Revised statement of facts & grounds

As of 24 December 2013 we issued a revised statement of facts and grounds, supported by a witness statement of Alex Monaco, both set out on this site. These are essentially a much beefed-up version of the previous efforts found elsewhere on this site. The footnotes are set out right at the bottom of the document, and the paragraph numbering hasn’t come out properly here, but the content is exactly the same:

 

Statement of Facts & Grounds

 

IN THE HIGH COURT OF JUSTICE                                                                 CO/16163/2013

QUEEN’S BENCH DIVISION (ADMINISTRATIVE COURT)

 

B E T W E E N : –

THE QUEEN on the application of COMPROMISE AGREEMENTS LTD

Claimant

— and —

 

SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLS

Defendant

 

CLAIMANT’S AMENDED STATEMENT OF FACTS AND GROUNDS

 

References to page numbers in the Claimant’s bundle of evidence filed with these Grounds appear as [D / page number]; references to paragraph numbers in witness statements are given as [witness’ initials / paragraph number].

Introduction and summary

  1. On 28 July 2013 the Defendant made the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013 (‘the Order’). [D79-D81]  The Order imposes a cap of one year’s pay on compensatory awards for unfair dismissal (‘the one-year cap’).  By these amended grounds (which replace the original grounds in their entirety), the Claimant challenges the lawfulness of the Order.
  2. In summary, the Order is unlawful because, in making it, the Defendant:

(i)       failed to comply with the public sector equality duty (‘PSED’) set out in section 149 of the Equality Act 2010; [D75-D76] and

(ii)     breached his obligation under section 6 of the Human Rights Act 1998 (‘the HRA’) [D72-D74] to act compatibly with Article 14 of the European Convention on Human Rights (‘ECHR’). [D4]

  1. As to the breach of the PSED, the Defendant failed to have any regard — let alone “due regard” — to the likely or possible differential impacts of the one-year cap on pregnant women, mothers of young children, the disabled, people from ethnic minorities and women.  Some or all of these groups may be more likely than others to remain out of work for more than a year after being unfairly dismissed, and if so would be disproportionately affected by the one-year cap.  Moreover, some or all of these groups may in general have lower pay than others, which would result in the one-year cap generally resulting in a lower cap (and a greater restriction on recovery of actual losses) for members of these groups than for others.  The Defendant’s consideration of the differential impact of the cap on older workers was seriously flawed and did not amount to “due regard”.  These are all groups with protected characteristics for the purposes of section 149 and who thereby have the benefit of its operation.
  2. As to the failure to act compatibly with Article 14, the one-year cap:

(i)       falls “within the ambit” of Article 1 of the First Protocol (‘A1P1’) to the ECHR [D5] since, but for the cap, those who have been unfairly dismissed would have a right, enforceable under domestic law, to receive fuller compensation for losses suffered as a result of their unfair dismissal;

(ii)     discriminates:

(a)     indirectly on grounds of age (which falls within the protection in Article 14 against discrimination on grounds of “other status”), since older workers are more likely than others to remain out of work for more than a year after being unfairly dismissed[1];

(b)     directly on grounds of level of earnings (which is also a “status” for the purposes of Article 14 [D4]), since it imposes greater limitations on full recovery of losses on those with low pay than it does on those with higher pay;

(c)     indirectly on grounds of sex (which is expressly prohibited as a ground of discrimination by Article 14 [D4]), since the pay of women is in general lower than the pay of men (median weekly pay for male employees is 56% higher than it is for female employees[2]), so the one-year cap will in general result in women being subject to a lower cap than men;

(iii)   has not been shown by the Defendant to be justified.

Facts

The Claimant and its standing to bring this claim

  1. The Claimant is a private limited company which provides specialist employment law advice to employees.
  2. The Claimant’s founder and its guiding mind, Mr Alex Monaco, established the business with the aim of promoting access to justice and protection of employees’ rights.  Its motive in bringing this claim is to protect such rights.
  3. It is possible that the Claimant also has a small financial interest in the claim, and is directly affected by the one-year cap, since the cap may lead to a contraction in the market for the services provided by the Claimant. See Second Witness Statement of AM paragraph 5.
  4. As to the timing of the claim, it has been brought within three months of the making of the Order.  The Claimant issued this claim only after trying, without success, to find others who would be willing to challenge the one-year cap.  It issued the original claim on 24 October 2013.  It then secured the services of counsel acting pro bono and solicitors acting under a conditional fee agreement.  The conditional fee agreement was signed on 14 November 2013.  These Amended Grounds were then drafted.  In all the circumstances the claim has been brought promptly.  Alternatively, to the extent that the Court thinks that it is required, the Claimant applies for any necessary extension of time.  This is a matter of high public importance, which potentially affects all UK employees. Further, neither the Defendant nor any other party has suffered detriment by any alleged lack of promptitude.
  5. Protection against unfair dismissal is contained in Part X of the Employment Rights Act 1996.[D6-D38]  It is an extremely important right, first introduced by the Industrial Relations Act 1971. As the leading textbook on employment law, Harvey on Industrial Relations, puts it (Div DI, para 3):

Protection against unfair dismissal

“it marked a trend towards recognising that the employee has an interest in his job which is akin to a property right. A person’s job can no longer be treated purely as a contractual right which the employer can terminate by giving the appropriate contractual notice. So it provides a greater element of job security than is afforded at common law ….”[B258]

  1. In summary, the protection operates as follows.
  2. The right to claim unfair dismissal is dependent, in most cases, on the employee having accrued two years’ continuous employment:  sections 94 and 108. [D7 and D34-D37 respectively]
  3. Upon dismissal, an employee may present a claim to an employment tribunal that he or she has been unfairly dismissed:  section 111. [D39-D40]
  4. If the employment tribunal finds that the claimant was unfairly dismissed then (subject to issues such as mitigation and contributory fault) it will make an award of compensation consisting of two elements, namely:

(i)       the compensatory award:  this is designed to compensate the claimant for the actual losses (e.g. loss of wages) he or she has suffered as a result of being unfairly dismissed.  Only this element is affected by the cap;

(ii)     the basic award:  this is calculated by multiplying (a) the number of years, capped at 20, for which the claimant was continuously employed by the employer by (b) his or her weekly pay, subject to a cap currently set at £450 by (c) an age-related factor of 0.5 or 1 or 1.5. The effect is that the basic award will fall within the range £0 to £13,500.

The tribunal also has the power to make orders for reinstatement and re-engagement (combined with compensation), though these are rarely exercised.  See in particular sections 112, 118, 119 and 123. [D40, D45-D46, D48-D49]

  1. The compensatory award has always been subject to a fixed cap in terms of an amount of money, which is adjusted by secondary legislation from time to time (‘the fixed cap’).  The fixed cap is currently set at £74,200:  section 124. [D49-D50]  The amount of the fixed cap was not altered by the Order.
  2. In September 2012 the Defendant’s department, the Department for Business, Innovation and Skills (‘BIS’), published “Unfair Dismissal Compensatory Awards:  Impact Assessment”. [B89-B110]  This document described two proposals which were being considered by the government:  first, to cap compensatory awards for unfair dismissal at one year’s pay, in addition to retaining the fixed cap, so that the maximum payable would be the lower of the one-year cap and the fixed cap; or second, to reduce the fixed cap.  The stated aims of the proposals were to set an “appropriate cap”, to “improve certainty of the amount of award that businesses will pay” and to “make expectations of awards more realistic among claimants”.  [B91]  The latter aim arose out of unfair dismissal claimants said to be expecting awards which were high compared with average awards.
  3. At page 15, the Defendant’s overall conclusion as to the equality impact of the proposed one-year cap was summarised as follows:

The Defendant’s proposal to introduce a one-year cap and impact assessment

“Wider impacts

We are unable to determine whether … the introduction of a limit linked to earnings would have a disparate impact on any particular group which shares a protected characteristic.” [B104]

  1. Annex A to the impact assessment was an “equality impact assessment” (‘EIA’) which gave further consideration to this issue. [B105-B109]
  2. In relation to gender, the EIA merely stated:

“Gender

60% of employment tribunal claimants and 65% of UD claimants in SETA [Survey of Employment Tribunal Applicants] 2008 were male.  This is higher than the proportion in the workforce as a whole (51 per cent), as given in the LFS [Labour Force Survey].

Men are also more likely to earn higher annual salaries than women so they may be more likely to be affected by a reduction in the cap, for example 13% of men earn over £50,000 a year compared to only 6% of women (based on gross full-time annual salary data from ASHE [Annual Survey of Hours and Earnings]).”[B106]

The EIA therefore contained no analysis of the possible differential impacts of the one-year cap on by gender.  Further, it contained no analysis of the impact of the one-year cap on pregnant women and mothers, despite the fact that pregnancy and maternity are protected characteristics under for the purposes of the PSED.

  1. In relation to ethnicity, the EIA merely stated:

“91% of UD claimants in SETA were white.  This is the same as the workforce in general in 2008 where 91% of LFS respondents reported being white, 4% of UD claimants were black, compared to 1% in the workforce, 3% Asian compared to 5% in the workforce and 1% mixed race compared to 2% in the workforce.  Eight-six per cent of employment tribunal claimants across all jurisdictions were white, 5% black, 5% Asian, 2% mixed race and 2% other.”[B106]

The EIA therefore contained no analysis of the possible differential impacts of the one-year cap on people from particular ethnic groups.  For example, there was no consideration of whether re-employment rates are or might be relatively low amongst particular ethnic groups and/or amongst minority ethnic people generally, and (if so) whether that would result in the cap having a differential adverse affect on those groups.

  1. In relation to disability, the EIA merely stated:

“Disability

In SETA 2008 twenty per cent of unfair dismissal claimants and 22% of employment tribunal claimants overall had a long-standing illness, disability or infirmity at the time of their employment claim, which is very close to the proportion among employees in general (22 per cent).  Twelve per cent had a long-standing illness, disability or infirmity that limited their activities in some way, again similar to the workforce as a whole (10 per cent) and slightly lower than employment tribunal claimants overall (15 per cent).” [B106]

Again there was no attempt to deal with the possible differential impact of the cap on disabled people.

  1. In relation to age, the EIA stated the following:

“Age

47% of respondents on the SETA (2008) claimant survey were 45+ compared to 38% of respondents to the Labour Force Survey and this was higher still for claimants whose primary jurisdiction was unfair dismissal at 52%.

This may be because older people are less likely to find another job quickly after leaving one.

ONS [Office for National Statistics] redundancy figures20 show that in 2012 Q4 the re-employment rate for individuals aged 50+ was 21.9% 3 months after being made redundant, 11% lower that for all aged 16+ (32.9%).21  If re-employment rates are still lower for individuals aged 50+ one year after leaving a job then they may be adversely affected by a cap based on annual salary as their losses may be greater than for one year.  However this analysis is not possible due to the methodology used in LFS22…” [B106]

  1. The footnotes to this passage read as follows:

“20.  ONS redundancy figures 2012, based on ONS [Office of National Statistics] analysis of LFS data.

21.  This trend is present in previous quarters and years where there is data available.

22.  LFS is a rotating panel survey based on 5 quarters and lot of people would have ‘rotated out’ of the panel 1 year after having been made redundant.” [B106]

  1. Under the heading “Summary”, the EIA stated:

“The data indicates that certain groups who share a protected characteristic are more likely to bring an unfair dismissal claim than other groups (e.g. men more likely to bring a claim than women, those over 45 years old more likely to bring a claim than those under 45 years).  However, the data does not tell us the protected characteristics of those claimants who were successful at the Employment Tribunal.  Similarly, the data does not tell us what protected characteristics were present in those claimants who received certain levels of award (e.g. we do not know how many of the compensatory awards above £30,000, £40,000, or £50,000 were awarded to men and how many to women).  As a result, we are unable to determine whether … the introduction of a limit linked to earnings would have a disparate impact on any particular group which shares a protected characteristic.  However, as the Economic Impact Assessment notes, the vast majority of awards currently made are below the proposed levels for a reduced cap and therefore the impact on claimants will be slight in any event.”[B107]

Consultation and government response

  1. Also in September 2012 BIS commenced a 10-week consultation on various proposed changes to employment law, including the introduction of the one-year cap. [B34-B88]
  2. In January 2013 BIS published the government’s response to the consultation,[B157-B204] in which the Minister for Employment Relations and Consumer Affairs stated that she was recommending the introduction of the one-year cap, but no change to the fixed cap.   The response records that, during consultation:

“A number of trade unions and legal representatives (around 22% of all responses) felt that certain groups are more likely to take longer than 12 months to find a new job.  These groups included older workers, younger workers, and disabled workers.  One legal representative remarked that, based on figures from the Office of National Statistics, ‘the older the worker, the higher the chance that they will be out of work for longer than one year.’” [B186]

  1. In response, the government stated:

“We have no evidence on whether certain groups are systematically more likely to receive an award higher than 12 months’ salary.  However, we do know that the majority of awards currently amount to significantly less than 12 months’ pay, with the median award less than a fifth of median earnings.  We therefore do not believe that there will be a disproportionate impact on these groups.” [B186]

The government’s final impact assessment

  1. On 17 January 2013, BIS published the government’s “final impact assessment” of the proposals. [B205-B226]  This was largely a word-for-word repetition of the September 2012 impact assessment.  The passages from the September 2012 impact assessment which are quoted at §§15 to 23 above were repeated in the final impact assessment.  Amongst those minor changes which were made was the addition of a passage on the consultation, which stated:

“…  Many trade unions and a number of legal representatives felt there would be a discriminatory impact on certain groups of claimants on introducing a pay based cap.  As the Equality Impact Assessment in Annex 1 notes, there is no evidence that supports this argument.”[3] [B217]

  1. The wording of the EIA annexed to the final impact assessment was largely unchanged from the wording of the EIA annexed to the September 2012 impact assessment.  Apart from the provision of updated figures on salaries by age, the only significant change was the addition of a paragraph which contained substantially the same text as that quoted at §26 above (from the consultation response), preceded by following:

“Several responses, from trade unions and legal representatives, to the consultation highlighted that certain groups, including older and younger workers and the disabled, may be systematically more likely to take longer than 12 months to find a new job following an unfair dismissal, in which case a 12 months’ salary cap may have a disproportionate negative impact.  However, it should be stressed that awards can often be much lower than lost earnings, and that therefore the cap may not come into play even where a claimant has not been in employment for over 12 months.” [B225]

The introduction of the one-year cap

  1. On 28 July 2013 the Defendant made the 2013 Order, which imposes the one-year cap by inserting in section 124 of the Employment Rights Act 1996 a provision that the compensatory award for unfair dismissal cannot exceed “52 multiplied by a week’s pay of the person concerned[4]. [D79]  The one-year cap will apply in addition to the fixed cap which is currently set at £74,200, so that the lower of the two caps will be imposed in any claim.
  2. The Order came into effect on 29 July 2013.  It applies in relation to all dismissals where the effective date of termination was on or after 29 July 2013.
  3. The Order was accompanied by an “explanatory memorandum” written by BIS.  [D82-D85]  As to the reasons for introducing the one-year cap, the memorandum states:

“7.2 … This additional cap is intended to address unrealistic expectations of the level of award that can be expected in unfair dismissal claims…

7.3  Claimants, with widely varying circumstances, may expect £74,200 at tribunal when in reality awards are rarely anywhere near this amount.  The perception created by this gap means employers are less likely to take on staff, for fear of being liable for huge sums.

7.4  The Government has concluded, after public consultation and considering various options, that changing the legislation is the most effective means of addressing this issue.  Simply publicising information about average levels of award does not impact on perception and expectation as long as the legislation still permits for a very high level of award…”[D83]

  1. As to the consultation, the memorandum states:

“8.2 … There was broad support for introducing a pay based cap.

8.3  Of the 119 respondents who answered, 48% were in favour of the introduction of a cap based on 52 weeks’ pay, 45% were opposed and 7% were not sure.  Three of the respondents did not favour the proposal, however, based on that [sic] fact that 52 weeks was too long.  If these respondents were considered as in favour of this cap (but just concerned about the number of weeks’ [sic] chosen), then overall 50% of all respondents would have favoured the introduction of a pay cap; comprising 95% of all of the business respondents…”[D84]

  1. The memorandum refers to the 17 January 2013 final impact assessment. [at § 10.3, D85]
  2. The effect of the one-year cap is to reduce compensation which would otherwise be payable to individuals who have been unfairly dismissed and who:

The effect of the one-year cap

(i)       lose, or are likely to lose, more than a year’s pay because of their dismissal, typically because they are out of work for more than approximately a year[5]; and

(ii)     earn less than such sum as would entitle them to £74,200 or more in respect of one year’s lost employment; i.e. people whose compensation would be limited by the fixed cap in any event.  Since median national weekly earnings are £26,462[6], for the vast majority of the national workforce, a loss of one year’s earnings will not be caught by the fixed cap.

  1. The cap directly affects such individuals where they are found by an employment tribunal to have been unfairly dismissed.  However, it also affects the value of undetermined claims and potential claims for unfair dismissal by such persons.  It therefore may well dissuade some individuals from presenting claims for unfair dismissal; for example, if they are on a very low annual salary, the one-year cap may dissuade lawyers from taking on their case on a contingency fee basis.  Further it is likely to cause a proportion of employees to settle unfair dismissal claims for lower sums than they otherwise would:  the Defendant’s impact assessment recorded that 41% of tribunal claims are the subject of ACAS-conciliated settlements; and that 25% of claims are withdrawn, a proportion of which are likely to be withdrawn on terms of settlement. [B95]  It also reduces the disincentive against employers unfairly dismissing employees who are unlikely to find work within a year.  It may therefore mean that more employees who are likely to have difficulty finding alternative employment lose their jobs unfairly.
  2. The cap has a disproportionate adverse effect on groups of people who are less likely than others to obtain alternative and equally remunerative employment within 12 months of being unfairly dismissed.
  3. Older people, i.e. those over 50 years of age, are more likely than others to remain unemployed for more than 12 months after being unfairly dismissed.  The likelihood that someone will remain unemployed for 12 months is liable to increase with any increase in age above 50, e.g. those aged 63 are even less likely than those aged 50 to find another job.  These conclusions are based on the following.
  4. First, the Employment Appeal Tribunal, in a division chaired by its then President,  held in MacCulloch v Imperial Chemical Industries PLC [2008] ICR 1334 that the employment tribunal – which has specialist expertise in this field – was entitled to find, without the need for evidence, that older workers find it harder to find work than younger workers. Elias P stated at §§15 and 48:

Older people

“A second aim relied upon by the employers, also accepted by the tribunal, was that it was legitimate to give a larger financial payment to older workers because they were more vulnerable in the job market and it gave them some protection from the stress which losing employment would otherwise create. The tribunal concluded that it did not require evidence from any express research study to support that conclusion. The tribunal observed that it had ample evidence, from its own knowledge, that older workers out of a job had real difficulty in obtaining new employment…

It was also submitted that the employers should have led evidence about this. We do not agree. The tribunal was fully entitled to draw from its own experience—shared we would suggest by all in the industrial relations’ field—that older workers find it harder to find work than younger workers, notwithstanding the existence of age discrimination laws.”

This Court should follow the approach in MacCulloch and/or itself take judicial notice of the fact that it is harder for older workers to find work than younger workers.  This means that they are more likely to be out of work for more than one year following unfair dismissal, and are therefore disproportionately adversely affected by the one-year cap.

  1. Second, such statistical evidence as was referred to by the Defendant before making the Order supports the conclusion that older workers are less likely to find alternative and equally remunerative work within a year.  The ONS statistics from Q4 of 2012 described in the EIA indicated that, within three months of being made redundant, 32.9% of adult workers found another job, whereas only 21.9% of workers over the age of 50 found another job. [B106]  Put another way, the average person who was made redundant was 1.5 times as likely to find another job within three months as the average redundant worker over the age of 50.  Of course, this is a comparison between the over-50s and all adults, the latter being a group which includes the over-50s.  Therefore the disparity would be even greater if a comparison were to be drawn between the over-50s and the under-50s.  There is no basis for thinking that this disparity would be smaller in relation to re-employment rates after 12 months: on the contrary, the Defendant’s consultation response referred to statistical evidence that 40% of unemployed individuals over the age of 50 have been unemployed for more than a year. [B186]
  2. Third, there is additional statistical evidence, not referred to in the EIA, which indicates that older workers are less likely to find alternative and equally remunerative work within a year.

(i)       ONS data show that a lower re-employment rate for the over-50s is not unique to Q4 of 2012.  On the contrary, those data indicate that re-employment rates for the over-50s were lower in every single quarter for which data were available, i.e. from 1997 onwards[7].

(ii)     The ‘OECD Employment Outlook 2013’[8], which includes analysis of re-employment data from a number of different countries, including the UK, states:

“In most of the countries examined, older workers… take longer to get back into work and suffer greater (and more persistent) earnings losses…  Young workers generally find work relatively quickly after displacement…

Older workers… also tend to suffer greater-than-average earnings losses after displacement.”[9]

“However, older people (aged 55-64 years) are less likely to be working within a year of displacement than prime-aged people in all the countries examined…”[10]

As to the UK specifically, graph C in figure 4.4 of the OECD report shows that the ratio of (a) the re-employment rate for those aged 55 to 64 to (b) the re-employment rate for those aged 35 to 44 is about 0.75:1.

  1. Fourth, consultees’ responses supported the view that certain groups — which “included older workers, younger workers, and disabled workers” — find it more difficult to find alternative work.
  2. Women are, in general, paid less than men, as is apparent from the following.

Women

(i)       ONS research[11] has found that the “gender pay gap” — defined as the difference between men’s and women’s median hourly pay excluding overtime for full-time employees — stood at 9.6% in 2012. [B227]

(ii)     The same research found that, looking at all employees (part-time and full-time), the hourly gender pay gap is even larger, namely 19.7% in 2012[12].  That is because more women than men work part-time, and working part-time generally involves lower hourly rates of pay.

(iii)   The gender pay gap for all employees’ weekly / annual pay is yet larger because more women work part-time and because, by definition, part-timers are paid for fewer hours’ work each week / year than full-timers.  According to the same research[13], in 2012, median gross weekly earnings for all male employees were £497.60, and for all female employees were £319.  This means that the weekly median pay for employed men is 56% higher than it is for employed women[14].

  1. Because women are generally paid less than men, the one-year cap has a differential adverse impact on women.  The lower someone’s pay, the lower the level of the one-year cap (and therefore the greater the potential bar to full recovery of actual losses) in their case.  Therefore the one-year cap generally imposes a lower cap on compensation for women than it does on compensation for men.  Applying the percentage difference at 42(iii) above, the median one-year cap (calculated as 52 multiplied by a week’s pay) for men is likely to be 56% higher than it is for women.
  2. The Claimant also believes that pregnant women and young mothers, people from ethnic minorities and disabled people are less likely than others to find new work within a year of being unfairly dismissed.  Moreover, if these groups are generally paid less than others then the one-year cap is liable to have a differential adverse impact on them; the lower someone’s pay, the lower the level of the one-year cap (and therefore the greater the potential bar to full recovery of actual losses) in their case.  At the very least, it is plainly possible that such groups would be disproportionately disadvantaged by the one-year cap.
  3. The public sector equality duty (‘PSED’) is set out in section 149 of the Equality Act 2010.  [D76-D77]  Section 149(1) states:

Ethnicity, disability, pregnancy and maternity

 

Grounds of claim

 

Ground 1:  breach of the public sector equality duty

The law

(1) A public authority must, in the exercise of its functions, have due regard to the need to—

(a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act;

(b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it;

(c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it. [D75]

  1. Section 149(3) states:

“(3) Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to—

(a) remove or minimise disadvantages suffered by persons who share a relevant protected characteristic that are connected to that characteristic;

(b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it…” [D75]

  1. By section 149(7), the relevant “protected characteristics” are: age; disability; gender reassignment; pregnancy and maternity; race; religion or belief; sex; and sexual orientation. [D76]
  2. Due regard” is the “regard that is appropriate in all the circumstances”:  R (Baker) v Secretary of State for Communities and Local Government [2009] PTSR 809 at §31 per Dyson LJ.
  3. The Divisional Court at §§90 – 96 in R (Brown) v Secretary of State for Work and Pensions [2009] PTSR 1506 set out a number of principles governing the PSED, including the following:

“…

Secondly, the “due regard” duty must be fulfilled before and at the time that a particular policy that will or might affect disabled people is being considered by the public authority in question. It involves a conscious approach and state of mind…  Attempts to justify a decision as being consistent with the exercise of the duty when it was not, in fact, considered before the decision, are not enough to discharge the duty…

Thirdly, the duty must be exercised in substance, with rigour and with an open mind. The duty has to be integrated within the discharge of the public functions of the authority. It is not a question of “ticking boxes”…

Fifthly, and obviously, the duty is a continuing one.

…”

  1. It is important to note the words “or might” in the second principle from Brown (the duty must be fulfilled when a particular policy “will or might” affect disabled people).  In R (Hurley) v Secretary of State for Business Innovation & Skills [2012] Eq LR 447 Elias LJ accepted at §96 that “if there is any doubt about whether a particular statutory objective is engaged, the issue needs to be explored before any conclusion can be safely reached that it is not.”  This means that it is not a necessary part of the Claimant’s case to show that the one-year cap would definitely have a disparate adverse impact on protected groups.  On the contrary, it is the very purpose of the PSED to discover, on analysis by the public body, whether there would be such an impact.
  2. Where the protected characteristics are potentially affected by a proposed measure, “the decision-maker is obliged to conduct a rigorous examination of the measure’s effects, including due enquiry where that is necessary. He does not, however, have to undertake a minute examination of every possible impact and ramification”:  R (MA) v Secretary of State for Work and Pensions [2013] Eq LR 972 at §72 per Laws LJ.
  3. Indeed, it is a fundamental principle of public law, as enunciated by Lord Diplock in Secretary of State for Education v Tameside [1977] AC 1014, at 1065, that the decision-maker must “ask himself the right question and take reasonable steps to acquaint himself with the relevant information to enable him to answer it correctly.”  Accordingly, in order to comply with the PSED, the public authority must “have due regard to the need to take steps to gather relevant information in order that it can properly take steps to take into account disabled persons’ disabilities in the context of the particular function under consideration” (per Aikens LJ in Brown at §85).  As the Court explained in R (Lunt) v Liverpool City Council [2010] 1 CMLR 14 Admin at §44: a “lawful exercise of discretion could not have been performed unless the Committee properly understood the problem, its degree and extent”.
  4. To similar effect, chapter 5 of the ‘Technical Guidance on the Public Sector Equality Duty England’,[B1-B33] issued by the Equality and Human Rights Commission under its powers to provide information and advice under s.13 of the Equality Act 2006[15] [D77-D78] and which continues in effect, emphasises the importance of a “sound evidence base” for the purpose of public decisions which engage the PSED.  (See §§5.15 – 5.36).  [B9-B19]  §5.20 of the guidance states:

“It is not acceptable for a relevant body to say that it cannot meet the duty because it does not have evidence about a relevant issue. If a body subject to the duty does not have sufficient evidence to have due regard it will need to obtain this.” [B12]

  1. If a risk of adverse impact is identified, consideration must be given to measures to avoid that impact before fixing on a particular solution”: R(W) v Birmingham [2011] BGLR 1 at §151.

The standard of review when the court assesses whether or not there has been compliance with the PSED is not the ‘Wednesbury’ standard; it is higher than that.  The court should reach its own conclusion as to whether or not “due regard” was had:  see R (Williams) v Surrey CC [2012] EqLR 656 (Admin) at §§18 – 25.  However, the “weight” to be attached to equality needs when making a decision is primarily a matter for the decision-maker.

The Defendant’s breach of the PSED

  1. The Defendant breached the PSED in the following ways.
  2. First, he gave no consideration at all to the likely or possible impact of the one-year cap on pregnant women and mothers, even though these are two of the characteristics which are “protected” under section 149, [D76] and despite the potential impact of the cap on such people.  The EIA did not even mention these characteristics when assessing the equalities impact of the one-year cap.  There was therefore a clear failure to give “the conscious consideration of the full range of the statutory criteria which the law requires” (per Elias LJ in Hurley at §91).  At the very least, the one-year cap “might” adversely affect pregnant women and mothers, which meant the Defendant was under a duty to consider this issue:  see §44 above.
  3. Second, similarly, he gave no consideration at all to whether disabled people would be adversely affected by the one-year cap on account of difficulty in finding alternative work after they are unfairly dismissed.
  4. Third, similarly again, he gave no consideration at all to whether people from particular ethnic groups, or minority ethnic people generally, would be adversely affected by the one-year cap on account of any difficulty in finding alternative work after they are unfairly dismissed.
  5. Fourth, he gave no consideration to whether women would be adversely affected by the one-year cap on account of the fact that it will generally be lower for women than for men, because women are paid less than men.  See §§42 to 43 above.
  6. Fifth, he failed to obtain adequate evidence to assess the likely impact of the one-year cap on protected groups:

(i)       It follows from the first two points above that he failed to obtain any evidence about the re-employment rates of pregnant women, mothers and the disabled, in order to assess the likely impact of the one-year cap on such groups.

(ii)     His conclusion that “we are unable” to determine whether there was likely to be a disparate impact on protected groups (see §§16 and 23 above) was inadequate.  In circumstances where it should have been plain that, at the very least, there was a potential disparate impact on certain groups, he was obliged to gather such evidence as was necessary to reach an informed view on this issue.

(iii)   The Defendant had available to him evidence from which he could have assessed the likely impact of the one-year cap on certain protected groups.  The Claimant understands that the Defendant has access to an archive of “ET1” claim forms.  These forms record the claimant’s date of birth; whether or not the claimant is disabled; gender; and annual pay. [B278-B295]  All judgments are stored at Bury St Edmunds, and record (in cases where the tribunal is required to determine quantum) the level of any award.  The Defendant could have used a sample of this evidence in order to analyse the proportion of unfair dismissal claimants in general who received awards of more than a year’s pay; and the proportion of (a) women, (b) the disabled and (c) older people who received awards of more than a year’s pay. [B278-B295]  If the latter proportions were significantly greater than the former then this would demonstrate that the one-year cap would have a disparate adverse impact on the latter groups.

  1. Sixth, in concluding “we therefore do not believe that there will be a disproportionate impact on these groups” (see §26 above), the Defendant reached a view which was not reasonably open to him on the basis of the evidence available, and which relied on flawed reasoning:

(i)       In relation to older people, all of the available evidence pointed one way, namely, that the one-year cap would have a differential adverse effect on such people.  Such was the conclusion indicated by common knowledge (§37 above), the available statistics (§39 above) and consultees’ responses (§41 above).  The Defendant therefore acted irrationally in saying that “there is no evidence that supports” the argument that certain groups (including older people) would be adversely affected by the one-year cap (see §§26 and 27 above).

(ii)     The Defendant gave illogical reasons for dismissing the evidence of a disparate impact on older people.

(a)     Having referred to the ONS statistics on the lower re-employment rates amongst over-50s three months after redundancy, the EIA stated:  “If re-employment rates are still lower for individuals aged 50+ one year after leaving a job then they may be adversely affected by a cap based on annual salary as their losses may be greater than for one year” (emphasis added).[B106]  In fact, lower re-employment rates after a year would (not “may”) mean that the cap has a disparate adverse effect on older people.

(b)     The Defendant committed a non sequitur by stating:  “However, we do know that the majority of awards currently amount to significantly less than 12 months’ pay, with the median award less than a fifth of median earnings.  We therefore do not believe that there will be a disproportionate impact on these groups” (§26 above).  The fact that the one-year cap would not affect the majority of claims generally does not mean that it would have no disproportionate impact on certain protected groups.

(iii)   The Defendant belittled the effect of the one-year cap by suggesting that it would affect only those individuals who receive from the tribunal an award of compensation for unfair dismissal.  (See p.13 of the impact assessment:  “…  only a very small number of claimants would be likely to be affected…  around 5% of claimants who receive an award would be affected by the individual cap (so around 0.3 per cent of all claims disposed of).” [B102]  The latter figure appears to rely on the fact that only 8% of tribunal claims are “successful at hearing”:  see p.6 of the impact assessment). [B95]  For the reasons explained at §35 above, the cap does not affect only those individuals who receive an award from the tribunal.  It also has a clear impact, for example, on many claims which are settled.  P.6 of the impact assessment records that 41% of tribunal claims are the subject of ACAS-conciliated settlements; and of the 25% of claims which are withdrawn, many will be withdrawn on terms of settlement. [B95]

(iv)    There was no evidence to support the Defendant’s “belief” that there would be no disproportionate impact.  Such evidence as was reviewed by the Defendant was very limited and contrary to that conclusion.

  1. Seventh, the Defendant failed to attempt any analysis of how any discriminatory impact might be mitigated.  (As to its obligation to do so, see the passage from W quoted at §54 above.)  For example, there was no analysis of how any discriminatory impact might be reduced by setting the cap by reference to a longer period (e.g. two years) of a claimant’s earnings, and of whether a cap set by reference to a longer period (e.g. a two-year cap) would achieve the Defendant’s aims.
    1. Article 14 provides:

Ground 2:  incompatibility with Article 14 of ECHR

The law

“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.” [D4]

  1. Article 14 therefore prohibits discrimination on a number of express grounds (sex, race, etc) as well as on grounds of “other status”.   In Clift v UK (Application No. 7205/07) (13 July 2010), at §§55 to 60, the ECtHR held that “other status” must be given a wide meaning.  It is not confined to characteristics which are “personal” in the sense that they are innate or are inherently linked to a person’s identity or personality.  For example, holding a particular type of planning permission is enough to amount to “other status” (see Clift at §58).
  2. The domestic courts have also recognised that “other status” is to be interpreted broadly.  Age falls comfortably within the broad meaning of “other status” for the purposes of Article 14.  See dicta in e.g. R (RJM) v Work and Pensions Secretary [2009] 1 AC 311 at §§36 to 41; Humphreys [2012] 1 WLR 1545 at §20; and Knowles v Secretary of State for Work and Pensions [2013] EWHC 19 (Admin) at §§70 to 71 (whether a person has a private or public sector landlord amounts to other status).  In Hurley, the Defendant accepted that “persons from the lower socio-economic groups” have a protected “status” for the purpose of Article 14:  see §29.
  3. Discrimination on any of the grounds listed in Article 14 may be direct or indirect.  In either event, if it is justified as a proportionate means of pursuing a legitimate aim, then it will be compatible with Article 14 and therefore lawful.
  4. For Article 14 to apply, the matter complained of must fall “within the ambit” of one of the other Convention rights:  Ghaidan v Godin-Mendoza [2004] 2 AC 557 at §10.
  5. A1P1 provides:

“(1) Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

(2) The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” [D5]

  1. The Grand Chamber in Stec v United Kingdom (Admissibility) (2005) 41 EHRR SE18 explained at §54 that where a Contracting State “has in force legislation providing for the payment as of right of a welfare benefit – whether conditional or not on the prior payment of contributions – that legislation must be regarded as generating a proprietary interest falling within the ambit of Article 1 of Protocol No. 1 for persons satisfying its requirements”.  The test for determining whether a particular welfare benefit falls “within the ambit” of A1P1 was explained at §55 (emphasis added):

“In cases, such as the present, concerning a complaint under Article 14 in conjunction with Article 1 of Protocol No. 1 that the applicant has been denied all or part of a particular benefit on a discriminatory ground covered by Article 14, the relevant test is whether, but for the condition of entitlement about which the applicant complains, he or she would have had a right, enforceable under domestic law, to receive the benefit in question (see Gaygusuz and Willis, also cited above, §34).  Although Protocol No. 1 does not include the right to receive a social security payment of any kind, if a State does decide to create a benefits scheme, it must do so in a manner which is compatible with Article 14.”

The instant case

  1. The right to compensation for unfair dismissal falls “within the ambit” of A1P1, since that right is a “possession” within the meaning of A1P1. [D5]  “Possessions” for this purpose include enforceable claims for compensation (see Matthews v Ministry of Defence [2002] 1 WLR 2621 at §72 per Lord Phillips MR) and even legitimate expectations of obtaining effective enjoyment of a property right (JA Pye (Oxford) Ltd v UK (2008) 46 EHRR 45 at §61).
  2. Since the Claimant’s case is not that there is a substantive breach of A1P1 per se, but rather that the one-year cap falls within the ambit of A1P1 for the purposes of Article 14, the appropriate test on the “ambit” question is that set out in Stec.  That test is passed here:  but for the one-year cap, claimants who have been unfairly dismissed and whose losses exceed a year’s pay would otherwise have an enforceable right to compensation exceeding a year’s pay.
  3. The one-year cap entails three types of discrimination which are prohibited by Article 14.
  4. First, on account of the disparate impact described at §§37 to 41 above, the one-year cap indirectly discriminates against older people.
  5. Second, the one-year cap discriminates directly against people with low pay and/or of lower socio-economic status.  Being on low pay and/or of lower socio-economic status is a “status” for the purposes of Article 14; see Hurley and §§64 to 65 above.  The one-year cap is set in each individual’s case by reference to their annual pay.  It is therefore lower for people with low pay.  This means that it imposes a greater limitation on recovery of actual losses on those with low pay than it does on those with higher pay.  This can be illustrated by a hypothetical example.  Two individuals who are unfairly dismissed each suffer losses of £50,000 as a result.  One of them earned £100,000 a year, and took 6 months to return to work; the other earned £25,000 a year, and took two years to return to work.  Even though their losses are the same, the one-year cap does not prevent the former from receiving full compensation of £50,000; but the one-year cap restricts the latter’s compensatory award to £25,000 because of his low earnings.
  6. Third, the one-year cap discriminates indirectly on grounds of sex, since the pay of women is in general lower than the pay of men.  The median one-year cap for men is likely to be 56% higher than it is for women (see §§42 to 43 above).  The one-year cap therefore places generally greater limitations on recovery of actual losses by women than by men.
  7. The onus is therefore on the Defendant to show that the one-year cap is justified for the purposes of Article 14 i.e. was a proportionate means of attaining a legitimate aim. In the explanatory memorandum which accompanied the 2013, the Defendant stated that the aim of the one-year cap is “to address unrealistic expectations of the level of award that can be expected in unfair dismissal claims”. [D82-D85]  The one-year cap is not a proportionate means of attaining a legitimate aim because:

(i)       the means (a one-year cap) are not rationally connected to the end (adjusting expectations);

(ii)     the end could be achieved by less discriminatory means, e.g. informing people about the average and likely levels of compensatory awards; and

(iii)   the benefit does not outweigh the discriminatory effect.

  1. To the extent that the Defendant’s aim was to provide “certainty of the amount of award that businesses will pay”, as it said in September 2012, [B91] there was no reason why a one-year cap was required, so for the same reasons this was not a proportionate means of achieving a legitimate aim.

 

Conclusion and relief sought

  1. For the reasons set out above, the 2013 Order was unlawful.
  2. The Claimant seeks an order quashing the 2013 Order.

 

COMPROMISE AGREEMENTS LTD

 24 December 2013

 

 



[1] The Claimant also believes it is likely that women (especially pregnant women and young mothers), people from ethnic minorities, disabled people and people from deprived backgrounds are less likely than others to find new work within a year of being unfairly dismissed.  That would mean that the one-year cap gives rise to indirect discrimination on grounds of sex and race (grounds of discrimination which are expressly prohibited by Article 14) and on grounds of pregnancy, maternity, disability and socio-economic status (each of which falls within the protection in Article 14 against discrimination on grounds of “other status”).  However, the Claimant has not yet obtained the evidence to allow such grounds to be asserted.  If the Claimant obtains such evidence then it will apply to re-amend this claim accordingly.

[2] See §42(iii) below.

[3] P.12.

[4] For these purposes a week’s pay falls to be calculated in accordance with Chapter 2 of Part 14 of the Employment Rights Act 1996. [D39-D71]

[5] In fact, the one-year cap will bite on some people when they have been out of work for less than a year.  That is because the one-year cap is calculated as 52 multiplied by a “week’s pay”; a “week’s pay” is calculated in accordance with Chapter 2 of Part 14 of the Employment Rights Act 1996; [D39-D71] that method excludes benefits in kind, such as company car, petrol and maintenance (see Harvey on Industrial Relations at Division Q, para 221); [B261-B262] but the loss of benefits in kind falls to be compensated through the compensatory award for unfair dismissal.  So some claimants’ total losses will exceed the one-year cap even before they have been out of employment for a year.  Conversely, in other cases, the one-year cap will not bite unless the claimant is, or is likely to be, out of work for more than a year.  That is because a “week’s pay” should be calculated upon the basis of the employee’s gross weekly pay and not net weekly pay: Secretary of State for Employment v John Woodrow & Sons (Builders) Ltd [1983] ICR 582.  Since net losses are used when calculating compensatory awards, many claimants’ losses will not reach the one-year cap until they have been out of work for more than a year.  Despite such nuances, the Claimant proceeds on the basis that the one-year cap will typically bite when someone is out of work for approximately a year.

[6] This is the “2012 provisional figure” cited in the Defendant’s final impact assessment, page [B213] [internal page 8].

[7] See page B296.

[8] Pages B143 to B156.  The OECD report uses, in relation to the UK, data from the ‘Annual Survey of Hours and Earnings’ and the ‘Business Structure Database’.

[9] Internal page 192, second and third bullet points. [B146]

[10] Internal pages 201 to 202. [B149-B150]

[11] ‘Patterns of Pay: Results from the Annual Survey of Hours and Earnings, 1997 to 2012’ (February 2013), http://www.ons.gov.uk/ons/dcp171766_300035.pdf, page 1.

[12] Ibid, page 10. [B236]

[13] These data do not appear in ‘Patterns of Pay: Results from the Annual Survey of Hours and Earnings, 1997 to 2012’ (February 2013).  However, they do appear in ‘Annual Survey of Hours and Earnings, 2012 Provisional Results’ (November 2012) at http://www.ons.gov.uk/ons/dcp171778_286243.pdf, page 4. [B114]

[14] The difference may be expressed either as a percentage of women’s pay, or as a percentage of men’s pay.  56% is the difference expressed as a percentage of women’s pay.  The difference expressed as a percentage of men’s pay is 36%.

[15] The guidance is not a statutory code issued under section 14 of the Equality Act 2006.  However, it is admissible as evidence in legal proceedings; and any departure from this sort of non-statutory guidance must be justified:  R (Kaur) v London Borough of Ealing [2008] EWHC 2062 (Admin), §22 per Moses LJ.


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