The Weighing Scales of Justice

I should start by declaring an interest: I am what shop assistants describe with charitable euphemism as a “larger gentleman” and have, therefore, followed the European Court of Justice case of Kaltoft (FOA v Kommunernes Landsforening C-354/13) with interest. In 2010 Mr Kaltoft, a child minder, was made redundant. He claims that he was selected for dismissal because he is obese. The facts are disputed but there is a logically prior issue: does it matter if obesity was the reason for his termination? Would that be unlawful?

Mr Kaltoft argued that selecting him for redundancy because of his obesity was unlawful discrimination. If you are unfamiliar with Discrimination Law, its underlying premise is that employment decisions are often based, inappropriately, on characteristics that have little real relevance to the issue to be decided. For instance, if being female is counted against a candidate for a job as a solicitor she will have been unlawfully discriminated against because of her sex. The decision will have been both stupid and unjust. It is stupid because very few business decisions are genuinely dependent on whether an employee has a penis. It is unjust because the product of stupid decision-making is that employees who deserve the same career opportunities as their colleagues are denied them. Domestic Discrimination Law does not expressly outlaw stupid and unjust business decisions. Instead it concentrates on certain characteristics which, experience suggests, commonly result in bad and unfair decisions. Those characteristics are referred to in the Equality Act 2010 as “protected characteristics” and include sex, race, sexual orientation, religious belief and significantly for present purposes, disability. The same specific characteristics are identified in European anti-discrimination legislation.

Mr Kaltoft’s most ambitious argument failed. He contended that there was a general principle of European Law precluding discrimination in employment that stretched beyond the specific protected characteristics expressly identified in legislation. Having failed to persuade the ECJ on his first argument, the challenge for Mr Kaltoft was to persuade the Court that obesity was capable of amounting to a disability. The Advocate General took the view that it was provided that it was “severe, extreme or morbid” which it would be if the employee’s Body Mass Index was higher than 40. A man of average height would need to weigh 20 stone to have a BMI of 40. The proposal had the benefit of a degree of certainty but employers were spared the necessity of regular employee weigh-ins as the Court rejected that approach. The Court found that obesity could amount to a disability where:

“under given circumstances, [it] entails a limitation which results in particular from physical, mental or psychological impairments that in interaction with various barriers may hinder the full and effective participation of that person in professional life on an equal basis with other workers, and the limitation is a long-term one”.

In other words, it all depends on the circumstances. Domestic Law must now be read so as to conform with the ECJ’s decision. Reaction to the decision in the press and on social media has been mixed. The most frequent complaint has been that obesity should not attract legal protection as it is an impairment for which the employee is responsible. The complaint is meritless. First, the premise that an obese person is just an exercise of will and some dieting away from being a healthy weight is ill-founded. Some employees have medical conditions that adversely affect their ability to control their weight. Second and more importantly, there is nothing in either European or Domestic Law that suggests that fault is relevant. If someone has lost their legs in a car crash they will be protected from discrimination whether or not they caused the accident. Encouraging employers to inquire into the extent to which an employee may be responsible for their impairment is to encourage a degree of intrusion that would make the situation of many employees worse rather than better. The point was expressly considered by the ECJ and the judgment emphasizes that the origin of the impairment is irrelevant.

What are the consequences for employers? Two particular areas of risk stand out. The first is that an employer may be required (by Equality Act 2010 s. 20) to make reasonable adjustments to obviate any substantial disadvantage to which an obese employee is subjected by their physical working conditions or any employment provision, criterion or practice. The obligation, however, is only to do what is reasonable. Despite the hand-wringing in the Press, it is unlikely that many employers are going to find that the ECJ ruling results in significant additional costs on this ground. The second area is harassment. Twitter has been awash with people complaining that they cannot now laugh at “fatsos”. Predictably, complainants have laid the blame at the door of “political correctness” which, it seems, “has gone mad”. If there is a culture in a workplace of mocking obese colleagues, that does now carry a real risk of unlawfulness. It is worth bearing in mind that harassment protection is not limited to those who actually have the protected characteristic. It covers those perceived to be obese even if they do not meet the medical definition; those who were obese but have since lost weight; and even (as the result of the Court of Appeal’s decision in English v Thomas Sanderson Blinds Ltd [2008] EWCA Civ 1421) those mocked as obese by colleagues who do not genuinely believe that their victim has the protected characteristic.

Mba, Article 9 and Indirect Discrimination

Ms Eweida, you may recall, is the British Airways employee who wanted to wear a cross on a necklace over her uniform so that others could see it. She considered that that was a religious belief. Over-simplifying, doing what she wanted to do meant a breach of her employer’s dress code. Ms Eweida complained that, amongst other things, she was the victim of an act of indirect discrimination.

The test of indirect discrimination is now to be found at Equality Act 2010s. 19. The constituent elements of the test are:

  1. A provision, criterion or practice (“PCP”) must be applied to the claimant;
  2. The respondent must apply it (or the Tribunal must be satisfied that they would apply it) to people who do not share the claimant’s protected characteristic (in this case, holding the belief);
  3. The PCP “puts, or would put, persons with whom [the claimant] shares the characteristic at a particular disadvantage”;
  4. The PCP puts or would put the claimant at that disadvantage; and
  5. The respondent cannot show it to be a proportionate means of achieving a legitimate aim”.

In the domestic proceedings Ms Ewieda failed at the third hurdle. She could not establish that there were others who shared her particular belief. This is often referred to as the requirement for a “group disadvantage”. Solitary disadvantage, the Court of Appeal found, was insufficient. Denied a domestic remedy, Ms Eweida went to the European Court of Human Rights. Again, rather over-simplifying, the ECtHR decided that the wearing of a crucifix in the manner proposed by Ms Eweida amounted to a manifestation of religion falling within Art 9(2) of the Convention:

Freedom to manifest one’s religion or beliefs shall be subject only to such limitations as are prescribed by law and are necessary in a democratic society in the interests of public safety, for the protection of public order, health or morals, or for the protection of the rights and freedoms of others.

The Court decided that the interference with the manifestation was not, in the particular circumstances, proportionate. The UK should have protected Ms Eweida’s right to manifest her religion and had failed to do so.

Whilst the reasoning was clear it left unaddressed a very significant question. The claim had not failed because the Court of Appeal had decided that the PCP could not be justified; it failed because it could not be shown to have had the necessary indirectly discriminatory effect. The question of justification did not arise. So was the effect of the ECtHR’s decision that element 3 of the statutory test was to be regarded as incompatible with Article 9.

The Court of Appeal has now addressed this question in its decision in Mba v Mayor and Burgesses of the London Borough of Merton. Mrs Mba wanted to obey the Fourth Commandment and refrain from working on Sundays. The Council needed to provide care 24 hours a day and seven days a week to those living in the children’s home at which Mrs Mba worked. Having accommodated her desire not to be rostered on Sundays for a period, the Council decided that it could no longer continue to do so. Following an unsuccessful grievance, Mrs Mba resigned.

It was accepted that the requirement to work Sundays was indirectly discriminatory. The argument was focussed on issue 5 above: whether the justification defence was available. There was no dispute that the Council had a legitimate aim so that the argument was focused, narrowly, on the question of proportionality. It was not a case, therefore, directly concerned with what one might call “the unresolved Eweida question”.

The Employment Tribunal had, in assessing proportionality, taken into account three specific factors. Only one matters for present purposes: the Tribunal had taken into account the fact that sabbatarianism was not, in its view, a “core component of the Christian faith”. A lot of Christians work on Sundays.

Christians might take the objection that judging what religion requires by what adherents actually do is a misguided exercise. We are all sinners. The Court focused on a rather different issue: whether the number of people affected was relevant to justification.

Maurice Kay LJ decided that that the Tribunal had erred in its approach to justification. It should not have been asking how many Christians were affected. It should have been looking at the extent of the impact on sabbatarians, i.e. those who shared Ms Mba’s particular belief. Once one was satisfied that others were affected adversely (so as to jump hurdle 3), the number of those affected was not something that was relevant to the assessment of proportionality. He specifically did not place reliance on either Article 9 or Eweida which he considered to be a case that was “entirely fact sensitive”.

Elias and Vos LJ took a different approach – one that depended upon the impact of Article 9. Patrick Elias (whom I adore with a near religious fervour) tackles the unresolved Eweida question head on. He says the “group disadvantage” requirement (ie, hurdle 3) cannot be read down. Reconciling the domestic legislation with the Eweida decision will, therefore, either take a differently minded Supreme Court or legislation. Article 9 could be used, however, to determine how the proportionality question should be answered. The effect of Eweida was that:

It does not matter whether the claimant is disadvantaged along with others or not, and it cannot weaken her case with respect to justification that her beliefs are not more widely shared or do not constitute a core belief of any particular religion.

Both Elias and Kay LJJ took the view that the smaller the group that shared a claimant’s belief the easier it should be to accommodate it. If number of adherents was a relevant issue, therefore, it had the opposite effect to that which the respondent might have supposed.

With all three judges deciding that the Tribunal had erred in law, did Mrs Mba win? Nope. It was decided that since there was in practice no way of accommodating Mrs Mba’s beliefs, the outcome would have been no different even if the Tribunal had adopted he correct analysis.

Tribunal Fees – Known Unknowns

The new Tribunal Fees regime applies to claims issued on or after today. Set out below is a list of questions identified by #ukemplaw tweeters including Hilary Aldred (@HilaryAldred) Laurie Anstis (@ljanstis); Matt Jackson (@MattEJackson); Paul Statham (@Divinglawyer); and Kerry Underwood (@Kerry_underwood) – if you are not following them, you should be.

I will update to add new questions raised in comments or sent to me via twitter as well as any answers that emerge.

Online Submission of Forms

  • If I believe that I have been unfairly dismissed because:
  1. I was or proposed to become a member of an independent trade union;
  2. I have taken part, or proposed to take part in the activities of an independent trade union at an appropriate time;
  3. I have made use or proposed to make use of trade union services at an appropriate time; or
  4. I have, in certain circumstances, failed to accept an offer made in contravention of TULR(C)A 1992 s 145A or 145B

I can apply to the Tribunal for interim relief (see TULR(C)A 1992, s. 161). However, I must also present “a certificate in writing signed by an authorised official of the independent trade union stating:

  1. That on the date of dismissal I was or proposed to become a member; and
  2. That there appears to be reasonable grounds for supposing that the reason for my dismissal was the one I have alleged in my complaint.”

How, practically, do I submit the certificate? The online process does not enable me to attach it.

Fees Payable

  • If, having commenced proceedings before 29 July 2013, a claim is added by amended that arose thereafter, is a commencement fee payable and, if so, what is the mechanism for ensuring that happens?
  • If, having brought a Type A claim, I apply to amend to add a Type B claim, do I have to pay a top up fee and, if so, what is the mechanism for ensuring that happens?
  • If, having paid a Type A hearing fee, I apply at the hearing to amend to add a Type B claim, is a top up hearing fee payable? If so, what is the mechanism for ensuring that happens?
  • If amending to add a Type B claim to Type A proceedings does not attract a top up fee, can the Tribunal take the possibility that I may be trying to escape the fee into account in exercising its discretion as to whether or not to allow the amendment?
  • If the Tribunal elects to convert a preliminary hearing into a final hearing pursuant to Rule 48, is a Hearing fee payable and, if so, what is the mechanism for ensuring that that happens?
  • Is a hearing fee payable in respect of an employer’s breach of contract claim and, if it is, is it payable:
  1. At the Type A or Type B rate; and
  2. Instead of or in addition to the Claimant’s hearing fee?
  • The Government has conceded in the Scottish JR proceedings that equal pay claims should be Type B. Must a Type B fee be paid whilst an amendment to the legislation is awaited? [UPDATE: the Ministry of Justice has said that the Type A fee should be paid for the present 29/07/2013]
  • Rule 52 of the New Tribunal Rules removes the need for an employer to apply for an order that withdrawn proceedings should be dismissed, but Schedule 1 of the Regulations provide for a fee for the making of such an application. Does Rule 52 have the effect of abolishing the need for an application or not?

Settlement: The wrong question

Most litigation settles. The parties reach an agreed compromise and move on to more productive pursuits. It is rare, therefore, for me to be asked to advise on proceedings without being asked about whether settlement should be explored.

In this post I want to touch on a single issue: I find clients consistently ask the wrong question. The question they ask is “What are my prospects of winning?” Of course the answer to that question is relevant and important to the decision whether or not to fight. It is, however, only the third most important question that a client should ask.

The most important question is “Can I afford to win?” It seems an unlikely question but it is vital. Fighting a case involves cost. The most obvious costs are the lawyers’ fees. In Tribunal proceedings they are generally not recoverable. There are opportunity costs. Employees sat in court are leaving work undone and opportunities uninvestigated. Less easy to define are the costs to working relationships and trust that may arise from subjecting employees to giving evidence in a high stress, hostile and blame-soaked environment. There are risks associated with the popular press practice of reporting the allegation and not the response. You may win the case and still find your interests damaged significantly. Start by asking yourself, therefore, where winning may leave you.

The next question is “Can I afford to lose?” No lawyer with an insurer will ever give you a 100% chance of success. It is important to understand what prospects of success actually mean. If your lawyer tells you that your chances of success are 70% she means that of the 10 judges you might find gazing sceptically at you as the trial beings, 7 would likely find for you and 3 would not. You don’t know whose court you will walk into. You never bet your house at the bookies. Similarly, you should never fight a case you simply cannot afford to lose unless a settlement is genuinely impossible. There are no points for bravery. It might all work out, but if it doesn’t the lawyers move on to the next case, the consequences of your loss are yours alone.

If you can afford to win and you can afford to lose, then, but only then, should you ask about prospects.

Bankers’ Bonuses: The EU acts

  • What is proposed?

The proposals are not a cap in the traditional sense because there is no fixed maximum amount that someone affected by the proposals will be entitled to earn. The proposed rules will require that the ratio of basic salary to bonus should not exceed 1:1. In other words, the value of the bonus should be no greater than the value of the banker’s basic salary.

However, the ratio can be raised to 1:2 with the express permission of the shareholders. The proposals stipulate with some care the majority necessary to pass any proposal to permit the higher level of remuneration. Where permission is obtained for the more generous entitlement, 25% of the bonus must be deferred for at least 5 years.

  • Who has agreed these proposals?

European Parliament and Council negotiators. On 5 March 2013, George Osborne failed to persuade the EU’s Economic and Financial Affairs Council to re-open negotiations. It is thought that some limited further tweaking may be possible. The political agreement will require the agreement of the Member States and the European Parliament in April 2013. The UK will not be entitled to veto the proposals. If the political agreement is ratified, the UK will have to introduce implementing legislation by 1 January 2014.

  • What is the significance of this announcement?

Commentators’ views have covered every part of the spectrum from talk of the cataclysmic destruction of London as a financial centre through to prosaic predictions that amending pay structures may well leave the sector relatively undisturbed. From an employment lawyer’s point of view the notion of direct control of UK workers’ maximum remuneration by Europe is, at first glance, an unsettling one. It is worth bearing in mind, however, that there has already been some limited domestic regulation of bonuses (see the FSA Remuneration Code).

  • Is this an attack on the free market? Are other sectors subject to such limitations?

It depends to some extent on how free the market you are envisaging is. No-one believes that banks and their activities should be beyond the reach of regulators. The background to the package of reforms of which the bonus proposals form part is the widely perceived need (to quote the Bank for International Settlements) to “strengthen the regulation, supervision and risk management of the banking sector”.

The proposals include new requirements in respect of retained capital and transparency which are intended to move banking in Europe towards compliance with the regime developed by the Basel Committee on Banking Supervision and favoured by the G20, known as Basel III.

The controversial question is whether, as part of this package of regulation, there is any need for direct control of bankers’ pay. The European perspective is that the global economic crisis was at least in part caused by bank employees taking on too much risk. It is thought that the emphasis on remuneration by bonus within the sector incentivized irrational risk taking. Neither proposition is uncontroversial. The causes of the crisis are unlikely to be quite so simple and the suggestion that bonuses increase risk-taking seems to be based more on intuition than study.

  • The UK government was the sole voice of dissent, is there any way in which the government could challenge or limit the effect of the decision?

It would be very surprising if the Government were not able to find a lawyer willing to advise them that the rules on bonuses may fall outside the competence of the European Union. A legal challenge to the validity of the rules cannot be ruled out. The length of the shrift that the European Court may give the challenge is a different question.

There has also been talk of the UK invoking the “Luxembourg Compromise”. It sounds like the title of the world’s dullest thriller but refers to a convention, the present scope of which is itself controversial, for there to be a veto where a proposal adversely affected a state’s “very important national interest”. It remains to be seen whether George Osborne would be prepared to risk playing that card. To play it and lose would likely have very considerable political consequences.

  • What impact will this have on remuneration structures in the banking sector?

They will adapt to meet the new regime. The likelihood is that banks will seek shareholder approval for proposals to allow them to use the 1:2 ratio and fixed salaries will increase.

  • What are the relevant merits/downsides of the various options:
    • Higher basic salary

The principal merit of this approach is that it allows the same total remuneration to be implemented as had previously been in place without any requirement for shareholder approval. It should enable employers, therefore, to forestall the possibility of significant desertions. If one accepts the premise that variable pay encourages risk taking increasing the proportion of income that is fixed should cause employees to take fewer chances.

From the bank’s point of view, decoupling remuneration from results may have a number of disadvantages. When an employee’s performance falls off, the impact on income is lessened. When the bank’s overall performance is affected, cost cutting may require re-negotiation of terms and conditions rather than changing the often non-contractual terms of a bonus policy.

  • Shareholder permission to exceed basic cap

This approach does not, by itself, allow replication of previously more generous remuneration arrangements (although it can be combined with increases to basic salary). Arguably, subsequent changes to bonus arrangements may require fresh shareholder approval complicating negotiations with high-value employees in circumstances where competitors based elsewhere may have greater immediate freedom of action.

  • Supplementary (non-cash) benefits

Non-cash benefits may be unattractive to employees, can have complex taxation treatments and are difficult to operate with sufficient flexibility to allow total remuneration to be closely correlated with performance.

  • Do you believe financial institutions will leave Europe?

Whether individual bankers want to leave will depend on whether the amount of money they are paid is the determinative factor for where they work. It has to be admitted that it would not be entirely surprising if the people with that worldview were disproportionately represented amongst the group of highest paid bank employees. A degree of international mobility is already commonplace in the banking industry. If institutions fear the loss of individuals or, worse still, of teams, they may be persuaded that replicating existing business in a less restrictive jurisdiction makes good commercial sense. In the meantime, they may wish to put lawyers specialising in team poaching cases on speed dial.

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