social policy objectives such as employment policy, the labour market or vocational training of a public interest nature from measures particular to the employer's situation such as cost reduction or improving competitiveness; and
2) emphasising that the mere fact that a particular aim was capable of being a legitimate aim was only the beginning of the story. Once an aim had been identified, it still had to be asked whether it was legitimate in the particular circumstances of the employment concerned. That required that both the aims and the means be carefully scrutinised to see whether they met the objective and whether there were less discriminatory measures which would do so.
"… much may depend on the nature of the justification and the extent to which it requires evidence to support it. For example, justifications based on moral or political considerations may not be capable of being established by evidence. The same may be true of justifications based on intuitive common sense. An economic or social justification, on the other hand, may well be expected to be supported by evidence."
"160. In my judgment the Appellants are correct in their contention that this narrow consideration of the material failed to take into account what the EJ had found to be a complex of moral and political judgments informed by the plethora of documentation from different sources. In my judgment, the EJ failed to have regard to that evidence and the complex of reasons which that evidence reveals. He failed to pay due regard to the cautionary words of the CJEU in Fuchs, and the Supreme Court in Lumsdon, on the particular difficulty of producing evidence where moral or political considerations are to the fore. In my judgment, the EJ, in concluding that no legitimate aims had been shown, misunderstood and/or misapplied the facts and thereby misdirected himself."
"168. … The EJ had regard, as he was entitled, to the unique position of the Judiciary and to the uniquely adverse impact of the pension scheme and tax changes on the unprotected, as opposed to the protected, members of the Judiciary and to come to a view on the issue which was open to him.
169. The EJ concluded that, in principle, transitional provisions were appropriate to achieve the aim because that is what they were designed to do (paragraph 112). In so doing he was assuming, contrary to his earlier finding that the pursuit of the policy was a legitimate aim. …
170. In the light of his clear and sustainable finding on the question of balance, the EJ's conclusion on whether the means were reasonably necessary for the achievement of the aim followed as a matter of course."
i) that Sir Alan erred in approving the judge's self-direction on margin of discretion since this was a case where the very widest margin of discretion should be accorded to government;
ii) that Sir Alan was, in any event, correct to say that Judge Williams erred in his approach to the evidence (or lack of it); and
iii) that both Sir Alan's and the judge's decisions on proportionality of means were affected by wrong conclusions as to legitimacy of aim.
Margin of discretion/level of judicial scrutiny
"… The burden placed on the government in this type of case is not as heavy as previously thought. Governments must be able to govern. They adopt general policies, and implement measures to carry out their policies. Governments must be able to take into account a wide range of social, economic and political factors. The Court of Justice has recognised these practical considerations. If their aim is legitimate, governments have a discretion when choosing the methods to achieve their aim. National courts, acting with hindsight, are not to impose an impracticable burden on governments which are proceeding in good faith. Generalised assumptions, lacking any factual foundation, are not good enough. But governments are to be afforded a broad measure of discretion. The onus is on the member state to show (1) that the allegedly discriminatory rule reflects a legitimate aim of its social policy, (2) that this aim is unrelated to any discrimination based on sex, and (3) that the member state could reasonably consider that the means chosen were suitable for attaining that aim."
This shows that in an appropriate case the government is to be accorded a margin of discretion when it comes to assessing proportionate means. Seymour-Smith was a sex discrimination case, but in our view the same principle must be applied whatever the ground of discrimination relied upon.
"The employer has to show that the proposal, in this case for a full-time appointment, is justified objectively notwithstanding its discriminatory effect. The principle of proportionality requires the tribunal to take into account the reasonable needs of the business. But it has to make its own judgment, upon a fair and detailed analysis of the working practices and business considerations involved, as to whether the proposal is reasonably necessary. I reject the employers' submission (apparently accepted by the appeal tribunal) that, when reaching its conclusion, the employment tribunal needs to consider only whether or not it is satisfied that the employer's views are within the range of views reasonable in the particular circumstances."
It is fair to say that this authority appears to equate the phrases "a range of reasonable responses" and "margin of discretion".
"(4) It is for the employment tribunal to weigh the reasonable needs of the undertaking against the discriminatory effect of the employer's measure and to make its own assessment of whether the former outweigh the latter. There is no "range of reasonable response" test in this context: Hardy & Hanson v Lax."
It is to be noted in both these cases that the dispute was a private dispute between employer and employee without any reference to the position of government.
"68. It should be recalled in this context that, as Community law stands at present, the Member States and, where appropriate, the social partners at national level enjoy broad discretion in their choice, not only to pursue a particular aim in the field of social and employment policy, but also in the definition of measures capable of achieving it (see, to that effect, Mangold v Rudiger Helm (C-144/04) [2005] ECR I-9981; [2006] 1 CMLR 43 at [63])."
"Accordingly in the light of the wide discretion granted to the social partners at national level in choosing not only to pursue a given aim in the area of social policy but also in defining measures to implement it, it does not appear unreasonable for the social partners to take the view that [the measure in question] may be appropriate for achieving the aims set out above."
"However, differences in treatment in connection with age may be justified under certain circumstances and therefore require specific provisions which may vary in accordance with the situation in member states. It is therefore essential to distinguish between differences in treatment which are justified, in particular by legitimate employment policy, labour market and vocational training objectives, and discrimination which must be prohibited."
She then conducted a comprehensive survey of the European jurisprudence citing (inter alia) Palacios in which the encouragement of recruitment was considered to be a legitimate aim but which required the means employed to achieve that aim to be both appropriate and necessary,
"although member states enjoyed a broad discretion in the choice both of the aims and of the means to pursue them" (para 33)
"(2) If it is sought to justify direct age discrimination under article 6(1) the aims of the measure must be social policy objectives, such as those related to employment policy, the labour market or vocational training. These are of a public interest nature, which is "distinguishable from purely individual reasons particular to the employer's situation, such as cost reduction or improving competitiveness" (Age Concern [2009] ICR 1080 and Fuchs [2012] ICR 93).
…
(4) A number of legitimate aims, some of which overlap, have been recognised in the context of direct age discrimination claims: (i) promoting access to employment for younger people (Palacios de la Villa, Hütter and Kücükdeveci); (ii) the efficient planning of the departure and recruitment of staff (Fuchs); (iii) sharing out employment opportunities fairly between the generations (Petersen, Rosenbladt and Fuchs); (iv) ensuring a mix of generations of staff so as to promote the exchange of experience and new ideas (Georgiev and Fuchs); (v) rewarding experience (Hütter and Hennigs); (vi) cushioning the blow for long serving employees who may find it hard to find new employment if dismissed (Ingeniørforeningen i Danmark); (vii) facilitating the participation of older workers in the workforce (Fuchs; see also Mangold v Helm (Case C-144/04) [2006] All ER (EC) 383); (viii) avoiding the need to dismiss employees on the ground that they are no longer capable of doing the job, which may be humiliating for the employee concerned (Rosenbladt); or (ix) avoiding disputes about the employee's fitness for work over a certain age (Fuchs).
…
(6) The gravity of the effect on the employees discriminated against has to be weighed against the importance of the legitimate aims in assessing the necessity of the particular measure chosen (Fuchs)."
"Finally, of course, the means chosen have to be both appropriate and necessary. It is one thing to say that the aim is to achieve a balanced and diverse workforce. It is another thing to say that a mandatory retirement age of 65 is both appropriate and necessary to achieving this end. It is one thing to say that the aim is to avoid the need for performance management procedures. It is another to say that a mandatory retirement age of 65 is appropriate and necessary to achieving this end. The means have to be carefully scrutinised in the context of the particular business concerned in order to see whether they do meet the objective and there are not other, less discriminatory, measures which would do so."
The law applicable to this case
Application to the judgments below
"be considered to be within the broad discretion accorded to member states to set the aims of their social policy."
He was thus completely alive to the need to accord a discretion to government to set aims of social policy in relation to employment. He just did not consider that the aims relied on stood up to scrutiny, whatever margin of discretion was to be afforded to government. His conclusions in paragraphs 86-87 which we have quoted betray no error of law and cannot be successfully impeached.
Other errors of law detected by Sir Alan in the employment tribunal judgment
Proportionate means
Conclusion on first appeal
Sargeant and Others v. The Secretary of State for the Home Department and Others
The facts
(a) Active members born on or before 1st April 1967. They would have been 45 or older on 1st April 2012 and so within ten years of their NPA under the FPS. They were given full protection, meaning they enjoyed continuing active membership of the FPS without limit of time.
(b) Active members born after 1st April 1967 but before 2nd April 1971. They would have been between 41 and 45 on 1st April 2012 and so within 14 years of their NPA under the FPS. They were given tapered protection, meaning they remained active members of the FPS for an additional 53 days for each month by which their age on 1st April 2012 was over 41.
(c) Active members born after 1st April 1971. They received no protection and were automatically transferred to the 2015 Scheme in respect of all pensionable service from 1st April 2015.
The claims
The decision of the Employment Tribunal
"31. … members of the FPS should maintain their current entitlement. They sought protection for all members of [the FPS]. The FBU did not take a direct part in the central negotiations which focussed on the four largest public sector schemes. The FBU wanted the best possible deal for its members. A particular concern of the FBU was that firefighters who had been recruited on the basis that they could take their pension between 50 and 55, might not be able to work to the new pension age of 60. Mr Starbuck [an FBU national officer, who had made two witness statements] explained that as firefighters get older it becomes harder to maintain their cardiovascular fitness. Mr Starbuck said that a person who cannot maintain that fitness, but who does not meet the criteria for an ill health retirement, is left with the choice of leaving the FRA with a deferred pension or drawing their pension early with an actuarial reduction.
32. When the NPA was fixed at 60 by the [Public Service Pensions Act 2013], the FBU sought to obtain the best possible deal for its members by seeking additional protection for those who were within ten years of their expected retirement and mitigating the detriment for unprotected firefighters who were in fact obliged to retire early. The FBU attempted to deal with their concerns in their negotiations with the DCLG and the devolved administrators."
"The aims have been identified in a number of ways. In the list of issues set out at paragraph 11.1 the aim is expressed to be:-
"… to protect those closest to pension age and to retirement from the effects of pension reform."
In his closing submissions, Mr Cavanagh identifies the aims as:-
(1) "To protect those closest to pension age from the effects of pension reform, since they would have least time to rearrange their affairs before retirement, by making lifestyle changes or alternative financial provision (or by finding alternative employment);
(2) To take account of the greater legitimate expectation that those closer to retirement would have that their pension entitlements would not change significantly when they were close to retirement.
(3) To have a tapering arrangement so as to prevent a cliff edge between Fully Protected and Unprotected Groups.
(4) In achieving these substantive aims behind the transitional provisions, the UK Government sought to ensure that a clear and simple message could be communicated, and that there was consistency across the public sector."
Mr Lynch for the FRAs identifies the legitimate aim in their ET3 at paragraph 9 … as:-
"The transitional provisions recognise that the nearer in time a firefighter was to reaching his or her Normal Pension Age, the more difficult it was likely to be to adjust to the move to the 2015 scheme. This is because the firefighters who were near a Normal Pension Age had less time to make the necessary changes to lifestyle and less time to put in place appropriate financial adjustments to accommodate the transfer to different pension provisions than was the case for firefighters whose Normal Pension Age was temporally more distant".
On 26 October 2016, the FRAs filed voluntary further and better particulars adopting the aims in the agreed list of issues … as the aim."
"66. I have considered whether there were real aims. The Hutton Report sets out the aims but did not recommend transitional protections. The Chief Secretary to the Treasury articulated the transitional protections, in his letter to Brendan Barber, TUC General Secretary dated 2 November 2011 … that those closest to retirement should not suffer any detriment, either as to when they can retire, or any decrease in the amount of pension they receive at NPA. The protection was provided to those who were within ten years of NPA on 1 April 2012 and there was also scope for tapering for three to four more years. The cost of the transitional protections was outside the costs ceiling and therefore did not need to be offset by reductions elsewhere in the pension schemes.
67. It was the decision of the Chief Secretary to the Treasury who took the decision to provide protection across the public sector for those within ten years of NPA, with a taper for three to four years. The policy originates from concessions within the Treasury concerning changes to the State Pension Age, in respect of which a ten year notice period was applied after extensive consultation. Mr Kelly gave evidence about the Treasury decision making process at paragraphs 44 to 56 of his witness statement. The Command Paper entitled "Public Service Pensions: Good Pensions That Last" (6/4851 – 4879) explained the rationale. In the Forward the Chief Secretary records:
'I believe it is right that we protect those public service workers who as of 1 April 2012 have ten years or less to their pension age. It is my objective that these people see no change in when they can retire, nor any decrease in the amount of pension they receive at their current Normal Pension Age.
On presentation of the Command Paper to the House of Commons on 2 November 2011 further detail was provided. The extract from Hansard sets out the matter in more detail as set out in paragraph 23 above [the material additional detail was as to the willingness of the Chief Secretary to the Treasury 'to consider tapering of transitional protection over a further three to four years.]'
68. The Welsh situation is slightly different. Mr Pomeroy [Head of the Fire Services Branch of the Education and Public Services Group within the Welsh Government] explained this. The [Public Service Pensions Act 2013] constrained the Welsh Government. The Welsh firefighters had more advantageous early retirement factors but a worse accrual rate. The decision was taken to adopt the same transitional protections."
"… the Respondents cannot establish a legitimate aim corresponding to a real social need to a high standard of proof, unless they can also show that those nearer retirement and Normal Pension Age were in greater need of protection. … it is insufficient to say that those nearest to retirement have less time to adjust. The amount of time that a person has to adjust is the period of time until Normal Pension Age and the older the person is, the closer they are to that age. It is also common ground that the closer someone was to retirement, the less change he or she would face, and less adjustment would be required. He argues that the Respondents must explain with precision the nature of the lifestyle changes and alternative financial provision and establish why the more limited amount of time to make those changes gives rise to a real social need."
"70. … The protected group were treated more favourably because of proximity to retirement. Whilst retirement is age related, and proximity to retirement is connected with age, there may be good reasons for treating different age groups differently. Mr Cavanagh relies on Seldon, where the measure complained about was a compulsory retirement age. Those below that retirement age were treated more favourably than others because of their age, but the objective justification defence succeeded.
71. In the case of firefighters, the decision maker was the Chief Secretary to the Treasury who decided to make a more generous provision to the public sector workers than had been recommended by Hutton. … It is clear to me that the transitional provisions that were envisaged by primary legislation were age related transitional provisions which protected those closest to Normal Pension Age. The evidence is that the decisions were taken with great care and after negotiations with the representatives of the Unions. There were detailed negotiations with the TUC and, in relation to the firefighters' pension schemes, the FBU was involved in negotiations with the DCLG and the Welsh Government. The evidence is that the DCLG and Welsh Government took seriously the representations made by the FBU.
73. Mr Short argues that the reforms have less impact upon older firefighters than younger firefighters and that the suggestion that younger firefighters can make good the effect of the pension reforms by applying some of their salary towards retirement is in fact saying that that the younger firefighters can choose when they experience the disadvantage of being paid less than the older firefighters. He argues that in any event it is wholly unrealistic given the sums in question. The suggestion that older firefighters would be less able than the younger firefighters to make changes in their expenditure leading up to retirement is unsupported by evidence. His argument is that the closer the scheme members are to retirement, the less they would be affected by the reforms."
"It is, therefore, for the competent authorities of the member states to find the right balance between the different interests involved. However, it is important to ensure that the national measures laid down in that context do not go beyond what is appropriate and necessary to achieve the aim pursued by the member state concerned."
She said (para 76) that on these authorities, "it [is] for the Member state to balance the different interests and I must be careful not to substitute my own view for that of the Government." She said it was clear that member states enjoy a broad discretion in the choice of both aims and means, and she cited the passage from Lord Nicholls of Birkenhead's speech in R v. Secretary of State for Employment Secretary, Ex Parte Seymour-Smith and Another (No 2) [2000] 1 WLR 435, at 450F, that we cited at para 71 above. She also cited from paras 28, 33, 50, 53 and 55 of Lady Hale's judgment in Seldon. She did not, however, cite from paras 59 and 61. As we shall explain, that was an unfortunate omission.
"… This is a situation where a Member State was introducing a measure as a result of having made a social policy decision to protect those within 10 years of retirement. The Government has a wide discretion in social policy matters. The standard of scrutiny involves granting a wide margin of discretion to the Member State. I am satisfied that this is the correct standard in the present case and the stricter test which applies to operational matters of a private sector employer is not the correct test."
At para 88, after referring to R (Lumsdon and Others) v. Legal Services Board [2016] AC 697, she said "I must take care not to substitute my view of the social policy issues for a view of the Member State."
"Mr Cavanagh argues that those closest to retirement have a greater legitimate expectation that things would not change in a significant way when they are only a few years away from retirement as compared with those who are earlier in their career. His submission is that a person in the early part of his or her career is not focused on, or concerned about their pension because retirement is a long way off and there may be changes to their careers or personal circumstances. He suggests that someone closer to Normal Pension Age is focused on their pension entitlement and has a legitimate expectation that their pension will stay as it is with no sudden changes in the last years before retirement."
That passage provoked criticism by Mr Short before us. He said (correctly) that there was no evidence supporting the submission in the first sentence; and that what was said in the second sentence as to the supposed attitudes of the young towards pension provision was unjustified stereotyping.
"The justification for the restriction tends to be examined in detail, although much may depend upon the nature of the justification, and the extent to which it requires evidence to support it. For example, justifications based on moral or political considerations may not be capable of being established by evidence. The same may be true of justifications based on intuitive common sense. An economic or social justification, on the other hand, may well be expected to be supported by evidence …."
"The authorities suggest that need for precise and concrete factors depends on the nature of the justification. The government relies on the fact that those in the protected group were closer to retirement. Political considerations may have played a part in the Government's decision. For those reasons I reject the criticism that the Government's decision was not based on precise or concrete factors. The fact that the Scottish Government adopted a different measure, that is drew the line in a different place, shows that these are social policy matters for which there is no right or wrong answer and the choice is that of the Government."
"101. There is a final matter to be considered in relation to the legitimacy of the aims and that relates to the fitness issue. Mr Lynch has made a number of submissions concerning fitness and the report of Dr Williams. He argues that a central reason for refocusing protection on the older firefighters is that they have the least ability to change their lifestyles and circumstances to accommodate the changes to the Normal Pension Age. This involves a consideration that it is the older firefighters who face the greatest difficulties in maintaining their fitness and weight. Mr Lynch argues that the new fitness regime is something that should be taken into account because the protection arrangements focusing on older firefighters allow for the new fitness structures to come into effect before the change is made to the firefighters' NPA. Retaining health and fitness is more difficult for older firefighters who will soon be 55 and otherwise facing being obliged to work until 60. The evidence for this is contained within the fitness report of Dr Williams. … The FBU was extremely concerned about issues concerning fitness and the possible disadvantage to a firefighter who became unfit and thus no longer able to work and needed to take early retirement.
102. The Williams Report … used a standard of fitness based on cardiorespiratory figures and VO2 42 max. The Williams Report noted that there were limitations to this standard. The report noted that a number of FRAs used a lower standard of VO2 35 max and expressed the view … that 100% of firefighters would be able to work until 60 years of age with such a standard. Whilst the report also says that if the VO2 42 max standard was used there would be some firefighters who could not meet it, although the majority would be able to regain their fitness with appropriate training. Mr Lynch submits that the protective arrangements mean that those who might be in difficulty in terms of benefiting from new policies and structures because the new structures are not in place and will need to be effective are protected from the need to work beyond 55."
"104. Having undertaken the analysis set out above, I am satisfied that the correct test for me to apply in determining the legitimate aims is to be determined by the approach to scrutiny laid down by the ECJ and the Supreme Court in Seldon. There is a wide margin of discretion for the Member State. On the evidence before me I am satisfied that the Respondents have demonstrated that the aims were to protect those closest to pension age from the effects of pension reform; to take account of the greater legitimate expectation that those closer to retirement would have that their pension entitlements would not change significantly when they were close to retirement; to have a tapering arrangement so as to prevent a cliff edge between fully protected and unprotected groups; and that there was consistency across the public sector.
105. It is my decision that the Respondents have demonstrated these aims."
She thus found the aims to be essentially as Mr Cavanagh had submitted them to be, as recorded by her at para 61 (see para [117] above); and, apparently, that they were also legitimate aims.
"… whether: (i) the legislative objective is sufficiently important to justify limiting a fundamental right; (ii) the measures designed to meet the legislative objective are rationally connected to it; and (iii) the means used to impair the right or freedom are no more than is necessary to accomplish the objective."
"The gravity of the effect upon the employees discriminated against has to be weighed against the importance of the legitimate aims in assessing the necessity of the particular measure chosen (Fuchs)."
"In that connection, it must be observed that in choosing the means capable of achieving their social policy objectives, the Member States enjoy broad discretion (see to that effect Mangold paragraph 63). However, that discretion cannot have the effect of frustrating the implementation of the principle of non discrimination on grounds of age. Mere generalisations concerning the capacity of a specific measure to contribute to employment policy, labour market or vocational training objectives are not enough to show that the aim of that measure is capable of justifying derogations from that principle and do not constitute evidence on the basis of which it could reasonably be considered that the means chosen are suitable for achieving that aim."
"111. …it follows that the place where the line was drawn was a matter of social policy choice. … The line was drawn ten years from Normal Pension Age with a four year taper. This was consistent with the rest of the public sector. The FBU would have preferred the line to be drawn elsewhere so that all member of the FPS were protected. That is a preference. The Government made a social policy choice which it applied across the public sector that those within ten years of NPA had protection to which was added a four year taper. …
115. It is clear to me on the case law that there has to be a line drawn at some point. That is a social policy choice and inevitably some individuals will be disadvantaged. The FBU put forward the arguments in negotiation that the starting point for the transitional provisions should have been when a firefighter would have qualified for a full unreduced pension. Had this been agreed, the transitional provisions would still have protected those closest to retirement with a different cut-off date. Indeed, the Scottish Government took account of the length of service in their transitional provisions, but nonetheless the FBU is pursuing claims for discrimination in Scotland. Mr Starbuck's evidence was that the FBU had noted that the Police had obtained an improved position and, thus, sought to obtain improvements for the firefighters.
116. It was reasonably necessary for the Government to draw the line at some point. I am satisfied that the Respondent have demonstrated a legitimate aim and having considered the three stage test, I am satisfied that that aim was proportionate.
117. In these circumstances it is my judgment that the treatment of the Claimants by the transitional provisions included in the Firefighters Pension Scheme 2015 are a proportionate means of achieving a legitimate aim and the claims of direct age discrimination fail."
The decision of the Employment Appeal Tribunal
"75. In my judgment, the Employment Judge was correct in following Seldon in that part of her decision. It involved considering whether there were legitimate aims by reference to, and giving effect to, the state's margin of discretion in pursuing and implementing social policy. The Employment Judge, in her analysis of the evidence, the facts and the arguments, was entitled to conclude that the Respondents had established legitimate aims. In my judgment looking at this part of the judgment as a whole, the Employment Judge understood the facts, considered and applied the correct legal principles and came to a conclusion to which she was entitled to come. I reject the contention that, looking at his part of the judgment as a whole, she failed to exercise sufficient scrutiny. She had well in mind the fact that it was a high test, but there was a margin of discretion and, in her careful exposition of the facts, the law and her conclusions, she did not, in my judgment, err in coming to the conclusion that she did."
"80. In my judgment, in considering whether the means adopted by the Government were proportionate in order to achieve the legitimate aims, the Employment Judge was entitled to have regard to the fact that the Government was seeking to implement a social policy and that questions of consistency of application were significant. In so doing she was following what she took to be the approach identified in Seldon and to that extent she cannot be faulted.
81. She did, however, have to grapple with the issue posed by the Claimants, namely that, comparing the protected group with the unprotected group, the differential between the two was said to be catastrophic and unfair to the unprotected group. This contention was made in the context of the Claimants' submission of law that, when considering the issue as applied to them, the ET ought, additionally, to make up its own mind on the question of proportionality, applying the established domestic law principles described in Hardy and Hansons, MacCulloch and Lockwood.
82. The Employment Judge did not do so. Her conclusion was that it was sufficient for her to consider the issue of proportionality by reference solely to the approach identified by the ECJ/CJEU line of authorities and, as she understood it, approved by the Supreme Court in Seldon. It also appears that she did not fully appreciate that, although the differential of which the complainants complained amounted to their being subject to the changes in the pension scheme by reason of the Government's implementation of the pension reforms, which were not in issue, their complaint was of differential treatment by not being granted the full protection against such changes granted to those who were older than they were but denied to them by reason of their age. It followed that, in practice, their complaint was that they were subject to the changes in the pension scheme whereas they should have been protected from those changes and that this failure was unlawful age discrimination.
83. In my judgment, in this limited respect, the Employment Judge erred in law. She failed to appreciate that in Seldon, whilst the Supreme Court had given effect to the approach of the ECJ/CJEU in applying article 6(1), both in respect of legitimate aim and means (see paragraph 55 of Baroness Hale in the Supreme Court) the Supreme Court had gone on, in paragraph 59 and following, to require that the means be carefully scrutinised in the context of the particular business concerned, in order to see whether they met the objective and whether there were not other, less discriminatory, measures which would do so. In particular, she failed to recognise that, on the issue of proportionate means of achieving a legitimate aim, the Court of Appeal in Lockwood had said that the judgment in MacCulloch had provided comprehensive guidance on the application of the test and the rigour with which tribunals must apply it (at paragraph 46). In my judgment, the Employment Judge erred in law in failing to consider whether, in the context of the Firefighters' Pension Schemes, the application of the transitional provisions and the differential treatment on the grounds of age was a proportionate means for achieving what she had concluded, were, and was entitled to conclude, legitimate aims of social policy."
The cross-appeals on the age discrimination issues
"(1) To protect those closest to pension age from the effects of pension reform, since they would have least time to rearrange their affairs before retirement, by making lifestyle changes or alternative financial provision (or by finding alternative employment);
(2) To take account of the greater legitimate expectation that those closer to retirement would have that their pension entitlements would not change significantly when they were close to retirement.
(3) To have a tapering arrangement so as to prevent a cliff edge between Fully Protected and Unprotected Groups.
(4) In achieving these substantive aims behind the transitional provisions, the UK Government sought to ensure that a clear and simple message could be communicated, and that there was consistency across the public sector."
"… because those who are 10 years or less away from their [NPA] will have less time to make any necessary changes to their lifestyle and plans for eventual retirement, than those with longer still to serve. So, for example, those closest to [NPA] will have less time in which to make additional provision to supplement their pension entitlements and might find it difficult to do so."
"51. Mere generalisations concerning the capacity of a specific measure to contribute to employment policy, labour market or vocational training objectives are not enough to show that the aim of that measure is capable of justifying derogation from that principle …
65. … However, it is important to note that the latter provision [Article 6(1) of Directive 2000/78] is addressed to the member states and imposes on them, notwithstanding their broad discretion in matters of social policy, the burden of establishing to a high standard of proof the legitimacy of the aim pursued."
The ECJ reminded itself of those observations in Fuchs v. Land Hessen Case C-160/10 [2012] ICR 93, at paras 77 and 78. They show that the burden of proof of the legitimacy of a claimed aim is a high one. So it should be. If the promoter of a policy that is directly discriminatory on age grounds wishes it to be recognised as legitimate, it must prove why it is.
Equal Pay and Race Discrimination
The relevant law
"(1) The sex equality clause in A's terms has no effect in relation to a difference between A's terms and B's terms if the responsible person shows that the difference is because of a material factor reliance on which—
(a) does not involve treating A less favourably because of A's sex than the responsible person treats B, and
(b) if the factor is within subsection (2), is a proportionate means of achieving a legitimate aim.
(2) A factor is within this subsection if A shows that, as a result of the factor, A and persons of the same sex doing work equal to A's are put at a particular disadvantage when compared with persons of the opposite sex doing work equal to A's. …
(4) A sex equality rule has no effect in relation to a difference between A and B in the effect of a relevant matter if the trustees or managers of the scheme in question show that the difference is because of a material factor which is not the difference of sex."
"Indirect discrimination
(1) A person (A) discriminates against and (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 purpose 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."
The Judges' case
The firefighters' case
"….a difference in treatment of individuals that is based purely on age cannot be transformed by statistics from age discrimination, which it certainly is, to sex discrimination."
"93. Paragraph 129 is less than clear - the Employment Judge seemed to think that, because the material factor was age and not sex, "no material factor defence was necessary". Upon a proper analysis, her finding of fact meant that the material factor defence under section 69(4) arose. Notwithstanding that element of confusion, in my judgment, the Employment Judge did not err in law in concluding, on the basis of that finding of fact, that the material factor defence had been made out. The equal pay claim arose under section 67 which imposes a sex equality rule. The statutory defence to such a claim is found in section 69(4) . By contrast, a claim under section 66 , based on a sex equality clause, is subject to a different, and more complicated, statutory defence pursuant to the provisions of section 69(1), (2) and (3) involving, as one element, the issue of justification. That issue does not arise for decision under section 69(4).
94. It follows that the appeal against the equal pay claim fails. So too does the associated piggy-back claim."
The issues in the appeal
The "no group disadvantage" submission
"22. In my view there is a dual statutory purpose underlying the provisions of section 1(1)(b) of the Act of 1975 and in particular the necessity under sub-paragraph (i) to show that the proportion of women who can comply with a given requirement or condition is "considerably smaller" than the proportion of men who can comply with it. The first is to prescribe as the threshold for intervention a situation in which there exists a substantial and not merely marginal discriminatory effect (disparate impact) as between men and women, so that it can be clearly demonstrated that a prima facie case of (indirect) discrimination exists, sufficient to require the employer to justify the application of the condition or requirement in question: see sub-paragraph (ii). The second is to ensure that a tribunal charged with deciding whether or not the requirement is discriminatory may be confident that its disparate impact is inherent in the application of the requirement or condition and is not simply the product of unreliable statistics or fortuitous circumstance. Since the disparate impact question will require to be resolved in an infinite number of different employment situations, well but by no means comprehensively exemplified in the arguments of Mr. Allen, an area of flexibility (or margin of appreciation), is necessarily applicable to the question of whether a particular percentage is to be regarded as "substantially smaller" in any given case."
The "no causal connection submission"
"… in considering section 1(3) of the Equal Pay Act 1970, the only circumstances in which questions of 'justification' can arise are those in which the employer is relying on a factor which is sexually discriminatory. There is no question of the employer having to 'justify' … all disparities of pay. Provided that there is no element of sexual discrimination, the employer establishes a subsection (3) defence by identifying the factors which he alleges have caused the disparity, proving that those factors are genuine and proving further that they were causally relevant to the disparity in pay complained of."
"My conclusion is that whether the alleged indirect discrimination arises in the field of pay or non-pay, it is always open to a defendant to demonstrate that, notwithstanding the appearance that the practice puts women at a particular disadvantage, in fact the apparent disadvantage has arisen due to factors which are wholly unrelated to gender."
"There must be such an implied possibility because the purpose of the legislation is to prevent sex discrimination, including unjustifiable indirect discrimination. A respondent is not to be held to have discriminated—and be put to justification of his practice—merely because it has given rise to a statistical imbalance."
"The law prohibits two main kinds of discrimination—direct and indirect. Direct discrimination is comparatively simple: it is treating one person less favourably than you would treat another person, because of a particular protected characteristic that the former has. Indirect discrimination, however, is not so simple. It is meant to avoid rules and practices which are not directed at or against people with a particular protected characteristic but have the effect of putting them at a disadvantage. It is one form of trying to 'level the playing field'".
"24. The first salient feature is that, in none of the various definitions of indirect discrimination, is there any express requirement for an explanation of the reasons why a particular PCP puts one group at a disadvantage when compared with others. Thus there was no requirement in the 1975 Act that the claimant had to show why the proportion of women who could comply with the requirement was smaller than the proportion of men. It was enough that it was. There is no requirement in the Equality Act that the claimant show why the PCP puts one group sharing a particular protected characteristic at a particular disadvantage when compared with others. It is enough that it does. Sometimes, perhaps usually, the reason will be obvious: women are on average shorter than men, so a tall minimum height requirement will disadvantage women whereas a short maximum will disadvantage men. But sometimes it will not be obvious: there is no generally accepted explanation for why women have on average achieved lower grades as chess players than men, but a requirement to hold a high chess grade will put them at a disadvantage.
25. A second salient feature is the contrast between the definitions of direct and indirect discrimination. Direct discrimination expressly requires a causal link between the less favourable treatment and the protected characteristic. Indirect discrimination does not. Instead it requires a causal link between the PCP and the particular disadvantage suffered by the group and the individual. The reason for this is that the prohibition of direct discrimination aims to achieve equality of treatment. Indirect discrimination assumes equality of treatment—the PCP is applied indiscriminately to all—but aims to achieve a level playing field, where people sharing a particular protected characteristic are not subjected to requirements which many of them cannot meet but which cannot be shown to be justified. The prohibition of indirect discrimination thus aims to achieve equality of results in the absence of such justification. It is dealing with hidden barriers which are not easy to anticipate or to spot.
26. A third salient feature is that the reasons why one group may find it harder to comply with the PCP than others are many and various (Mr Sean Jones QC for Mr Naeem called them "context factors"). They could be genetic, such as strength or height. They could be social, such as the expectation that women will bear the greater responsibility for caring for the home and family than will men. They could be traditional employment practices, such as the division between "women's jobs" and "men's jobs" or the practice of starting at the bottom of an incremental pay scale. They could be another PCP, working in combination with the one at issue, as in Chief Constable of West Yorkshire Police v Homer [2012] ICR 704 , where the requirement of a law degree operated in combination with normal retirement age to produce the disadvantage suffered by Mr Homer and others in his age group. These various examples show that the reason for the disadvantage need not be unlawful in itself or be under the control of the employer or provider (although sometimes it will be). They also show that both the PCP and the reason for the disadvantage are "but for" causes of the disadvantage: removing one or the other would solve the problem."
"That leads to the second argument—that "undeserving" claimants, who have failed for reasons that have nothing to do with the disparate impact, may "coat tail" upon the claims of the deserving ones. This is easier to answer if the disadvantage is defined in terms of actual failure than if it is defined in terms of likelihood of failure (because only some suffer the first whereas all suffer the second). But in any event, it must be open to the respondent to show that the particular claimant was not put at a disadvantage by the requirement. There was no causal link between the PCP and the disadvantage suffered by the individual: he failed because he did not prepare, or did not show up at the right time or in the right place to take the test, or did not finish the task. A second answer is that a candidate who fails for reasons such as that is not in the same position as a candidate who diligently prepares for the test, turns up in the right place at the right time, and finishes the tasks he was set. In such a situation there would be a "material difference between the circumstances relating to each case", contrary to section 23(1) : para 4 above."
"The composition of the respective groups would not depend upon an individual's ability or inability to satisfy particular condition. It would depend, of course, on the individual's decision whether or not to continue in employment after the age of 65 and, also, on whether he or she survived to that age. The latter condition is essentially non-discriminatory, otherwise than on the ground of age. Age discrimination cannot be turned by statistics into sex discrimination."
Was there in fact sex or race tainting?
Piggy back claims
Conclusions
UPON HEARING COUNSEL FOR THE APPELLANTS, RESPONDENTS AND CROSS APPELLANTS AT A HEARING ON 5, 6, 7, 8, 9 NOVEMBER 2018
IT IS ORDERED THAT
Appeal A2/2018/0635: the Judges' claims
1. The Appellants' appeal in A2/2018/0635 is dismissed.
2. Accordingly, the Judicial Claimants' claims of age discrimination succeed.
3. Further, where a claim of equal pay or indirect race discrimination is made by a female or BAME Judicial Claimant, such a Claimant's claim of equal pay and/or race discrimination, succeeds.
4. By consent, the Court of Appeal makes no ruling on the 'piggy-back' issue.
5. The age discrimination claims by the Judicial Claimants are remitted to the Employment Tribunal for a remedy hearing to be dealt with by an Employment Judge who need not be the same judge as dealt with liability, such remission to be stayed pending the outcome of an application for permission to appeal and, if granted, appeal, to the Supreme Court.
6. The equal pay and indirect race discrimination claims are remitted to the Employment Tribunal on the piggy-back issue and remedy, such remission to be stayed pending the outcome of an application for permission to appeal and, if granted, appeal, to the Supreme Court.
7. The Appellants shall pay the Respondents and Cross-Appellants' costs of the appeals, on the standard basis, to be subject to a detailed assessment if not agreed.
8. The Appellants shall pay the solicitors for the McCloud Judicial Claimants £50,000 (inclusive of VAT of £8,333) on account of their costs within 49 days, such payment to be stayed for so long as there is an outstanding application for permission to appeal to the Supreme Court or, if such an application is granted, any outstanding appeal.
9. The Appellants shall pay the solicitors for the Mostyn Judicial Claimants £50,000 (inclusive of VAT of £8,333) on account of their costs within 49 days, such payment to be stayed for so long as there is an outstanding application for permission to appeal to the Supreme Court or, if such an application is granted, any outstanding appeal.
10. Permission to appeal to the Supreme Court is [granted/ refused].
Appeals A2/2018/0636, A2/2018/0505 & A2/2018/0647: the Firefighters' claims
9. The appeals in relation to age discrimination by the Secretary of State for the Home Department and the Welsh Ministers in A2/2018/0636, and the appeal of the Fire and Rescue Authorities in A2/2018/0647 are dismissed.
10. The Firefighter Claimants' appeal in A2/2018/0505 is allowed.
11. The Firefighter Claimants' cross-appeals in A2/2018/0636 and in A2/2018/0647 are allowed.
12. The Court of Appeal sets aside the ruling of Employment Judge Lewzey on liability in relation to age discrimination, and substitutes a finding that the Firefighter Claimants' claims of age discrimination are successful.
13. By consent, the Court of Appeal makes no ruling on the 'piggy-back' issue.
14. The age discrimination claims by the Firefighter Claimants are remitted to the Employment Tribunal for a remedy hearing to be dealt with by an Employment Judge who need not be the same judge as dealt with liability, such remission to be stayed pending the outcome of an application for permission to appeal and, if granted, appeal, to the Supreme Court.
15. The equal pay and indirect race discrimination claims are remitted to the Employment Tribunal on the prima facie indirect discrimination and piggy-back issues and remedy, such remission to be stayed pending the outcome of an application for permission to appeal and, if granted, appeal, to the Supreme Court and any remitted hearing if so ordered by the Supreme Court. Thereafter, the claims are to remain stayed in the Employment Tribunal, but with permission to the Firefighter Claimants to apply to the Employment Tribunal to lift the stay in the event that they may become material.
16. The Appellants shall pay the Respondents and Cross-Appellants' costs of the appeals, on the standard basis, to be subject to a detailed assessment if not agreed. The obligation is joint and several.
17. The Secretary of State for the Home Department shall pay the solicitors for the Respondents and Cross-Appellants' £50,000 on account of their costs within 49 days, such payment to be stayed for so long as there is any outstanding application for permission to appeal to the Supreme Court or, if such an application is granted, an outstanding appeal and remitted hearing if so ordered by the Supreme Court.
18. Permission to appeal to the Supreme Court is granted/ refused.