Appeal No. UKEAT/0162/15/MC

EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

	At the Tribunal
	On 16 October 2015

Before
HER HONOUR JUDGE EADY QC
(SITTING ALONE)

MR J DONKOR	APPELLANT

THE ROYAL BANK OF SCOTLAND	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellant	MS AILEEN McCOLGAN
(of Counsel)
Instructed by:
Farooq Bajwa & Co Solicitors
45 Charles Street
London
W1J 5EH

For the Respondent	MR BRIAN CAMPBELL
(Solicitor)
Brodies LLP
2 Blythswood Square
Glasgow
G2 4AD	

SUMMARY
AGE DISCRIMINATION

Equality Act 2010 sections 5, 13(1) and (2), 23 and 39(2)(d)
Direct age discrimination - different treatment of those aged over 50.
Held: Allowing the appeal.  
(1)	The ET had erred in its approach to the question of comparison; wrongly relying on the differences attributable to the ages of the Claimant and his comparators (Lockwood v Department of Work and Pensions [2013] IRLR 941 CA).  
(2)	It had then erred in its alternative finding that there was no less favourable treatment.  It had considered the Claimant’s case on a basis that was not before it.  As the Respondent conceded, the failure to afford the Claimant the opportunity to apply for voluntary redundancy could amount to a detriment and to less favourable treatment in these circumstances.
(3)	Finally, in considering (as a further alternative) the reason for the less favourable treatment, the ET had erred in failing to adopt the correct - but for - test, where the reason for the treatment (the Claimant’s ability, as an employee aged over 50, to apply for early retirement if accepted for voluntary redundancy) itself imported the relevant characteristic, age (applying James v Eastleigh Borough Council [1990] 2 AC 751 HL, R (E) v Governing Body of JFS [2010] 2 AC 728 SC and Bull v Hall [2013] UKSC 73 SC).

The conclusion that there was no direct age discrimination would be set aside and substituted by a finding that, subject to the ET’s (outstanding) finding on justification, the Claimant’s case had been made out.  The matter would be remitted to the same ET for consideration of the question of justification.

HER HONOUR JUDGE EADY QC

Introduction
1.	I refer to the parties as the Claimant and the Respondent, as below.  This is the Claimant’s appeal against a Judgment of the London (Central) Employment Tribunal (Employment Judge Grewal, sitting with members on 10-13 November and on 14 November 2014 in chambers; “the ET”), sent to the parties on 15 January 2015.  Representation below was as now.  By its Judgment, the ET dismissed the Claimant’s claims of unfair dismissal, and of direct race and age discrimination.  This appeal concerns only the rejection of one aspect of the age discrimination claim.  The Respondent resists the appeal, essentially relying on the reasons provided by the ET for concluding there was no less favourable treatment because of age.

The Background Facts
2.	The Claimant, born on 5 January 1960, was aged over 50 at the time of the events with which this appeal is concerned.  He started his employment with the Respondent on 15 August 1978 and, from March 2003, had been employed as a Regional Director in retail banking.  

3.	In 2012 a restructure took place, which gave rise to what was seen as a new Regional Director role.  As such, no existing Regional Director would automatically transfer into the new position but would have to go through a selection exercise.  The decision was initially taken that no one should be permitted to apply for voluntary severance until after a preliminary desktop selection exercise, as the Respondent did not want to risk losing talent.  Those who were not to be offered an interview would then be given an options letter, allowing them to volunteer for redundancy.  If aged over 50, that would include an option to take early retirement, a benefit that did not amount to unlawful discrimination given the provisions of section 61(8) of the Equality Act 2010 (“EqA”) and the Equality Act (Age Exceptions for Pension Schemes) Order 2010, Schedule 1, paragraph 10.

4.	Four Regional Directors fell into the category of those who were not to be offered an interview under that process.  Two, including the Claimant, were aged over 50.  When the severance costs were calculated, however, it became apparent that, out of redundancy costs of £1.4 million, £1.25 million would be accounted for by the two individuals aged over 50.  Specifically, the cost to the Respondent of the Claimant taking early retirement would be £552,286.87, mainly due to the amount the Respondent would have to contribute to provide an undiscounted pension (£460,275 in the Claimant’s case).  Such a significant severance payment gave rise to certain risks for the Respondent and needed higher level approval.

5.	The Respondent had a change of mind and interviews were then also offered to those initially unsuccessful on the desktop sift.  One of the four was successful after all; the Claimant and the remaining two were not.  Meanwhile, the Respondent had progressed the question of the severance costs to a higher level; it would need to do so where the value of the package in issue exceeded £500,000, and there was a risk that any such package would be declined if there were redeployment opportunities that had not been explored.  Whilst this issue was investigated further, on 28 May 2012 two of those who had not been selected - Ms Denise Alexander and Mr David Batey, both aged under 50 - were given letters giving them the opportunity to apply for voluntary redundancy or redeployment; no such letter was given to the Claimant.

6.	On 29 May 2012, an alternative role became available, which was suitable for the Claimant; in part, because he had previously carried it out for a year between 2010 and 2011.  It was decided that he and Mr Batey - who had declined voluntary redundancy - should be offered the opportunity to be considered for this.  This offer was made to the Claimant on 31 May.  He asked whether redundancy options were available but was told that they were not given there was a suitable alternative role.  It seems the Claimant was told he would be appointed into the alternative job before the selection exercise involving him and Mr Batey was conducted.  He was pleased to accept and undertook that role until a further, unrelated restructuring in 2013.

7.	In the meantime and after a two month consultation, from 1 October 2012, the Respondent had changed its pension rules.  From that date, the age at which volunteers for redundancy could retire immediately with a non-discounted pension was raised from 50 to 55.  

8.	In the 2013 restructuring, the Claimant was permitted to apply for voluntary redundancy; which he did, leading to the termination of his employment on 30 September 2013.

The ET’s Conclusions and Reasoning
9.	On direct age discrimination, the question was whether the Respondent discriminated against the Claimant by failing to offer him the option of applying for voluntary redundancy as it had his under age 50 comparators, Ms Alexander and Mr Batey.  An objection to the ET hearing this claim (as out of time) had previously been resolved in the Claimant’s favour.  

10.	The ET first considered whether Ms Alexander and Mr Batey were appropriate comparators.  It concluded they were not, reasoning:
“69. … Leaving aside the difference in age, we considered whether there were any material differences between their circumstances and that of the Claimant.  We concluded that there was a material difference in respect of the benefits to which they would be entitled if they applied for voluntary redundancy.  The Claimant would be entitled to apply for voluntary early retirement; Mr Batey and Ms Alexander were not entitled to that benefit.  It was a benefit that could lawfully be offered to the Claimant, but not to Mr Batey and Ms Alexander. …”

11.	That said, the ET acknowledged that the entitlement to the benefit of early retirement was itself linked to age and it might be argued that this was tantamount to taking the ages of the Claimant and his comparators into account.  Allowing for this alternative, the ET concluded that, in any event, the Claimant was not less favourably treated:
“70. The Claimant’s basic complaint was not that he had not been given the option to apply for voluntary early retirement.  Mr Batey and Ms Alexander were also not given the option to apply for voluntary early retirement because they were not entitled to apply for it.  In those circumstances, it is difficult to see how it can be said that the Claimant was treated less favourably than them in this respect.  They were all treated in the same way.”

12.	And, even if less favourable treatment, the ET further concluded that the difference:
“71. … was attributable to the fact that the costs implications, legal risks and process to obtain approval were different in his case from that of Mr Batey and Ms Alexander.  We were satisfied that if the Claimant’s severance package would have cost the Respondent less than £500,000, he would have been given the option to apply for voluntary redundancy/voluntary early retirement at the same time as Mr Batey and Ms Alexander notwithstanding his age. … the reason that the Claimant was not given the option to apply for voluntary redundancy at the end of May 2012 was not because he was over 50 or entitled to apply for voluntary early retirement but because of the amount that his redundancy package would have cost the Respondent and the unlikelihood of that being approved when there was potential suitable alternative employment that he could be offered. …”

13.	Although the Respondent had amended its response to assert a defence of justification in respect of direct age discrimination, that was not addressed by the ET.

The Relevant Legal Principles
14.	I start with the relevant legislative provisions, which are to be found in the EqA 2010.  Section 5 defines the protected characteristic of age as follows:
“(1) In relation to the protected characteristic of age -
(a) a reference to a person who has a particular protected characteristic is a reference to a person of a particular age group;
(b) a reference to persons who share a protected characteristic is a reference to persons of the same age group.
(2) A reference to an age group is a reference to a group of persons defined by reference to age, whether by reference to a particular age or to a range of ages.”

15.	Direct discrimination in this context is then defined by section 13(1) and (2):
“(1) A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.
(2) If the protected characteristic is age, A does not discriminate against B if A can show A’s treatment of B to be a proportionate means of achieving a legitimate aim.”

16.	Less favourable treatment imports an element of comparison, whether that is with an actual or hypothetical comparator.  In this regard section 23, relevantly, reads:
“(1) On a comparison of cases for the purposes of section 13 … there must be no material difference between the circumstances relating to each case.”

17.	Direct age discrimination in the field of work is rendered unlawful by (so far as relevant to this case) section 39(2)(d), which provides that an employer must not discriminate against one of its employees by subjecting that employee to a detriment.

18.	Turning to the relevant case-law, the question of comparison for these purposes was considered in Lockwood v Department of Work and Pensions [2013] IRLR 941, in the context of a redundancy scheme that provided differential benefits dependent on age, distinguishing between those over and under 35.  That case was brought under the earlier provisions of the Employment Equality (Age) Regulations 2006 SI 2006/1031, but there is no material difference for present purposes.  Although ultimately rejecting the Claimant’s appeal - on the basis that the age discrimination was justified - the Court of Appeal held that the ET and the EAT had erred in finding there were material differences between the 26 year old complainant and her over 35 year old comparators; see, per Rimer LJ:
“35. … There was no difficulty in identifying a comparator, namely someone over 35 who was, or would have been, otherwise in all material respects as regards his or her employment in the DWP in the same position as Ms Lockwood.  For the ET then, however, to have held that the respective circumstances of the, say, 36-year-old comparator and the 26-year-old Ms Lockwood were materially different, so that Ms Lockwood failed to show less favourable treatment as compared with her comparator, was wrong.
36. First, Ms Lockwood’s age of 26 did not make the relevant circumstances of her case materially different from that of the comparator.  Her case was that it was because of her age that she was being discriminated against.  Just as a comparison between a black claimant and a white comparator is not invalidated because of their difference in race, so the comparison between the 26-year-old Ms Lockwood and the 36-year-old comparator was not invalidated either.  On the contrary, the comparison was relevant, valid and essential for the purposes of answering the question whether or not Ms Lockwood had suffered less favourable treatment on the ground of her age.
37. Second, once the comparison was made, there was only one answer to the question whether she had suffered such less favourable treatment, namely yes.  That is because, upon leaving her employment, she was paid substantially less money than was or would be paid to someone whose circumstances, age apart, were identical.  The ET, however, rejected this straightforward conclusion.  It instead approached the case by bringing into account in its assessment of the relevant circumstances the fact that, because Ms Lockwood was younger than the comparator and belonged to a generation whose members could adjust more easily and rapidly to the loss of jobs than their colleagues in their late 30s, her circumstances were materially different from those of the comparator.
38. Those considerations were, however, nothing more than features of being 26 rather than 36.  The ET’s reasoning appears to have been that, because a 26-year-old leaver can be assumed not to need as much money as a 36-year-old leaver, there was no less favourable treatment in giving the former a lower severance payment than the latter.  Even if the premise was correct, the conclusion was self-evidently wrong.  The premise, if right, may have provided grounds for justifying the disparity of the treatment between the different age groups.  But that was a different question.  There was, however, no question that Ms Lockwood suffered less favourable treatment than her comparator.  The ET ought so to have found, and the EAT was wrong in failing to correct its error.”

19.	As can be seen from that passage, the correct approach to the comparison required in a direct discrimination case of this nature can itself answer the question whether there has been less favourable treatment.  As Langstaff P observed in a postscript to his Judgment in Chief Constable of West Midlands Police and Ors v Harrod and Ors UKEAT/0189/14:
“49. … Where a criterion inevitably distinguishes between individuals on the basis of age … to apply it is to discriminate directly …”

20.	The point is well rehearsed in the case law: where the criterion itself imports the relevant characteristic, the question to be asked is whether the treatment in question would have occurred but for that characteristic, see James v Eastleigh Borough Council [1990] 2 AC 751 HL, adopting the “but for” test laid down by Lord Goff in R v Birmingham City Council (Ex Parte EOC) [1989] AC 1155 HL.  See, also, the affirmation of that approach in Nagarajan v LRT [2000] AC 501 HL, per Lord Nicholls at page 511; R (E) v Governing Body of JFS [2010] 2 AC 728 SC, per Lord Phillips at paragraph 20; and Bull v Hall [2013] UKSC 73, per Lady Hale at paragraph 30, Lord Carr at paragraph 61, and Lord Toulson at paragraph 70.  If the reason relied on for the conduct in issue itself directly discriminates on the basis of the relevant protected characteristic, then that conduct is an act of direct discrimination; to hold otherwise is simply fallacious (per Lord Bridge in James at page 763H).  As Underhill J (as he then was) explained in Amnesty International v Ahmed [2009] ICR 1450 EAT:
“33. In some cases the ground, or the reason, for the treatment complained of is inherent in the act itself.  If an owner of premises puts up a sign saying “no blacks admitted”, race is, necessarily, the ground on which (or the reason why) a black person is excluded.  James … is a case of this kind.  There is a superficial complication, in that the rule which was claimed to be unlawful - namely that pensioners were entitled to free entry to the council’s swimming-pools - was not explicitly discriminatory.  But it nevertheless necessarily discriminated against men because men and women had different pensionable ages: the rule could entirely accurately have been stated as “free entry for women at 60 and men at 65”.  The council was therefore applying a criterion which was of its nature discriminatory: it was … “gender based”.  In cases of this kind what was going on inside the head of the putative discriminator - whether described as his intention, his motive, his reason or his purpose - will be irrelevant.  The “ground” of his action being inherent in the act itself, no further inquiry is needed. …”

21.	As for the detriment relied on by a Claimant for the purposes of section 39(2)(d), an unjustified sense of grievance will not be sufficient, albeit she does not have to establish some physical or economic consequence; the question is whether the treatment was (per Lord Hope, in Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] ICR 337, HL):
“35. … of such a kind that a reasonable worker would or might take the view that in all the circumstances it was to his detriment? …”

Submissions
The Claimant’s Case
22.	The Claimant submits that the ET made the classic mistake identified in James; the denial of the benefit due to the cost of voluntary early retirement necessarily discriminated against those aged over 50 (who would be entitled to the relevant pension benefits), as opposed to those under 50 (who would not).  The ET had made the same error as the ET and the EAT in Lockwood.  It had then further erred in failing to consider whether the matter complained of - the option to apply for voluntary redundancy - amounted to a detriment (applying the low test laid down in Shamoon), and, instead, inappropriately redefined the Claimant’s complaint.

23.	As for less favourable treatment, the ET had wrongly focused on the Respondent’s underlying reason; its motivation was irrelevant (James).  The question was not why the Respondent had taken into account the Claimant’s age; it was, rather, whether it did so.  The only permissible conclusion was that it did.  While the Respondent argued that age was not the only factor - if the Claimant had been on a lower salary, then the severance package might have fallen below the £500,000 and so, on the ET’s finding, not requiring to have been considered at a higher level - that was not the point.  All else being equal - if compared to another employee on the same (not some lower) salary - but for age, the Claimant’s case would have been so referred and thus the option of voluntary redundancy not extended to him, and the case of the other employee would not (thus enabling the latter to apply for voluntary redundancy).

24.	The matters relied on by the ET at paragraph 71 might have gone to the Respondent’s defence of justification, but the ET did not engage with that (although it had been identified as an issue for the hearing).  Had it done so, it would have found that the only reason for the Respondent’s conduct was cost, which could not amount to good justification.  The EAT should allow the appeal and hold that the case must succeed.  If minded to remit the issue of justification, however, then it should be to a different ET, to consider this question on the basis of the findings already made.  To remit to the same ET would give rise to the risk that it had already formed a view and/or be perceived to be being allowed a second bite of the cherry.

The Respondent’s Case
25.	On behalf of the Respondent, Mr Campbell made clear that it was not accepted that the Claimant had been denied a benefit: although not given the option to apply for voluntary redundancy, there was no conscious decision by the Respondent that he would not be issued with an options letter.  Whilst he was not given a letter offering him the option of accepting voluntary redundancy on 28 May 2012, very shortly thereafter he was offered redeployment.

26.	Accepting, however, that as of 28 May 2012 - whether as a result of a conscious policy on the part of the Respondent or not - the Claimant could have seen the failure to extend the option of redundancy to him as a detriment, the ET had still been entitled to take the approach that it did.  The first basis for the ET’s conclusion was correct: as a matter of fact, the Claimant was not in the same position as his comparators; he was entitled to pension benefits that did not apply to them, and that more beneficial treatment of him was permitted by statute.

27.	Accepting that the ET’s second, alternative reasoning was weaker, the Respondent contended that the third basis for its conclusion was founded upon permissible findings of fact: if there was less favourable treatment, it was not for a reason related to age but, rather, related to cost and the additional scrutiny required in that regard.  That was not necessarily linked to age; any severance package at that level would be referred up and could be denied whether or not it was age related.  There was also a risk to the Respondent of inviting the Claimant to apply for voluntary redundancy in those circumstances and when there might be suitable redeployment options, specifically the vacancy identified very shortly after 28 May 2012.  

28.	It should further be noted there was no guarantee that if the Claimant had applied for voluntary redundancy he would have been successful.  Even if that did not mean that there was no detriment, it was a point that should be borne in mind when considering the likely value of the case and the proportionate order on disposal if the appeal were to be allowed.  On that question the issue of justification had not been addressed and would need to be resolved by an ET.  Applying the guidance in Sinclair Roche & Temperley v Heard and Anor [2004] IRLR 763, the right course was to remit this matter to the same ET.  The worst of all possible worlds would be to remit it to a different ET, which would be handicapped if held to these findings.

Discussion and Conclusions
29.	Before descending into the detail of the points raised by this appeal, I observe that the issue before me was just one of many before the ET.  As the first instance Tribunal, it carried out its fact finding role diligently, and its careful reasoning in respect of the other claims has not been the subject of any challenge.  That said, I consider that the ET lost its way when it came to this particular aspect of the direct age discrimination claim before it.

30.	The complaint related to the Respondent’s failure to offer the Claimant voluntary redundancy - strictly speaking, the opportunity to apply for voluntary redundancy - after it was decided he would not be offered one of the new Regional Director roles.  In this regard he drew a comparison with Ms Alexander and Mr Batey, both of whom were also unsuccessful in the selection process but were given the option of applying for voluntary redundancy rather than being considered for redeployment.  Regardless of the pension position, as Mr Campbell has accepted, the ability to apply for voluntary redundancy might be considered a benefit; conversely, to be denied that option might reasonably be viewed as a detriment.

31.	The ET’s starting point was to deny the appropriateness of the comparison between the Claimant, Ms Alexander and Mr Batey because of the material difference arising from the fact that voluntary redundancy would enable the Claimant to obtain early retirement benefits, which it would not for his comparators.  As the ET went on to recognise, however, the difference so identified was, in reality, simply one of age: it was because the Claimant was aged over 50 that voluntary redundancy would enable him to obtain early retirement benefits.  As in Lockwood, the difference between the cases was that of age.  That was precisely the Claimant’s complaint and it could not be relied on as a material difference for the purpose of the comparison.

32.	The ET then turned to consider the question of less favourable treatment.  Here, however, the reasoning addresses a case that was not before the ET.  The ET considered it conclusive that neither the Claimant nor his comparators was given the option of applying for early retirement, but that was not his complaint.  The issue for the ET was whether he was treated less favourably in not being given the option to apply for voluntary redundancy.  As the Respondent has accepted before me (subject to the caveat that his application might not have been accepted), that could amount to a detriment and to less favourable treatment of the Claimant (who was denied the option to apply for voluntary redundancy) as compared to his comparators (who were afforded the benefit of being able to make such an application).

33.	That then leaves the ET’s alternative conclusion as to the reason for any less favourable treatment.  It held that the difference in treatment was:
“71. … attributable to the fact that the costs implications, legal risks and process to obtain approval were different in his case from that of Mr Batey and Ms Alexander. …”

34.	It observed that the requirement of approval might not simply arise from age.  The cost to the Respondent for someone in their late 50s would be significantly less and so may not take the severance package over the £500,000 limit before approval had to be obtained.  Equally, the same level of cost might not arise in the case of someone of the Claimant’s age but with a lower salary.  Those, however, were not the relevant questions.  In the Claimant’s case, compared to someone at the same salary level, the need for the referral arose from his age.  That is the problem with the ET’s reasoning in this regard; all of the factors it identified were simply matters arising from the Claimant’s age.  As Ms McColgan submitted, the question was not why the Respondent had taken into account the Claimant’s age; it was, rather, whether it did so.  Here, it was the Claimant’s age that gave rise to the costs complications for the Respondent, to the legal risk and, therefore, the need to obtain high level approval, and to the additional imperative to explore all redeployment opportunities.  The Claimant’s age was inherent in each of the matters identified.  It was the reason why the Respondent did not extend to him the opportunity to apply for voluntary redundancy as it did in the cases of his comparators.  

35.	On the ET’s findings, therefore, I have no hesitation in concluding that the only permissible conclusion was that a prima facie case of direct age discrimination had been made out.  I therefore allow the appeal on this point and duly substitute my finding for that of the ET.

36.	That leaves the outstanding issue of justification, a defence uniquely available in the case of a direct age discrimination claim.  It is common ground that the ET did not address this issue (presumably because of its findings on the less favourable treatment issue).  It is not a matter that can generally be determined by the EAT: the question of justification requires a balancing exercise and objective assessment by the first instance Tribunal.  The Claimant submits, however, that, on the ET’s findings, there only one possible answer to this question: the Respondent’s justification is all about cost and that cannot provide good justification.  

37.	I do not consider that I can make such an assumption.  The ET did not begin to consider what the Respondent’s legitimate aims might be, still less whether those might be legitimate aims for the purpose of a direct age discrimination complaint.  If it had been satisfied that they were, it would then have needed to go on to consider the question of proportionality.  I do not think it would be appropriate for me to assume that the answer to the question of justification given by the ET was, or would be, cost alone.  That being so, this issue will need to be remitted.
38.	Having given my Judgment in this matter, I permitted the parties to address me further on the question of disposal.  The Claimant urged that remission should be to a different ET: the evidence on justification was limited to that in the Respondent’s witness statements and there was no further oral evidence and no cross-examination on that point; it would simply be a matter of submission on the basis of the ET’s existing findings and the evidence contained in the Respondent’s witness statements.  For the Respondent, it was observed that I have not made widespread criticisms of the ET in terms of its fact finding role or its decision making on the other aspects of the case.  It urged that I remit the case to the same ET.

39.	I have reminded myself of the guidance laid down in Heard.  The ET here made no findings on the question of justification and carried out no assessment of that issue.  My concern if I sent this to a differently constituted ET would be that it would have to approach this matter on the basis of findings of fact that it had not made; inevitably a difficult (although not impossible) exercise.  I have made no criticism of the ET in terms of the other claims it decided or its findings of fact and I have no reason to think it would not carry out its role in relation to the question of justification in an entirely professional manner.  The issues that it would need to address are different to those that were before it on the question of comparison and less favourable treatment.  It will need to carry out an assessment as to whether or not objective justification has been made out properly addressing itself in the light of the guidance that has been given in Seldon v Clarkson Wright & Jakes [2012] UKSC 16 and to consider the question of proportionality.  That is, as I have said, a new matter for this ET, albeit that it will carry out that assessment on the basis of findings of fact that it has already made.  It seems to me that the appropriate and proportionate order on disposal is therefore that I remit this matter to the same ET, to the extent that that is still reasonably practicable.