Judgments - Secretary of State for Trade and Industry (Respondent) v. Rutherford and another (FC) (Appellants) and others

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    21.  Accordingly, the only respect, in my opinion, in which the statutory bar might be said to have an indirectly discriminatory effect would be if comparison A were the correct comparison (see para.11 above) and if the respective fractions showed that a substantially higher proportion of men than of women had their post 65 employment terminated by dismissal. But the appellants have not attempted to establish indirect discrimination by that route. The route they have chosen, rejected by the EAT and the Court of Appeal, involved, in my opinion, a misuse of statistics. Statistics are never more than a tool and the statistics deployed in the lower courts were not, in my opinion, an apt tool for identifying indirect discrimination on the facts of this case.

    22.  The disadvantage of which complaint is made in this case is certainly a result of discrimination on the ground of age. Age discrimination is not yet unlawful. It will become so, I understand, under legislation to be introduced later this year. But the age discrimination cannot, in my opinion, be passed-off as sex discrimination on the ground that statistics show that relatively more men than women continue in employment after the age of 65.

    23.  For these reasons, which I believe follow essentially the same line of reasoning as that of my noble and learned friends Lord Rodger of Earlsferry and Baroness Hale of Richmond, with both of whose opinions I agree, I would dismiss these appeals.

LORD RODGER OF EARLSFERRY

My Lords,

    24.  People who work after the age of 65 have no right to compensation for unfair dismissal ("compensation") unless there is a higher normal retiring age for such employees in the undertaking where they work: section 109(1)(b) of the Employment Rights Act 1996 ("ERA"). Also, even if the normal retiring age in the business is higher than 65, after reaching that age they have no right to a redundancy payment ("redundancy pay"): section 156(1)(b) of the ERA. Only a relatively small percentage of men and women work after the age of 65, but, as the Secretary of State accepts, the proportion of men over 65 who work is higher than the proportion of women over 65 who work. It follows that a higher proportion of men over 65 than of women over 65 are working but have no right to compensation or redundancy pay.

    25.  The appellants are men who worked on after reaching 65 in businesses where there was no higher normal retiring age. Mr Rutherford was dismissed when he was 67. He says that he was unfairly dismissed but, by virtue of the legislation, could not make a claim for compensation and that he was made redundant but, for the same reason, could not claim redundancy pay. Mr Bentley was dismissed at the age of 73 and says that he was made redundant but could not claim redundancy pay because of the Act. Both appellants allege that the provisions of the ERA removing the rights to compensation and redundancy pay are indirectly discriminatory against men, since they impose a detriment or disadvantage which has a very different impact on men as compared to women, whether looked at in numerical or proportionate terms. Since the discrimination cannot be objectively justified, it should be eliminated by disapplying sections 109(1)(b) and 156(1)(b) of the ERA.

    26.  The Secretary of State does not dispute that a considerably higher proportion of men over 65 than of women over 65 work and have no right to compensation or to redundancy pay. But he says that this does not mean that the legislation discriminates against men. To see whether it does, the employment tribunal should not look at the statistics for those over 65 who are adversely affected by the provisions, but at the statistics for those under 65 who are able to fulfil the preconditions for having the rights to compensation and to redundancy pay. The Secretary of State's preferred statistics show that in 1998 98.79% of men and 98.69% of women could fulfil those requirements, while in 2001 98.88% of men and 99.01% of women could do so. The statistics preferred by the appellants would bring out comparable figures. There is therefore no considerable difference between the position of men and women in this respect and sections 109(1)(b) and 156(1)(b) have no indirectly discriminatory effect. Even if there were discrimination, it would be objectively justified.

    27.  The House was thus presented with a battle of statistics. More particularly, Mr Allen QC for the appellants submitted that the correct approach was to have regard to all the statistics, both those for employees under 65 and those for employees over 65, but that in the circumstances of this case particular weight should be given to the statistics for those over 65. For the Secretary of State Mr Pannick QC argued that an employment tribunal should have regard to all the statistics, but in a case such as the present, where the percentages of men and women who could fulfil the preconditions for enjoying the relevant rights were so close, there was no need to look at the figures for those over 65 who could not. Counsel sought to support these rival submissions by reference to the decisions of the European Court of Justice and of your Lordships' House in R v Secretary of State for Employment ex parte Seymour-Smith [1999] ICR 447 and [2000] ICR 244.

    28.  My Lords, if one were to proceed along those lines and have regard to what the Court of Justice said in Seymour-Smith, then it would point in favour of placing the emphasis on the statistics for those who could comply with the preconditions for having rights to compensation and redundancy pay. Which is essentially what Mummery LJ did in giving the judgment of the Court of Appeal, [2005] ICR 119, 192, at para 29. My noble and learned friend, Lord Walker of Gestingthorpe, has produced a more detailed analysis which leads to essentially the same result. Therefore, if I considered the statistics in the case to be relevant to the issue of indirect discrimination raised by the appellants, I would approach the matter in that way and dismiss the appeal. But, in my view, these statistics are actually irrelevant to that issue.

    29.  The appellants' entire case is based on article 141(1) (ex 119(1)) EC which provides:

    "Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied."

In terms of article 141(2) "pay" includes wages or salary "and any other consideration ... which the worker receives directly or indirectly, in respect of his employment, from his employer." It is accepted that the right to compensation for unfair dismissal and the right to redundancy pay are indeed part of the consideration which a worker receives in respect of his employment. Hence they are part of the worker's "pay" in terms of article 141(1).

    30.  For the purposes of article 141, therefore, any employee who has worked for an employer for a year and who is under 65 receives as part of his or her "pay" a right to compensation and a right to redundancy pay. It is undisputed that in this respect men and women are to be treated equally. In other words, in return for "equal work or work of equal value" ("equal work"), these men and women under 65 are entitled to an equal package comprising wages or salary, a right to compensation and a right to redundancy pay. Such a man under 65 seeing such a woman under 65 alongside him doing equal work is therefore entitled to demand that he should have a pay package equal to hers, including the rights to compensation and redundancy pay.

    31.  Under the ERA, however, those who work when over 65 have no right to compensation or redundancy pay. So their "pay" for the purposes of article 141(1) does not include those elements. This applies to both men and women. Therefore, under article 141, a man over 65 seeing a woman over 65 alongside him doing equal work is entitled to demand that he should have a pay package equal to hers, but that package will not contain the rights to compensation or to redundancy pay. Provided that he gets the same (smaller) pay package as the female worker over 65, he is receiving equal pay for equal work and there is no breach of article 141.

    32.  What article 141 does not do is guarantee that a man over 65 will have the same (higher) level of pay as a woman under 65 doing equal work. Parliament has decided that a younger woman, who has worked for her employer for more than a year, should have rights which a man or woman over 65 does not have. The man over 65 can claim no more than to receive pay equal to the pay of a woman over 65 for equal work. In the usual jargon, the woman over 65 is the appropriate comparator.

    33.  The statistics in the case simply demonstrate that a higher proportion of men over 65 than of women over 65 work and receive this reduced package of "pay". They are not refined enough to show why this is so but, for present purposes, that does not actually matter since article 141 is designed to ensure that the men and women who are in the workforce receive equal pay for equal work - not to ensure that equal proportions, or indeed any particular proportion, of the men and of the women in any age group will be members of that workforce. Crucially, however, the statistics do not point to indirect discrimination. To be relevant to that issue, they would have to deal with the position among men and women over 65 who work and who therefore wish to receive equal pay for equal work. More precisely, in order to raise an issue of indirect discrimination, they would have to show that a substantially higher proportion of the men over 65 who work than of the women over 65 who work receive merely the reduced pay package. In fact, however, the statistics show no such thing since, subject to section 156(1)(a) of the ERA, 100% of both groups receive it.

    34.  The only conceivable way of putting the argument for the appellants would be to build on a suggestion which Lord Walker of Gestingthorpe advanced for discussion during the hearing. Since a higher proportion of women stop work before 65, it might be said that there was indirect discrimination against men because a substantially higher proportion of women than of men received pay which included rights to compensation and redundancy pay throughout their entire working lives. But there is no hint of such an approach in article 141. It does not guarantee equal pay over working lives which end at different ages. It has the more straightforward aim of ensuring that men and women who are in the same position, doing equal work, receive equal pay.

    35.  The appellants have not even tried to show any respect in which, while they worked on after 65, they were receiving less by way of pay than any woman over 65 received or would have received for equal work. In particular, as my noble and learned friend, Baroness Hale of Richmond, pointed out during the hearing, the appellants neither have, nor could have, shown that any woman over 65 had or would have had those rights which the ERA denied to them. There is therefore no breach of article 141 and no discrimination. For these reasons, which are essentially the same as those of Baroness Hale, I would dismiss the appeals.

LORD WALKER OF GESTINGTHORPE

My Lords,

    36.  This appeal is concerned with complaints of indirect discrimination in employment law. The appellants claim that sections 109(1)(b) and 156(1)(b) of the Employment Rights Act 1996 (which, as they apply in this case, exclude claims for unfair dismissal and redundancy payments by an employee who has attained the age of 65 years) are contrary to EU law as having a disproportionately adverse impact on male employees.

    37.  At an early stage in his judgment in the Court of Appeal [2005] ICR 119, para 3, Mummery LJ (who has great experience in this field) observed:

    "Although there is quite a simple answer to the indirect discrimination point, it has become virtually impossible and almost unacceptable to decide points of this kind in short form. The legal materials on indirect discrimination and equal pay are increasingly voluminous and incredibly intractable. The available arguments have become more convoluted, while continuing to multiply. Separating the wheat from the chaff takes more and more time. The short snappy decisions of the early days of the industrial tribunals have long since disappeared. They have been replaced by what truly are 'extended reasons' which have to grapple with factual situations of escalating complexity and with thicker seams of domestic and EC law, as interpreted in cascades of case law from the House of Lords and the European Court of Justice."

    It is impossible not to feel some sympathy with these observations. As Mummery LJ went on to point out, the litigation was still stuck at the most preliminary stage. Mr Rutherford, the first appellant, started his proceedings in the Employment Tribunal in December 1998; Mr Bentley, the second appellant, started his proceedings in May 2001; both are still waiting to learn whether the Employment Tribunal had jurisdiction to hear their claims for redundancy pay (and in Mr Rutherford's case compensation for unlawful dismissal as well).

    38.  The appellants' claims do however have two unusual features. The first is simply stated: although throughout the development of EU law as to equal pay and equal treatment the aim has been to put an end to long-standing and deplorable discrimination against women, these are claims for indirect discrimination on the ground of gender brought by men. The other unusual feature (which to my mind negatives the notion that the appeal has quite an easy answer) is less simply stated, and a full explanation of it is better deferred. In general terms, however, it is that in the consideration of these claims the comparison of proportions (inherent in any assessment of indirect discrimination) produces startlingly different results depending on whether the comparison focuses on (i) proportions of advantaged men and women respectively ("advantage-led") or (ii) proportions of disadvantaged men and women respectively "("disadvantage-led"). Your Lordships were not referred to any decision of the Court of Justice of the European Communities in which either of these two unusual features was present. All the tribunals and courts which have considered this matter have therefore had to do so without any clear guidance from the Court of Justice (nevertheless, in common, as I understand it, with all your Lordships, I do not consider that a reference to the Court of Justice is necessary or appropriate in this case; it is a matter to be decided by the national court).

The facts and the proceedings below

    39.  Mr Rutherford was dismissed by his employer, Harvest Town Circle Ltd ("Harvest"), on 25 October 1998 when he was aged 67. On 7 December 1998 he applied to the Employment Tribunal claiming against Harvest redundancy pay and compensation for unfair dismissal. In 2001 Harvest went into liquidation with Mr Rutherford's claims still unresolved.

    40.  Mr Bentley was dismissed by his employer, Bodner Elem Ltd ("Bodner"), on 9 February 2001 when he was aged 73. At the same time Bodner went into administrative receivership, and it is insolvent. Mr Bentley commenced proceedings in the Employment Tribunal on 30 May 2001, claiming a redundancy payment.

    41.  Neither of the appellants had a normal retiring age fixed by contract, and so the statutory default age of 65 (in sections 109 (1)(b) and 156 (1)(b) of the Employment Rights Act 1996) was applicable. The Secretary of State for Trade and Industry is responsible for both unsatisfied claims in consequence of Part XII of the Employment Rights Act 1996. In relation to Mr Bentley the Secretary of State has had that responsibility since his dismissal; in the case of Mr Rutherford it arose when Harvest went into liquidation.

    42.  Mr Rutherford's claim was initially heard in the Stratford Employment Tribunal in January 1999. It was submitted on his behalf that the exclusion at age 65 was contrary to article 141 (formerly 119) of the Treaty. The case was stayed pending the reference to the Court of Justice made by this House in R v Secretary of State for Employment ex parte Seymour-Smith (the reference was made by the House on 13 March 1997, following decisions of the Divisional Court and the Court of Appeal reported at [1995] ICR 889; the Court of Justice gave judgment on 9 February 1999, [1999] 2 AC 554; when the matter returned to this House judgment was given on 17 February 2000, [2000] ICR 244).

    43.  Following the judgment of the Court of Justice in Seymour-Smith, on 16 July 1999 the Employment Tribunal ruled that it did have jurisdiction to hear the claim, as the statutory exclusions were contrary to article 141. Harvest appealed successfully to the Employment Appeal Tribunal, which on 10 July 2001 allowed the appeal and remitted the case to the Employment Tribunal. In the judgement of the Employment Appeal Tribunal (sometimes referred to as "Rutherford 1") Lindsay J gave some guidance as to how the Employment Tribunal should approach the matter. By this time Harvest had gone into liquidation and the Secretary of State had taken over the defence of Mr Rutherford's claim. Soon afterwards the Employment Tribunal directed that Mr Bentley's claim should be heard together with Mr Rutherford's claim.

    44.  The two cases were heard by the Employment Tribunal over eight days in June and July 2002, with expert evidence from statisticians called by both sides (and also oral evidence by two officials of the Department of Trade and Industry). By a written decision dated 22 August 2002 the Employment Tribunal again decided that it did have jurisdiction to hear the claims, and that the statutory exclusions must be disapplied. At later hearings it was determined that (unless the Secretary of State's appeal was successful) Mr Rutherford was entitled to a basic award of £990 and a compensatory award of £4,500 for unfair dismissal, and that Mr Bentley was entitled to a redundancy payment of just under £1,500.

    45.  Meanwhile the Secretary of State had appealed and on 2 October 2003 the Employment Appeal Tribunal (presided over by Wall J) allowed her appeal. An appeal by Mr Rutherford and Mr Bentley was dismissed by the Court of Appeal on 3 September 2004, [2005] ICR 119.

Indirect discrimination

    46.  Indirect discrimination (on the ground of gender, and in the context of equal pay and equal treatment under EU law) is defined in the Burden of Proof Directive (97/80/EC) as "where an apparently neutral provision, criterion or practice disadvantages a substantially higher proportion of the members of one sex unless that provision, criterion or practice is appropriate and necessary and can be justified by objective factors unrelated to sex." This definition is largely declaratory of the case law of the Court of Justice (see Recital (18) of the Directive and also the Opinion of the Economic and Social Committee, Official Journal C113 p.34, paras 3.1.1 to 3.1.3; also the judgment of the Court of Justice in Nikoloudi v Organismos Tilepikoinonion Ellados AE [2005] ECR I-01789, para 69).

    47.  The definition has a broad scope. The "apparently neutral" measure may be formal and general or informal and particular, ranging from national legislation applicable to all employment in a member state to an administrative change in a single employer's shift system. The disadvantage may consist in less favourable terms of employment accorded to part-term workers as compared with full-term workers (a recurring theme in the Luxembourg jurisprudence, with numerous variations), or in benefits or opportunities not being available to employees above or below a specified age (or outside a specified age bracket) where such age limits bear harder on one gender than on the other. Similarly a requirement for a minimum qualifying period of service before an employee acquires statutory rights may indirectly discriminate against women because their family responsibilities make it more difficult for them to achieve stable long-term employment.

    48.  The phrase "a substantially higher proportion of the members of one sex" is a rather compressed one which prompts several questions. The first question is: higher than what? The answer is reasonably obvious: higher than the corresponding proportion of the members of the opposite sex. The test looks at proportions rather than crude numbers for the reason stated by the Court of Justice in Seymour-Smith [1999] 2 AC 554, 597, para 59:

    "It is not sufficient to consider the number of persons affected, since that depends on the number of working people in the member state as a whole as well as the percentages of men and women employed in that state."

    This leads on to the second and more difficult question: how are these proportions to be determined? The cases show that there must be a larger group (generally referred to, in authorities on our domestic anti-discrimination legislation, as a pool) for the purposes of comparison. Because Seymour-Smith was concerned with secondary legislation of very general application (the two-year qualifying period introduced by the Unfair Dismissal (Variation of Qualifying Period) Order 1985) it was in that case appropriate to look at the entire national workforce as the pool. The identification of the proper pool has been one of the contentious issues in this case, although as the argument has progressed through different courts it has, I think, become apparent that what I have called the advantage-led/disadvantage-led issue is the crucial point.

    49.  The principles of EU law in regard to indirect discrimination have developed over the last twenty-five years, and may still have some way to go. One of the seminal cases was Jenkins v Kingsgate (Clothing Productions) Ltd [1981] ECR 911, a reference to the Court of Justice from the Employment Appeal Tribunal. The opinion of Advocate-General Warner is particularly instructive, especially as it differs from the views which had been expressed by the Commission. It makes a full examination of indirect discrimination, referring to the well-known American case of Griggs v Duke Power Company (1971) 401 US 424. Indirect discrimination was referred to in some of the early cases as "disguised" discrimination, but it was soon recognised that this term was inapposite (see Evelyn Ellis, EC Sex Equality Law, 2nd ed. (1998) pp.111-113). In cases during the 1980s the Court of Justice did not have to focus very closely on the details of the process of comparison inherent in the notion of disproportionate impact (the concept first spelled out, I think, in Advocate-General Warner's opinion in Jenkins at p.936). That is because in the early cases the disproportionate impact was perfectly obvious.

    50.  For instance in Rinner-Kuhn v FWW Spezial-Gebaudereinigung [1989] ECR 2743 the Court of Justice was concerned with a statute of the Federal Republic of Germany under which an employer was not required to pay wages during sickness to a part-time worker. Unchallenged statistical evidence showed that in at least seven member states part-time workers were predominantly women (the percentages ranging from 89% in the Federal Republic to 62% in Italy; only in Denmark, at 54%, was there anything close to parity). So in the Federal Republic there was such a striking disparity between men and women that the question referred to the Court of Justice assumed that the proportion of women adversely affected was considerably greater than that of men, and the Court of Justice was concerned only with the issue of objective justification. Nine times as many women as men were disadvantaged, and no one was going to waste time in suggesting that the entire national workforce contained nine times as many women as men.

The Seymour-Smith case

    51.  The particular importance of Seymour-Smith is that it was the first case in which the Court of Justice had to consider a situation in which the disparity was not obvious, but marginal and debatable. The case does therefore call for detailed examination. Ms Seymour-Smith had worked as a secretary for a firm of estate agents for fifteen months when she was dismissed in May 1991. She made a complaint to the Industrial Tribunal but was met by the two-year time limit. She applied for judicial review contending that the Unfair Dismissal (Variation of Qualifying Period) Order 1985 was invalid because incompatible with EU legislation (article 119 of the Treaty, as it then was, and the Equal Treatment Directive, 76/207/EEC). In 1995 the Court of Appeal, reversing the Divisional Court, granted the applicant limited declaratory relief, declined to make a reference to the Court of Justice, but granted leave to appeal to this House: [1995] ICR 889.

    52.  This House did make a reference to the Court of Justice of five questions, of which the third is most relevant:

    "What is the legal test for establishing whether a measure adopted by a member state has such a degree of disparate effect as between men and women as to amount to indirect discrimination for the purposes of article 119 of the EC Treaty unless shown to be based on objectively justified factors other than sex?"

    53.  The Court of Justice's answer to the third question, [1999] 2 AC 554, 597-598, is contained in the following paragraphs which have been much discussed in later cases:

    "58.  As regards the establishment of indirect discrimination, the first question is whether a measure such as the rule at issue has a more unfavourable impact on women than on men.

    59.  Next, as the United Kingdom Government was right to point out, the best approach to the comparison of statistics is to consider, on the one hand, the respective proportions of men in the workforce able to satisfy the requirement of two years' employment under the disputed rule and of those unable to do so, and, on the other, to compare those proportions as regards women in the workforce. It is not sufficient to consider the number of persons affected, since that depends on the number of working people in the member state as a whole as well as the percentages of men and women employed in that state.

    60.  As the Court has stated on several occasions, it must be ascertained whether the statistics available indicate that a considerably smaller percentage of women than men is able to satisfy the condition of two years' employment required by the disputed rule. That situation would be evidence of apparent sex discrimination unless the disputed rule were justified by objective factors unrelated to any discrimination based on sex.

    61.  That could also be the case if the statistical evidence revealed a lesser but persistent and relatively constant disparity over a long period between men and women who satisfy the requirement of two years' employment. It would, however, be for the national court to determine the conclusions to be drawn from such statistics.

    62.  It is also for the national court to assess whether the statistics concerning the situation of the workforce are valid and can be taken into account, that is to say, whether they cover enough individuals, whether they illustrate purely fortuitous or short-term phenomena, and whether, in general, they appear to be significant: see Enderby v Frenchay Health Authority (Case C-127/92) [1994] ICR 112, 161, para 17. It is, in particular, for the national court to establish whether, given the answer to the fourth question [relating to timing], the 1985 statistics concerning the respective percentages of men and women fulfilling the requirement of two years' employment under the disputed rule are relevant and sufficient for the purposes of resolving the case before it."

 
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