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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Fasano v Reckitt Benckiser Group Plc & Anor [2025] EWCA Civ 592 (07 May 2025) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2025/592.html Cite as: [2025] EWCA Civ 592

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL
HIS HONOUR JUDGE SHANKS
[2024] EAT 7

		Royal Courts of Justice Strand, London, WC2A 2LL
		7 May 2025

This judgment was handed down remotely at 10.30am on 7 May 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

LORD JUSTICE LEWIS:

INTRODUCTION

1. This appeal concerns a claim that a former employee, the appellant, Mr Fasano, was discriminated against on the grounds of age. The first respondent, Reckitt Benckiser Group plc ("RB Group") was the parent company within the Reckitt Benckiser group of companies. The second respondent, Reckitt Benckiser Health Limited ("RB Health") was a wholly owned subsidiary of another company within the group. The appellant, Mr Fasano, had been employed by RB Health until 30 June 2019.
2. In brief, RB Group operated a long term incentive plan ("the LTIP"). That plan provided for benefits in the form of shares or share options to be awarded to senior personnel employed by different companies within the group. The 2015 LTIP provided that eligible persons would receive an award of shares or share options which would vest in May 2020 provided that certain performance conditions were satisfied. Those conditions were tied to the earnings per share of the group over a three year period. The appellant was entitled under the terms of his contract of employment with RB Health to participate in the 2015 LTIP. The appellant agreed with RB Health that his contract would terminate on 30 June 2019. Under the terms of the rules of the LTIP then in force he would have received a pro-rata award in May 2020 if the performance conditions were met. As it happened, they were not and the appellant received no award under the 2015 LTIP.
3. On 18 September 2019, RB Group amended the terms of the 2015 LTIP requiring those participating in the 2015 LTIP to be employed as at 18 September 2019 in order to benefit from amended performance conditions in May 2020. Those amended conditions provided for payment of 50% of the award irrespective of whether other performance conditions were met. The appellant was not eligible for an award under the amended LTIP rules as he was not in employment on 18 September 2019. He brought a claim in an employment tribunal against both his former employer, RB Health, and RB Group, alleging that he had been subjected to indirect discrimination on the grounds of age contrary to sections 19 and 39 of the Equality Act 2010 ("the 2010 Act"). He alleged that the requirement that he be in employment on 18 September 2019 in order to benefit from the amended performance conditions was a provision, practice or criterion ("PCP") which put him at a particular disadvantage because of his age. He alleged that RB Health was liable by virtue of section 109 of the 2010 Act as RB Group had acted as agent of RB Health in making the changes. He said that RB Group, as agent, was liable by virtue of section 110 of the 2010 Act.
4. The employment tribunal held that RB Group was acting as the agent of RB Health when it amended the terms of the rules of the 2015 LTIP. It held, however, that the PCP pursued a legitimate aim, namely to encourage retention of staff, and was a proportionate means of achieving that aim. It therefore dismissed the claim.
5. On appeal, the Employment Appeal Tribunal ("EAT") held that the PCP applied by RB Group was not capable of achieving the legitimate aim of retaining staff and so was not justified. It held, however, that RB Group were not acting as the agent of RB Health and neither RB Health nor RB Group was liable by reason of sections 109 and 110 of the 2010 Act. It, therefore, dismissed the appeal on that basis.
6. The appellant appeals against the finding that RB Group was not acting as agent of RB Health. By a respondent's notice, the two respondents sought to cross-appeal, or to uphold the decision of the EAT on an alternative ground, namely that the PCP was a proportionate means of achieving a legitimate aim.

THE LEGAL FRAMEWORK

7. The 2010 Act prohibits discrimination over a wide range of activities in specified fields including employment. It does that in the following way. In Part 2, it defines the personal characteristics that are protected characteristics. They include age (see section 5). The 2010 Act then defines different forms of discrimination, including direct and indirect discrimination (see chapter 2 of Part 2). The 2010 Act then provides that it is unlawful for persons to discriminate in specified fields such as employment (see Part 5).
8. The material provisions of the 2010 Act are as follows. Section 19 of the 2010 Act defines indirect discrimination as follows:

19 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 purposes 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;

disability;

gender reassignment;

marriage and civil partnership;

race;

religion or belief;

sex;

sexual orientation."

9. Section 39 of the 2010 Act deals with discrimination in employment and provides, so far as material, that:

"39 Employees and applicants

(1) An employer (A) must not discriminate against a person (B)—

(a) in the arrangements A makes for deciding to whom to offer employment;

(b) as to the terms on which A offers B employment;

(c) by not offering B employment.

(2) An employer (A) must not discriminate against an employee of A's (B)—

(a) as to B's terms of employment;

(b) in the way A affords B access, or by not affording B access, to opportunities for promotion, transfer or training or for receiving any other benefit, facility or service;

(c) by dismissing B;

(d) by subjecting B to any other detriment.

….."

10. Part 8 of the 2010 Act deals with ancillary matters. They include circumstances in which a person must not discriminate against a former employee when the employment relationship has ended (see section 108(1)). That section is not relied upon here and it is not suggested that RB Health is liable for any differential treatment on grounds of age by reason of that provision.
11. Sections 109 and 110 deal with the liability of agents and principals. They provide so far as material:

"109 Liability of employers and principals

(1) Anything done by a person (A) in the course of A's employment must be treated as also done by the employer.

(2) Anything done by an agent for a principal, with the authority of the principal, must be treated as also done by the principal.

(3) It does not matter whether that thing is done with the employer's or principal's knowledge or approval.

…..

110 Liability of employees and agents

(1) A person (A) contravenes this section if—

(a) A is an employee or agent,

(b) A does something which, by virtue of section 109(1) or (2), is treated as having been done by A's employer or principal (as the case may be), and

(c) the doing of that thing by A amounts to a contravention of this Act by the employer or principal (as the case may be).

….."

THE FACTS

The corporate structure

12. RB Group and RB Health are both separate companies, that is they are separate legal entities, within the Reckitt Benckiser group of companies. RB Group holds the entire shareholding in a subsidiary company which, in turn, owns the shareholding in other companies. Ultimately, one of the subsidiary companies holds the entire shareholding in RB Health.

The Rules of the 2015 LTIP

13. The 2015 LTIP was made by RB Group pursuant to rules approved by the directors and shareholders of RB Group. Rule 1 of the rules deals with granting awards. Ru1e 1.1 provides that awards will be made by the company (which is defined as RB Group) or the committee (which is defined as the remuneration committee authorised to operate the LTIP). Rule 1.2 provides that RB Group:

"may grant an Award to any employee (including an executive director) of the Company or any Subsidiary."

14. Rule 1.4 deals with performance conditions and provides as follows:

"1.4 Performance Conditions

When granting an Award, the Company may make the Vesting conditional on the satisfaction of one or more conditions determined by the Committee at least one of which must be linked to the performance of the Company. Performance Conditions must be objective and specified at the Award Date and may provide that an Award will lapse if the Performance Conditions are not satisfied. The Company, with the consent of the Committee, may waive or change the Performance Conditions in accordance with its terms or if anything happens which causes the Company reasonably to consider it appropriate, provided that any changed Performance Conditions will be no more difficult to satisfy."

15. Awards comprise, essentially, options to purchase shares. Rule 4 deals with the vesting of awards. The material provisions are rules 4.1.1. and 4.2 which provide as follows:

"4. Vesting of Awards

4.1 Timing of Vesting

Subject to rules 6 (Leaving the Group) and 8 (Takeovers and restructurings), an Award shall Vest on the latest of the following:

4.1.1 the date on which the Committee makes its determination under rule 4.2 of the extent to which any Performance Conditions are satisfied or waived…..

4.2 Determination of Performance Conditions and other conditions

As soon as reasonably practicable after the end of the Performance Period, the Committee will determine whether and to what extent any Performance Conditions … have been satisfied and how many Shares Vest for each Award. To the extent that any Performance Conditions or other conditions are not satisfied, the Award lapses."

16. The performance period is defined as not normally less than three financial years of RB Group. In practice, for the 2015 LTIP, the performance period would normally have run to the end of the 2019 financial year. The remuneration committee would have decided in May 2020 whether the performance conditions had been satisfied (in accordance with rule 4.2). Performance conditions were typically linked to growth in earnings per share over three financial years. Awards would vest in May 2020 if the performance conditions were met.
17. Rule 6 deals with situations where persons leave employment. The material provisions are as follows:

"6 Leaving the Group

6.1 General rule on leaving employment

An Award which has Vested will not lapse on the date the Participant ceases to be an employee.

An Award which has not Vested will lapse on the date the Participant ceases to be an employee unless rule 6.2 applies…

6.2 Leaving in exceptional circumstances – unvested Awards

6.2.1 If a Participant ceases to be an employee of any Member of the Group for any of the reasons set out below, then his Awards which have not Vested will Vest as described in rule 6.3 and lapse as to the balance. The reasons are:

(i) ill-health, injury or permanent disability, established to the satisfaction of the company;

(ii) the Participant's employing company ceasing to be under the Control of the Company;

(iii) a transfer of the undertaking, or the part of the undertaking, in which the Participant works to a person which is neither under the Control of the Company nor a Member of the Group; or

(iv) redundancy; or

(v) retirement with the agreement of the Company;

(vi) any other reason, at the discretion of the Committee."

18. Rule 6.3 provides for an Award to be made pro-rata to reflect the period from the end of the employment to the end of the performance period.

Mr Fasano's employment

19. The appellant was employed by RB Health (or its predecessors) from 1 August 1997. At the time of his retirement on 30 June 2019 he was employed as chief supply officer, one level below that of a board director.
20. The appellant's latest contract of employment, on the evidence before us, was dated 19 February 2009. That was made between the appellant and Reckitt Benckiser Corporate Services Limited. The parties proceeded on the basis that that contract governed the appellant's employment with RB Health and we approach this appeal on the same basis. References in that contract to the company are to be treated as references to what is now RB Health and the "Executive" is Mr Fasano. The material clause of the contract is clause 5 which provides:

"5. Employee Benefits

The Executive shall be entitled to participate in retirement, welfare benefits, incentive compensation, perquisite and other plans and arrangements of the Company [i.e. RB Health] applicable to its senior executives as in effect and on such terms as are prescribed by the Company in its sole discretion from time to time. Such participation includes any awards granted under the "Long Term Incentive Plan" of a Group Company.

21. The appellant and RB Health agreed that the appellant's employment would terminate on 30 June 2019. There is a letter, headed without prejudice and subject to contract, dated 7 September 2018 which includes the terms on which RB Health has agreed that the appellant would retire. The parties proceeded on the basis that that letter accurately sets out the terms of the retirement agreement between the appellant and RB Health and we approach this appeal on the same basis.
22. The letter of 7 September 2018 says that RB Health "is entering into this agreement for itself and as agent for all Group companies and is duly authorised to do so". Clause 1 provides that the appellant's employment with RB Health "will terminate on 30 June 2019 ("the Termination Date")… by reason of Retirement". Clause 9 deals with the LTIP and provides, so far as material, that:

"9. The Reckitt Benckiser Group plc Long-Term Incentive Plan 2007 and/or the Reckitt Benckiser Group plc Long-Term Incentive Plan 2015

…..

9.3 Your outstanding long term incentive awards will be pro-rated for service to the Termination Date.

9.4 These may vest in May 2020 subject to the achievement of performance conditions at the end of the financial year 2019 and confirmation at the AGM that shareholders approve the final results for 2019. If they do not vest in May 2020 they will lapse. Upon any vesting being confirmed the shares will be transferred to you will have 12 months from the vesting date (i.e. until early May 2021) to exercise these share options… at the end of which period they will lapse….."

23. As it happened, the performance conditions applicable at the time that the appellant retired on 30 June 2019 were not met and the appellant was not awarded any share options. However, as set out below, the rules were amended in September 2019, after he had ceased to be an employee, and the appellant's complaint concerns the fact that he was not eligible for an award under the terms of the amended rules.

The Amendment of the rules of the 2015 LTIP

24. In 2019, a number of events occurred. First, it was announced in January 2019 that the chief executive officer of RB Group would stand down later in the year. Secondly, a restructuring of the company was under consideration. Also in 2019 it became clear that the performance conditions for certain awards under the 2015 LTIP (earnings per share) would not be met. That would mean that certain awards would not be made under the 2015 LTIP unless the rules setting out the performance conditions were amended.
25. The remuneration committee, therefore, considered a paper prepared for its meeting on 18 September 2019. The recommendation in that paper was to waive the performance conditions in respect of 50% of awards of shares and share options, that is 50% of the award should vest irrespective of the fact that the performance conditions would not be met at the end of the 2019 financial year. The minutes of the meeting record that:

"After due consideration, the Committee was satisfied:

the current retention issues faced by the organisation meant waiver or change of the performance conditions attaching to the 2017-2019 LTIP (collectively the "Performance Conditions") was appropriate; and

the recommendation would not cause the Performance Conditions to be more difficult to satisfy."

26. The remuneration committee therefore resolved to consent to the amendment of the performance conditions for the 2015 LTIP for participants who were current employees within the group as at 18 September 2019 so that 50% of the award would vest even if the performance conditions (i.e. the earnings per share over three financial years) were not met. That meant that at least 50% of the shares would vest in May 2020, when the annual general meeting approved the results for the 2019 financial year. A higher proportion of shares would vest if the earnings per share over three years fell within a particular range, and 100% of the award would be made if, in fact, the earnings per share were above the relevant target. In the event, the earnings per share target was not met and did not fall within the lower range. The award was of 50% of shares for those in employment at 18 September 2019. As the appellant had ceased to be in employment on 30 June 2019, the amendment to the LTIP did not apply to him and he did not qualify for the award of 50% of shares.

THE JUDGMENTS OF THE EMPLOYMENT TRIBUNAL AND THE EAT

27. The appellant brought a claim of indirect age discrimination contrary to section 19 of the 2010 Act. The basis of the claim was that RB Group acted as agent of RB Health in the operation and amendment of the 2015 LTIP and so RB Health was liable under section 109 of the 2010 Act for RB Group's actions in amending the 2015 LTIP. RB Group, as agent, was also said to be responsible for the alleged act of indirect discrimination under section 110 of the 2010 Act. The respondents were alleged to have adopted a PCP which put the appellant at a particular disadvantage on grounds of age, and they could not show it to be a proportionate means of achieving a legitimate aim. The PCP was identified (in paragraph 8 under the heading of "The issue" in the reasons of the employment tribunal) as:

"requiring LTIP participants (who were not already bad leavers) to be employed as of 18 September 2019 (or, in the alternative, May 2020) in order for them to benefit from the amended performance condition."

28. The reference to "bad leavers" is a reference to those people who had left employment with a company within the Group but who did not fall within rule 6.2. Those who left because of circumstances falling within rule 6.2, such as health or injury, redundancy, or where RB Group agreed to their early retirement, were known as "good leavers" and they would receive a pro-rated award. Employees who simply left employment (other than in the circumstances set out in rule 6.2) were known as "bad leavers" and would lose their entitlement to any award under the LTIP on leaving employment.

The decision of the employment tribunal

29. The employment tribunal set out the elements of the claim, and identified the issues, at paragraphs 1 to 9 of its reasons. It set out its findings of fact at paragraphs 14 to 100. It set out the law at paragraphs 101 to 135. It then turned to its discussion and conclusion on the issues.
30. It dealt first with the question of whether RB Group was acting as agent for RB Health when RB Group's remuneration committee made the amendments to the 2015 LTIP. At paragraph 141, it noted the appellant's argument that consent, not control, lay at the heart of an agency relationship and his submission that RB Health consented to RB Group providing and administering the LTIP scheme. The employment tribunal went on to find that RB Group was acting as agent for essentially the following reasons:

"146. It appears reasonably clear that in providing the LTIP scheme the first respondent is acting on behalf of the second respondent in providing a benefit to the second respondent's employees. The second respondent is the one that benefits from this by (at least on the respondents' argument) retaining and incentivising employees. The first respondent benefits indirectly through what must be intended as greater profitability throughout its group. The question that follows is whether this is done, strictly speaking, through the means of agency as "the mere fact that one person does something in order to benefit another… does not make the former the agent of the latter."

147. We accept that the concept of "control" is not of great significance in this context. The claimant is correct to emphasise that it is "consent" that is the more important factor, and here there clearly is that consent from the second respondent to the first respondent operating the LTIP scheme and, most likely, other benefit schemes on behalf of it.

148. Looking at the definition of agency from the first paragraph of Bowstead & Reynolds, the second respondent has assented to the first respondent acting on its behalf in the provision of the LTIP, and there appears to be no doubt that the first respondent also assents to acting on its behalf. As far as we can tell the first respondent has very few direct employees – possibly only the two executive directors. The entire basis and purpose of the LTIPs is that they are offered by the first respondent to the employees of its subsidiary companies, such as the second respondent. It was not argued on behalf of the respondents that the relationship (if it exists) is not a fiduciary one. The question that remains is whether this is intended to affect the second respondent's legal relations with third parties."

31. At paragraph 150, it said this:

"150. We have concluded that the LTIP scheme was offered by the first respondent to the second respondent's employees as agent for the second respondent. As noted above, we draw this conclusion from the common law definition of agency, but it also seems to us that this must be the right conclusion if a properly purposive approach is taken to the definition of agency. To find otherwise would leave a large gap in protection against unlawful discrimination, where the action in question is taken by another company in a respondent's group.

151. The outcome of this is that if the application of the PCP did amount to unlawful indirect age discrimination, then:

a. The second respondent is treated as having carried out the action of its agent, the first respondent, by virtue of s109(2), and

b. The first respondent is also liable for that discrimination by virtue of s110(1)."

32. The employment tribunal then turned to the question of indirect discrimination. It found that the amendments to the 2015 LTIP rules did give rise to a PCP as described above. It found that the application of the PCP put people aged 57 and over at a disadvantage and therefore put the appellant at a disadvantage. Those matters are not in dispute and I do not mention them further. The employment tribunal then turned to the question of legitimate aim and justification under section 19(2)(d) of the 2010 Act.
33. The employment tribunal concluded that the aim pursued by the PCP was to retain employees. It said this:

"195. In those circumstances, we do not consider that any quantitative analysis by the respondents of the problem is necessary for us to conclude that this was the legitimate aim pursued by the PCP. Retention was the essence of the PCP. Putting it bluntly, individuals were getting valuable awards they would not otherwise be entitled to, and in return they were doing nothing more than remaining with the business for a particular period of time. The obligation to remain with the business for a particular period of time was reinforced by the extension of vesting to May 2020. That the amended performance condition only applied to those who were employed at 18 September 2019 was entirely consistent with that. Those who had already left the business could not be retained. As we shall see when discussing proportionality, there were a small number of employees who benefited despite them already being under notice – their position (and its effect on the legitimate aim) is dealt with below primarily as a matter of proportionality.

196. Everything in the materials points to retention being the aim pursued by the respondents in the PCP. We also accept that given the circumstances the respondents had a real (as opposed to imaginary) retention problem that was either actually occurring at the time or looming in the near future (or a combination of the two).

197. We conclude that retention was a legitimate aim and was the aim being pursued by the respondents in the application of the PCP."

34. The employment tribunal then considered whether the respondents had shown that the PCP was a proportionate means of achieving a legitimate aim. It identified the PCP that it had found to exist at paragraph 199 as:

"requiring LTIP participants (who were not already bad leavers) to be employed as of 18 September 2019 (or, in the alternative, May 2020) in order for them to benefit from the amended performance condition."

35. At paragraph 202, the employment tribunal said:

"202. If, as we accept it was, the aim of the PCP was retention, it must be the case that it only applies to those who were employees as at the date of the change. They were the only employees who could be retained. The claimant's argument that the amended performance criteria should apply to those such as him who had already left but had retained their rights under the LTIP scheme does not do anything for retention of staff."

36. Having considered further arguments by the parties, the employment tribunal concluded that:

"217. Having found that the respondents were pursuing a legitimate aim of retention we are satisfied that the PCP was a proportionate means of achieving that aim. The amended performance condition had to be subject to some sort of qualifying or cut-off date to be effective as a retention tool and to avoid unnecessary payments to those who were no longer in a position to be retained. The date of the decision was made at the most appropriate qualifying or cut-off date that could be applied, and the aim and proportionality of the PCP is not substantially undermined by the fact that there was a small anomalous category of employees who benefitted from the amended performance criteria despite not being in a position to be retained."

37. The employment tribunal, therefore, dismissed the claim. Mr Fasano appealed and the respondents cross-appealed.

The Judgment of the EAT

38. In relation to the question of agency, the EAT observed that:

"33. Whatever else can be said, it seems to me that it must be an essential feature of agency (at least for the purposes of section 109) that (whether expressly or impliedly) the principal authorises the agent to do the relevant act and the agent does the act on behalf of the principal. The act of the agent may be for the benefit of the principal but that is not essential or indeed sufficient. The principal may control the way the agent does the act but control is also not essential. And it is not essential that the act of an agent affects the contractual position of the principal with a third party (see Kemeh per Elias LJ at [38]). But equally, it seems to me, the mere fact that the act of A affects the legal relationship of B with a third party cannot make A the agent of B: to take a simple example, there may be a provision in the contract of employment of a waiter with a restaurant that he is entitled as part of his remuneration to a particular share of the tips provided by diners; the tip given (or not given) by a diner may therefore affect the legal relationship between the restaurant and the waiter but that would not conceivably make the diner an agent of the restaurant in providing the tip.

34. As for the "purposive approach" to the construction of a statute like the Equality Act 2010, it is important to recognise the limitations on this as discussed by Elias LJ in Kemeh at [35] and [36]. First, it is a principle of statutory construction. Second, it does not enable a court or tribunal to extend the meaning of the statute because it is thought that the overall objective of the legislation would be better achieved that way. Third, it is only if there are two equally plausible constructions of the statute available that the court or tribunal can adopt the one which better achieves the statutory purpose. With respect to Wilkie J, if there is any conflict between these propositions and the statement in the Remploy judgment on which Ms Banerjee relies, I am inclined to accept the guidance in Kemeh, a decision of the Court of Appeal which post-dates Remploy."

39. In applying the legal principles to the present case, the EAT concluded that:

"36. It is plain (if not conclusive) that RB Health had no control over RB Group's actions or decisions in relation to the LTIP. Mr Fasano may well have had an entitlement under his contract of employment to participate in the LTIP and (as the tribunal found at para 149) the decisions of RB Group in relation to the LTIP no doubt had some effect on the legal relationship between him and RB Health, but that in itself cannot make RB Group the agent of RB Health. Of most relevance, I can see no basis in the facts found by the tribunal for saying that RB Health authorised RB Group to act in relation to the LTIP or that RB Group was acting on behalf of RB Health when it was making the changes to the LTIP rules and imposing the PCP. It seems to me that the tribunal are really just asserting those conclusions in paras 146 and 148.

37. I also consider that Mr Forshaw is plainly right to suggest that the tribunal have allowed themselves to be over-influenced in their decision by the unsatisfactory consequences of the opposite result and that they have adopted an impermissible "purposive approach". I have mentioned the limitations to that approach above: it is only if there are two genuinely competing interpretations of the relevant statutory provision that regard can be had to the general purpose of the statute to "deter and combat discrimination" in construing it and deciding which interpretation to adopt. In this case I do not think that there is any scope for a "purposive" construction.

38. Unpalatable as the result is, I therefore do not see how it can be properly maintained that RB Group were acting as RB Health's agent in this case so as to fix them both with liability and I consider that the only possible outcome was a finding that RB Group were not RB Health's agent. It may be that the claim could have been put in some other way and it may be that there is a lacuna in the law that Parliament ought to be looking at, but it seems to me plain that the cross-appeal must succeed and that the ultimate conclusion of the tribunal must therefore be upheld."

40. In relation to the question of justification, the EAT set out paragraph 217 of the employment tribunal's reasoning and said this at paragraph 14 of its judgment

"It seems clear to me that the tribunal's reasoning here is deficient. The change to the performance criteria and the vesting date for the awards both contributed to the legitimate aim of retention but it was the specific PCP and not the changes as a whole that needed to be justified (as the tribunal recognised in a different context at para [185] of their judgment). Even if it was thought that there was a need for "some sort of qualifying or cut off date" in relation to the amended performance condition, the relevant PCP could not contribute to retention of staff. As the tribunal appear to recognise in the final phrase in this quotation, the only real justification for the PCP was to avoid unnecessary payments to those who could not be retained, ie to save the expenditure of money. But it was never part of the Respondents' case that the legitimate aim of the PCP was to save money or that they could not afford to pay the participants in the 2017 LTIP award who had left before 18 September 2019 what would otherwise become due to them."

41. At paragraph 16, the EAT said this:

"16…I fully accept that the legitimate aim of the changes to the performance criteria under the LTIP was to retain staff who might otherwise leave before May 2020 and that payments to Mr Fasano and the other 23 would not assist in this aim. But this is no answer to the claim for indirect age discrimination. The Respondents chose to use the changes to the LTIP as a means of achieving their aim of retaining staff rather than, for example, introducing a free-standing scheme involving straightforward "retention payments" to existing staff. As part of those changes, they introduced a PCP which did not itself contribute to the achievement of the aim at all. It was necessary to justify that PCP, not the overall changes to the LTIP."

42. It also decided that it was an appropriate case for it to exercise its power to make a new decision, pursuant to section 35(1)(a) of the Employment Tribunals Act 1996, rather than remitting the matter to the employment tribunal. It concluded that:

"It seems to me that the employment tribunal's decision on the point was really misconceived and that there was only one possible result, namely that the Respondents had not shown that the PCP was a means (let alone a proportionate means) of achieving a legitimate aim. "

43. In the result, it allowed the appellant's appeal in relation to justification but also allowed the respondents' cross-appeal on agency. The EAT, therefore, dismissed the appeal.

THE APPEAL AND RESPONDENT'S NOTICE

44. The appellant has permission to appeal on three grounds:

"Ground 1 – The Employment Appeal Tribunal erred in law in its' interpretation of common law agency principles.

Ground 2 – The EAT wrongly concluded that a purposive approach had been applied and that such an approach was impermissible.

Ground 3 – The EAT erred in setting aside the judgment of the [employment tribunal] as being perverse."

45. By its respondent's notice, the respondents sought to uphold the decision of the EAT, or to cross-appeal:

"on the additional ground that the PCP was justified as a proportionate means of achieving a legitimate aim".

THE FIRST ISSUE – AGENCY

Submissions

46. Mr Reade KC, with Ms Banerjee, for the appellant, submitted that the appellant's employer, RB Health, determined what benefits its employees were to receive as appeared from the contract of employment. The employer, RB Health, authorised RB Group to provide and operate an LTIP and to grant awards of behalf of it, RB Health, as employer. When RB Health granted that authority, it also granted authority to RB Group to make changes or amendments to the rules.
47. Mr Reade accepted that RB Health had no control over RB Group's actions or decision in relation to the LTIP. He submitted that control was not itself a requirement, or test, of the existence of an agency relationship. Rather the key factor was that RB Health had consented, or assented, to RB Group providing, operating and applying the LTIP on behalf of RB Health. Those were findings of fact by the employment tribunal, as appeared from paragraph 146 and 148 of its reasoning. In those circumstances, having directed itself properly in law, there was no basis for concluding that the employment tribunal had erred in law by finding that RB Group was acting as agent for RB Health.
48. Further, Mr Reade submitted that the EAT had erred in considering that the employment tribunal had adopted a purposive approach to the interpretation of section 109 of the 2010 Act and, thereby, departed from the meaning of agency applying recognised common law principles. The employment tribunal reached its conclusion on the basis of common law principles and its findings of fact as appeared from paragraphs 146 to 148 of its reasons.
49. Mr Forshaw KC, for the respondents, submitted that "agent" in sections 109 and 110 of the 2010 Act had its ordinary meaning at common law, relying on Ministry of Defence v Kemeh [2014] ICR 625 per Lewison LJ at paragraph 70, Blackwood v Birmingham & Solihull Mental Health NHS Foundation Trust [2016] IRLR 878 (per Underhill LJ at paragraph 57) and Unite the Union v Nailard [2019] ICR 28 (per Underhill LJ at paragraph 42).
50. Mr Forshaw relied upon the definition of agency provided by Bowstead & Reynolds on Agency (23^rd edition). The principles flowing from that definition were that the relationship of agency and principal was a fiduciary relationship which arose when an agent was authorised to act on behalf of another person, usually to affect the principal's relationship with a third party. The fact that someone did an act which benefitted another person is insufficient to give rise to an agency relationship. Some level of control is necessary for the relationship to exist.
51. In the present case, Mr Forshaw submitted, RB Group operated the LTIP pursuant to the power it had to issue awards. It was granted that power by the rules which were approved by its shareholders and directors. No authority was granted by RB Health to operate the LTIP scheme, nor to issue awards to the appellant, nor to amend the performance conditions attached to such awards. Consequently, RB Group was not acting as agent for RB Health when it did so.

Discussion and conclusion

The meaning of "agent" in sections 109 and 110 of the 2010 Act

52. The context in which the interpretation of sections 109 and 110, and the meaning of agency, arise is as follows. The 2010 Act prohibits certain conduct, namely discrimination, as defined, in certain fields including employment. Section 39 provides that the employer is liable if the employer discriminates against a person in relation to specified matters. Part 8 of the 2010 Act makes ancillary provision in respect of prohibited conduct. That provides that anything done "by an agent for a principal, with the authority of the principal" must be treated as also done by the principal (section 109(2) of the 2010 Act). Thus, anything done by the agent of the employer is treated as having been done by the employer. The agent is also liable (see section 110 of the 2010 Act).
53. The intention underlying sections 109 and 110 of the 2010 Act is that concepts such as agency "be given their ordinary common law meaning" (see per Underhill LJ, with whom Lewison and Patten LJJ agreed, at paragraph 57 of his judgment in Blackwood.) That approach reflected the interpretation given to materially similar words in section 32 of the Race Relations Act 1976 in Kemeh by Lewison LJ, with whom Kitchin LJ agreed, at paragraph 70. As Lewison LJ. expressed it:

"…Parliament has chosen to attribute liability by reference to well established legal concepts. It must, therefore, be taken to have intended those legal concepts to be interpreted in accordance with ordinary legal parlance…"

54. A useful starting point in considering the common meaning at law of agency is the definition given in Bowstead & Reynolds at paragraph 1-001:

"Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifestly assents that the other should act on his behalf so as to affect his legal relations with third parties, and the other of whom similarly manifests assent so to act or so acts pursuant to the manifestation. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent. Any person other than the principal and the agent may be referred to as a third party."

55. The authors went on to provide three further elements to that definition. The authors recognise that the definition had to be treated as a whole, and further recognised that the elements were not necessarily exhaustive, or determinative, of whether a relationship between two parties was one of agency. Furthermore, the authors identify a number of features which may point to the presence, or absence, of an agency relationship whilst again recognising that other factors might result in a different conclusion. As the authors recognise, the "basic situation of agency is treated as being that in which the principal agrees that the agent should act for the principal and the agent expressly or impliedly agrees to do so" (paragraph 1-012). The authors note that control is commonly regarded as a defining characteristic of agency whilst recognising that, in many situations, "the principal's only control lies in his power to revoke the authority" (paragraph 1-018). The authors also note that the courts have not generally accepted that a subsidiary company is acting as principal for a parent company or vice versa and the existence of such a relationship in those circumstances would need to be demonstrated by the usual criteria for agency (paragraph 1-030).
56. That approach is reflected in the judgment of Elias LJ, with whom Lewison and Kitchin LJJ agreed, in Kemeh. There, the claimant was a person who joined the British army as a cook and was stationed in the South Atlantic. He was allegedly subjected to racist abuse by Ms Ausher who was employed as a butcher by a company called Sodexo. Sodexo was a subsidiary of another company, Serco, who had a contract to provide facilities management services in the South Atlantic. Both Ms Ausher and the claimant were working in the main catering facility in the South Atlantic. The claimant alleged that Ms Ausher was the agent of the Ministry of Defence. Elias LJ said the following:

"38. ….. The concept of agency at common law is not one which can be readily encapsulated in a simple definition. As the editors of Bowstead & Reynolds point out, "no-one has the correct use of this or any term". Moreover, Judge Peter Clark appears to have had reservations about the requirement, considered to be an essential part of the definition by the appeal tribunal in the Yearwood case, that an agent must have power to affect the principal's legal relations with third parties. In fact the authors of Bowstead & Reynolds (see para 1–04) recognise that someone might quite properly be described as an agent even where this feature is missing. An example is someone who merely introduces or canvasses custom on behalf of the principal without in fact having the power to bind the principal contractually. An estate agent is a typical example. This is not, therefore, an essential element in a common law definition of agency.

39. Even in the so-called "general concept of agency" advanced in the Yearwood case, it would be necessary to show that a person (the agent) is acting on behalf of another (the principal) and with that principal's authority. Once it is recognised that the legal concept does not necessarily involve an obligation to affect the legal relations with third parties, I doubt whether the concepts are materially different.

40. But ultimately it is not necessary for the purposes of appeal to resolve that question. Whatever the precise scope of the legal concept of agency, and whatever difficulties there may be of applying it in marginal cases, I am satisfied that no question of agency arises in this case. In my view, it cannot be appropriate to describe as an agent someone who is employed by a contractor simply on the grounds that he or she performs work for the benefit of a third party employer. She is no more acting on behalf of the employer than his own employees are, and they would not typically be treated as agents. (That is not, of course, to say that employees can never be agents; they might well be, depending on the obligations cast on them, such as where a senior manager is authorised to contract with third parties. He will be an employee but will also act as an agent when exercising the authority to deal with third parties.)

41. In my judgment, Ms Ausher's contract with Sodexo is the source of any authority she has to make decisions relating to the butcher's department in the mess. It may be, as Ms Romney asserts, that ultimately the MoD would have the right to veto her presence, at least for good reason. But that limited degree of control comes nowhere near constituting an authorisation by the MoD to allow Ms Ausher to act on its behalf with respect to third parties."

The application of those principles to the present case

57. Applying those principles to the present case, the following is the position. The authority, or power, of RB Group to make and amend an LTIP is derived from the rules adopted by its shareholders and directors. RB Group did not need the assent of RB Health (or any of the other subsidiaries in the group) to make those rules. There is no evidence of there being any express, or implied, assent on the part of RB Group to act as the agent of RB Health (or any other subsidiary) when it made the LTIP rules. RB Group acted under, and derived its authority from, the rules made by its shareholders and directors.
58. A number of other factors reinforce the conclusion that RB Group was not acting as agent. RB Group and RB Health, and indeed, the other subsidiary companies, are separate legal entities. The existence of a corporate structure comprising separate legal entities tends to point against a relationship of agency whereby one legal entity acts as agent on behalf of the other separate legal entities. Further, there is no evidence of any element of control on the part of RB Health over RB Group in terms of making, or amending, the LTIP. While those factors may be outweighed by other factors pointing towards an agency relationship, there are no such factors present here.
59. Dealing with the reasons of the employment tribunal, paragraph 146 is not a finding of fact but, rather, expresses a legal conclusion, namely because RB Health's employees benefit from RB Group providing the LTIP, RB Group is acting as agent. The correct legal analysis, however, is that RB Group makes a scheme under which certain persons are eligible for an award. RB Health agreed with certain of its employees, including the appellant, that they would benefit from the scheme. To that extent, the operation of the LTIP provided a benefit to employees of RB Health (and, indeed, employees of other subsidiary companies). But the fact that a parent company adopts a scheme which may benefit employees of a subsidiary company does not, without more, constitute the parent company as the agent of the subsidiary company.
60. Similarly, in relation to paragraph 148, the employment tribunal is not finding facts. Rather it is seeking to attribute a legal conclusion or label to certain facts. It says that RB Health has assented to RB Group acting on its behalf and "there appears to be no doubt" that RB Group has assented to acting on RB Health's behalf. But there is no manifestation, express or implied, of RB Group assenting to act on behalf of RB Health (or any other subsidiary company within the group). RB Group provided an LTIP. It did so as it was empowered to do so under the rules authorised by its shareholders and directors. There is no basis, nor need, to attribute that fact to "assent" provided by RB Health or RB Group. RB Group acted pursuant to its rules (just as Ms Ausher acted pursuant to her contract with Sodexo in Kemeh) and not because it was acting on behalf of RB Health.
61. In my judgment, therefore, the EAT was correct in its conclusions at paragraph 36 of its judgment. Mr Reade accepted that the first two sentences of paragraph 36 were correct. RB Health did not have control (although that was not conclusive) over RB Group's actions. The appellant may well have had an entitlement under his contract of employment with RB Health to participate in the LTIP (and, to that extent, the decisions of RB Group in terms of making, operating and amending the LTIP, may have had an effect on the legal relationship between the appellant and RB Health). But that, in itself, did not make RB Group the agent of RB Health. Most significantly, I consider that the third sentence of paragraph 36 is also correct. On the facts as found by the employment tribunal, there is no basis for saying that "RB Health authorised RB Group to act in relation to the LTIP or that RB Group was acting on behalf of RB Health when it was making the changes to the LTIP rules".
62. For those reasons, I consider that the EAT was correct to allow the cross-appeal on this point. RB Group was not the agent of RB Health when RB Group's remuneration committee amended the rules of the LTIP on 18 September 2019. RB Health is not, therefore, liable as the principal of RB Group for the effect of those changes pursuant to section 109 of the 2010 Act. For that reason, I would dismiss this appeal.
63. I would add these further observations. First, I do not consider that the employment tribunal did seek to adopt a purposive approach in order to reach a conclusion that it thought best served what it saw as the overall purpose of the 2010 Act, namely to eliminate discrimination. It is common now to refer to interpreting statutory provisions by considering the meaning of the words used, read in context, and having regard to the purpose underlying the statute and any legitimate aids to interpretation. As Elias LJ observed at paragraphs 35 and 36 of his judgment in Kemeh, that case (and this) involves a question of the interpretation of a statute. Where a statutory provision has two equally plausible meanings, it may be appropriate to adopt that one of the two meanings which better achieves the statutory purpose. But it "is not permissible to expand the meaning of a statutory concept beyond its legitimate reach because it is thought that the broad objective of the statute would be better effected thereby".
64. In the present case, I consider that the employment tribunal came to the wrong conclusion in its application of section 109 of the 2010 Act to the facts as found by it. Consequently, I consider that its finding that RB Group was acting as an agent for RB Health was wrong. I do not consider, however, that the employment tribunal simply sought to give a meaning to the words in section 109 of the 2010 Act which it thought would best achieve its understanding of the objects of the 2010 Act.
65. Further, it is important to bear in mind the factual limits of this case. This appeal is concerned only with a situation where conduct occurs after employment has terminated. The appellant ceased to be an employee on 30 June 2019 and the rules were changed on 18 September 2019. The only issue is whether the acts which occurred after the end of the employment were prohibited by reason of sections 109 and 110 of the 2010 Act. It may well be that a different result would follow if the employer applied to their employees rules made by another entity (whether a parent company or some other legal entity) during the currency of the employment. It may well be, depending on the facts, that the employer would be liable for any discrimination inherent in any rules which it applied to its employees. We did not hear argument on that issue and the point does not arise on the facts of this case. It is, however, important to bear in mind the limits of the decision on this appeal which is concerned solely with post-employment conduct said to amount to discrimination.
66. For those reasons, I would dismiss the appeal on grounds 1 to 3.

THE SECOND ISSUE – JUSTIFICATION

Submissions

67. Mr Forshaw for the respondents submitted that the EAT was wrong to substitute its view for that of the employment tribunal on the question of whether the respondents had shown that the PCP was a proportionate means of achieving a legitimate aim. The employment tribunal accepted that the aim was the retention of staff and accepted that that was a legitimate aim. The purpose of the amended performance conditions was to encourage staff to remain in post until May 2020. Former staff could not be retained as they had already left. If the amended performance conditions had been extended to former employees, they would not have served the aim of rewarding employees who remained in post until May 2020. The EAT was wrong to regard the reasoning of the employment tribunal as deficient. It was wrong to find that the means chosen did not contribute to the aim of retaining staff.
68. Mr Reade submitted that the EAT had rightly concluded that it was the specific PCP, not the changes to the amended performance conditions as a whole, that had to be justified. It was right to conclude that the employment tribunal had therefore considered the wrong question as it had looked at the changes as a whole not the specific PCP that had been challenged. The EAT was correct to find that a requirement that a person be in post on 18 September 2019 could not contribute to the retention of staff. It had no prospective effect and did not encourage staff to remain in post after that date. Rather, the PCP did not achieve the retention of staff but rather enabled the respondents to avoid making payments under the amended rules and save money.

Discussion and conclusion

69. Indirect discrimination, broadly, arises where a person applies a provision, criterion or practice (the PCP) to a person which is discriminatory in relation to a protected characteristic (see section 19(1) of the 2010 Act). That is then broken down into four elements (see section 19(2) of the 2010 Act). The element that is relevant to this appeal is that in section 19(2)(d), can the respondents show that "it", that is the PCP, "is a proportionate means of achieving a legitimate aim". To that extent, the EAT was correct to say at paragraph 14 of its judgment that it was the specific PCP that has to be justified. Where, with respect, I disagree with the reasoning of the EAT is that the EAT itself only considered part of the PCP, and further, that it did not have regard to what the PCP, considered in context, did.
70. It is helpful to set out the PCP again. It is:

"requiring LTIP participants (who were not already bad leavers) to be employed as of 18 September 2019 (or, in the alternative, May 2020) in order for them to benefit from the amended performance condition."

71. The elements of the PCP are that (1) LTIP participants are to be employed as at 18 September 2019 (2) in order for them to benefit from the amended performance conditions. The first part refers to the date at which the person must be employed in order to be eligible. However, it is not enough to be in employment as at that date. The second part of the PCP is that the person is in employment "in order to benefit from the amended performance condition". A person can only benefit from the amended performance conditions if he or she is in employment in May 2020 as that is when the award is determined upon and, if the performance targets are not met, an award of 50% of shares or share options will be made. The PCP as a whole, therefore, is directed towards the retention of staff. The PCP aims to ensure that employees are in post at 18 September 2019 and remain in post until May 2020 in order to benefit from the amended performance conditions. The EAT was wrong therefore to say that the PCP could not contribute to the retention of staff. It could.
72. It is correct that there is provision in rule 6.2 for people to leave employment in certain circumstances and still be eligible for a pro-rated award. Those are employees who leave employment through circumstances over which they have no control such as ill-health or redundancy or where RB Group agree to their early retirement. Conversely, if employees do leave between 18 September 2019 and May 2020, they will not be eligible for an award. That reinforces the conclusion that the PCP as a whole is concerned with retaining employees. Those who leave during the period September 2019 to May 2020 will not benefit from an award under the amended performance conditions. The fact that some employees in some circumstances may leave and will not be retained in post for the entire period between 18 September 2019 and May 2020 does not alter the fact that the PCP as a whole is concerned with the retention of staff. It is. The employment tribunal was entitled to find that the PCP was a proportionate means of achieving the aim of retaining staff.
73. The EAT was also wrong at paragraph 14 of its judgment when dealing with the finding of the employment tribunal that a qualifying or cut-off date was necessary to ensure that the amended performance condition was effective as a retention tool and to avoid unnecessary payments to those who were no longer in a position to be retained. The EAT considered that the relevant PCP could not contribute to retention and "the only real justification for the PCP was to avoid unnecessary payments to those who could not be retained, ie to save the expenditure of money" and that was not an aim relied upon. That analysis is flawed for two reasons.
74. First, as explained, the PCP as a whole was intended to contribute to the retention of staff. They had to be employed as at 18 September 2019 and be in employment in May 2020 in order to benefit from the amended performance conditions. Secondly, as part of that aim, the respondents did not want to make payments to former employees, i.e. those who had ceased to be in employment and so could not be retained. The purpose of the PCP was to retain the top layer of senior employees in post between 18 September 2019 and May 2020 during a period when there was a new chief executive officer in place and there were uncertainties over the future structure of the group. It was not to reward those who had already left.
75. Standing back from the details, therefore, the employment tribunal correctly directed itself as to the law on section 19(2) of the 2010 Act (see paragraph 123 to 133 of its reasons). It identified the PCP at paragraph 199 of its reasons. It found that the aim of the PCP was to retain employees at a time when there was a need for stability in the light of a possible restructuring and with a new chief executive officer in post. It found that the PCP was a proportionate means of achieving that aim. Those who had left employment prior to 18 September 2019 could not be retained and the PCP, therefore, would only apply to those in employment at 18 September 2019 (see paragraph 202 of its reasons). However, the PCP as a whole did more than that. The PCP required persons to be in employment as at 18 September 2019 and still in employment (save in limited circumstances) in May 2020 in order to benefit from the amended performance conditions. The employment tribunal was entitled to conclude that that was a proportionate means of achieving a legitimate aim.

CONCLUSION

76. I would dismiss this appeal. First, the EAT was correct to conclude that RB Group was not acting as agent for RB Health when it amended the performance conditions of the LTIP. RB Health is not, therefore, liable for any change made by RB Group to the LTIP pursuant to section 109 of the 2010 Act. Secondly, I would uphold the decision to dismiss the appeal for an additional reason, namely that the employment tribunal was entitled to find that there had been no indirect discrimination as the PCP which the respondents applied was a proportionate means of achieving a legitimate aim within the meaning of section 19(2)(d) of the 2010 Act.

LADY JUSTICE NICOLA DAVIES

77. I agree.

LORD JUSTICE BAKER

78. I also agree.