Video – issuing the JR
In this video our Alex Monaco explains the difficulties faced when issuing this judicial review. This was a mammoth task which involved taking the government to court. We expected the government to play fair but instead they used every trick in the book to stop us from succeeding. In the end we were defeated in the Court of Appeal, but not without a fight. We even had Peter Oldham QC (Queen’s Counsel – the most senior type of barrister) and Patrick Halliday (another senior barrister) represent us ‘pro bono’ (meaning for free) as they believed in the cause. Thanks guys. Below we set out the legal documents which we prepared for this case which are still useful guides for those who are currently looking to continue the challenge in individual cases.
On 24 December 2013 Alex Monaco issued this witness statement in support of the Judicial Review:
IN THE HIGH COURT OF JUSTICE CO/161632013
QUEEN’S BENCH DIVISION (ADMINISTRATIVE COURT)
B E T W E E N :
THE QUEEN on the application of COMPROMISE AGREEMENTS LTD
Claimant
— and —
SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLS
Defendant
FIRST WITNESS STATEMENT OF ALEX MONACO
I, Alex Monaco, non-practising Solicitor Advocate (All Higher Rights), of Compromise Agreements Ltd, WILL STATE AS FOLLOWS:
I am authorised by the Claimant to make this statement in support of the Claimant’s applications for:
[a] permission to proceed with the judicial review;
[b] permission to amends its grounds of claim; and
[c] a Protective Costs Order.
Except whether indicated to the contrary, the facts in this statement are within my knowledge, and are true. Where the facts in this statement are not within my direct knowledge, they are based on the source indicated and are true to the best of my knowledge and belief.
PERMISSION TO PROCEED WITH THE JUDICIAL REVIEW
Re standing: background information about the Claimant
Compromise Agreement’s Ltd (‘CAL’) is a company, limited by shares which was formed on 11 December 2009, company number 7102813.
It is a specialist law firm in the field of employment law, catering to employees only, and providing services including representation at employment tribunal as well as out-of-court negotiations. It is regulated by the Ministry of Justice.
I am the sole director and shareholder, although I have lawyers working for me including Lorna Valcin and Meg Pennycook and others.
As well as the commercial aim of the Claimant, we also provide a wealth of free information to employees via our website, which allows members of the public to keep up to date with developments in employment law.
We passionately believe in helping individuals to stay informed about their rights and enabling them to take legal action if they are treated unfairly by an employer, especially where there in an inequality of arms. Most of our claims proceed on a contingency fee basis and this helps to ensure that we only take on cases where we believe that the employee has been unfairly treated.
Background information about me
Given that I am the sole director and shareholder of the Claimant, and that it was my decision to proceed with this judicial review, it is relevant that I set out some brief about my own professional background and motivation too.
I decided to study law so that I might be able to make a difference by helping change things for the better. Having graduated I began working pro bono for Luton Law Centre in the fields of immigration, housing and employment, and also taking on employment cases for ‘FRU’ – the Free Representation Unit. Both of these organisations are charities which provide legal services to those who cannot afford representation.
I completed the Bar Vocational Course and was called to Gray’s Inn, then started training in a legal aid solicitors’ firm called O’Keefes. After practising in criminal defence, I moved into the asylum and immigration department of the same firm, where I was able to help refugees to apply for asylum by representing them in the Immigration & Asylum Tribunals.
Around this time I became a young father and, out of financial necessity, I left the legally aided sector and joined a boutique commercial litigation and employment firm called C J Jones Solicitors. I had also cross qualified as a Solicitor-Advocate (All Higher Courts). In 2009 I set up CAL and since then have focussed on growing that, apart from serving as a trustee for Small Steps Project, a charity which helps children living on rubbish dumps.
Effect on vulnerable groups
We did not take this step of initiating legal proceedings lightly. However, this new law will have a large impact over many years to come, and especially upon those who will be sat at home this winter with the heating off trying to survive on the breadline. When it became clear that no one else was going to undertake this judicial review, I felt that it was my public duty to act.
The new cap on unfair dismissal compensation of 1 year’s salary will primarily impact those earning less than £74,200 per year, and who are likely to be out of work for more than a year following an unfair dismissal. For instance, older people are more likely to be awarded more than a year’s salary by employment tribunals in my experience. This is because they are more likely to be out of work for more than a year, and therefore would have been eligible to more than a year’s compensation were it not for the new cap. Thus the cap indirectly discriminates against older people.
14. I believed that the new cap would also disproportionately affect women, ethnic minorities and disabled people. The same groups take longer to find employment than other groups, and therefore they would be more likely to be affected by the cap after winning an unfair dismissal claim. Furthermore, one year’s salary for them will be lower than those from other groups (because they earn less).
15. It will not be just those who have won an unfair dismissal claim, but also those contemplating bringing such a claim in the first place, or seeking a settlement prior to issuing proceedings. Many claimant employment lawyers operate on a contingency fee basis whereby they would represent a claimant in exchange for a percentage of the damages obtained. With the new cap, a claimant on a very low wage would hardly be able to convince a lawyer to take on their case, and therefore will not try to negotiate a settlement or issue a claim at all. In my experience more people negotiate settlements than issue claims, and those who negotiate outside of ACAS are not accounted for in the statistics.
16. Employers will be aware of the limitation imposed by the new cap, and unscrupulous employers will be free to unfairly dismiss older people without repercussions. With an aging population, I believe we need more protection for older workers in this country, not less.
17. When I read the government’s Equality Impact Assessment (‘EIA’) in relation to this matter, it appeared to me to be woefully inadequate. I couldn’t believe that an Impact Assessment for such an important new law had been dealt with in such a perfunctory manner.
18. The only protected group which seems to have been grappled with in any details in the EIA is older people, whereby the government all but admits that the cap will probably disproportionately them. But it then appears to state that such a conclusion is not drawn, because the statistics are not reliable.
19. In the EIA there is no mention at all of pregnant women and those on maternity leave. Again, it is obvious to me that pregnant women are more likely to take over a year to find a job than most people. If you are pregnant you will struggle to find a job; and then once you have had your child, you will struggle to make time for a job, or find the money for childcare. Yet it appears to me that the government simply neglected to consider the impact on pregnant women and those on maternity leave at all.
20. The government claims not to have access to enough data or statistics to determine the effect of the cap on older people. But as I set out in my letter to TSOL of 12 November 2013, it does have the data available. Every ET1 records the age and income of the Claimant. And every judgment records the level of the award. So the government could simply compare the level of unfair dismissal awards with income and age.
21. The ET1’s are stored at the relevant Tribunal for one year after the judgment is promulgated, but they are not available to the public – the government could access them, however. In my letter I did ask TSOL to ensure that the ET1’s are preserved and not destroyed after one year, as they will hold the key to a proper and informed Impact Assessment. The judgments are publically available and all judgments ever handed down are stored in Bury St Edmonds at Tribunals Service, 100 Southgate Street, Bury St Edmunds, Suffolk, IP33 2AQ. On 07 November 2013 I called the Tribunal Service at Bury on 08457 959775 and spoke to Linda Ralf there who confirmed to me that judgments were stored there, but that the ET1’s are stored at the relevant tribunal for one year and are not publically available. The ET1’s contain compulsory sections for the claimant to input their date of birth and income, as well as whether they consider themselves to have a disability. Other information pertaining to protected characteristics, such as religion and sexual orientation, is contained within the equal opportunities monitoring form at the back of the ET1, and is optional.
Effect on the taxpayer
22. It is not just the rights of the unfairly dismissed employee which are affected by the new cap. The tax payer will be hit too. If compensation is restricted to one years’ salary, but the employee is out of work, through no fault of their own, for over one year, then who will support them financially? It is likely that the public purse, in the form of benefits, will take the burden of this, rather than the employer actually responsible for the unfair dismissal in the first place.
23. Therefore not only does this law discriminate against vulnerable groups, but it also punishes the innocent taxpayer in favour of the guilty employer. There are no austerity cuts here which might benefit the country overall: quite the opposite.
The stated aims of the new cap
24. One of the stated aims of this new cap to stop employees from bringing claims with unrealistic expectations of the compensation they may receive. But the government could, instead, educate claimants about the average award made and the proportion of unfair dismissal claims which succeed.
25. That could be achieved in a number of relatively simple and affordable ways. For example, the Government has already introduced new claim forms whereby the average award is stated on the front of the form. The same information could be stated in other literature given to Claimants as there case progresses through the tribunal; it can be made readily available on the ETS website and on boards at the tribunals; a specific leaflet called “Compensation levels” can be produced to support the various leaflets given to parties by the tribunals; ministers can address the issue through various media interviews and so on. None of these steps provides for any disparate impact on protected groups.
26. The government’s “Response to Consultation: Ending the Employment Relationship” of January 2013 at paragraph 97 states that 50% of those consulted were in favour of the new cap. But when I added up the number of respondents to the consultation, it seemed that there were around 70 employers, 27 union respondents, 24 individuals, 5 charities and 6 government respondents. So the number of businesses consulted (70) outweighed all the other groups put together (62). Therefore when 50% of those surveyed were in favour of the cap, this represents less than 50% if you weigh the views of employers equally with the views of all other groups.
27. It is of note that the government’s “Response to Consultation: Ending the Employment Relationship” of January 2013 is ambiguous regarding expectations of Claimants. At para 11 it states:
“11. There was no consensus among key stakeholders on the compensatory cap. Businesses believed that a cap would help bring perceptions amongst employers and employees more in line with what they might reasonably expect. Trade unions did not agree there was an issue with perception of awards. The Government found arguments that the high level of the current cap is creating unhelpful perceptions persuasive. Empirical studies have shown a number of claimants hope for awards far in excess of the median award.”
28. Then in its conclusions on this point it states at para 110 state: 110.
“The Government does not find the suggestion that there are no issues with perception of unfair dismissal awards persuasive. The SETA 2008 data cited by trade unions shows that the median amount claimants hoped for was £5,000. But it also shows that there are some very high expectations. For example, out of a sample of over 150 unfair dismissal claimants, 38% expected to receive £10,000 or more, and of those, 37% expected more than £25,000 (14% of the total). Though the sample size is relatively small, these are large proportions of claimants with expectations far in excess of the median award.”
29. From reading this justification, it does not seem to me that there is sufficient evidence that there is a misconception amongst Claimants. If only 38% expected to receive £10,000 or more, those 38% could be correct. There might be 38% who expected to receive less than the median for all we know. And the sample size is admittedly small. By reducing the cap, it is using a sledgehammer to crack a nut, and that sledgehammer will also hurt a lot of vulnerable people.
29. The other stated aim of the cap was to ‘improve certainty of the amount of award that business will pay’. If the real aim is to reduce the liability of businesses which unfairly dismiss employees, then why not just reduce the cap, rather than restrict it to one year’s salary?
Acting promptly & the time-line for commencing proceedings
30. In around spring or summer of 2013 there was talk on the grapevine of a new cap being enacted, but, unlike the other big changes in employment legislation, such as fees for issuing tribunal claims, the introduction of a cap did not appear to be timetabled until relatively later in the day. We do not recall ever receiving an invitation to participate in the government consultation which preceded the new cap coming into force.
31. We began preparing our challenge in advance by using our contacts to try to find counsel to advise us. We did not have any funding for this matter and we were acting pro bono ourselves. We managed to instruct a QC and a junior from a high profile public law set on a pro bono basis. By around late July 2013, we had managed to draft an application for funding to the Equality & Human Rights Commission (‘EHRC’) which we submitted to them on around 20 July 2013.
32. The government order which brings the cap into force was made on 28 July 2013, with a date for coming into force of 29 July 2013.
33. The EHRC replied to us on around 30 July 2013 with a decision not to take the case forward. This reply was relayed to me on 06 August 2013 by counsel, as my CAL lawyer was abroad on her summer holidays. It was not clear to us why the application had been refused and so we sought additional clarification. A brief explanation was received on around 15 August 2013 from the EHRC.
34. At this point I tried to contact our counsel again for their views on resubmitting an improved application. Unfortunately they were both abroad on their summer holidays, to return in early September. Much of the profession was on holiday at this time and we decided to await their return, as they had an intimate knowledge of the case. They had also been acting pro bono and we did not have a budget to instruct other counsel on a paying basis.
35. Upon counsel’s return we learned that they would no longer be prepared to continue acting pro bono and that now we would need to start paying their fees. CAL could not afford this. At this time I had already decided to try to look elsewhere for help. I had contacted UK Uncut, which were an organisation which had recently been in the news because it had raised funds for an adverse costs order when it had challenged HMRC’s decision to let Goldman Sachs off a £20M tax bill. I arranged a meeting with this organisation and they were supportive but when I followed it up with them on around 16 August 2013 they did not take it any further.
36. I then contacted the campaigning organisation 38 Degrees with a view to requesting support from them regarding the costs of instructing counsel and/or covering adverse costs of the action. We had not realised that a PCO was a possibility, and we had understood that we could be liable for a large adverse costs order if unsuccessful and therefore we wanted to arrange some cover for this eventuality before plunging into proceedings.
37. 38 Degrees issued a bulletin to their members canvassing opinion, but then my contact there went abroad on work for a number of weeks. When she returned, in September 2013, I learned that 38 Degrees was focussing all its efforts on campaigning against the ‘gagging law’ which threatened lobbying groups such as themselves. Thus the new cap on unfair dismissal was not on their agenda any more.
38. On 03 September 2013 I attended a seminar on employment law hosted by Daniel Barnett, a well-known employment barrister. Along with my lawyer Lorna Valcin, we asked Daniel to canvass opinion amongst the lawyers in attendance to see whether any other firms would be interested to join a coalition with us to bring these proceedings. It may have been an unexpected question for the audience, as no hands went up when Daniel asked for volunteers.
39. It was only faced with this knowledge that no other party was willing or able to assist us, that we began to investigate the possibility of issuing this claim ourselves, unrepresented – the last resort.
40. On Friday 27 September 2013, my daughter’s grandma had surgery to remove a tumour from her brain. This meant that for the next three weeks I was looking after my daughter every day, doing both school runs, as well as trying to hold down a business, whilst her mother tended to sick grandma. This time period encompassed half term 25 October 2013 whereby I took my daughter to Italy for the week.
41. On around 18 October 2013 I had contacted an employment judge to ask his advice on what I should do. He suggested trying to find a test case to take to the ECJ in Strasbourg. The plus side was that it would be cheaper and a safer option from the costs point of view. The downside was that it could take years to resolve and by this time the new cap could already have affected thousands of vulnerable people.
42. In order to try to understand more about judicial review, I attended the hearing of the Unison judicial review against fees in the employment tribunal on 23 October 2013. This was the first time I had experienced judicial review proceedings and I was able to learn enough by watching that hearing to complete my draft claim form and grounds. I then discussed this draft with another CAL lawyer and we finalised our application which was then issued on 25 October 2013.
APPLICATION TO AMEND THE STATEMENT OF FACTS AND GROUNDS
I am not a public lawyer and so the Claimant’s statement of facts and grounds, which I drafted, were the best that I could manage. I managed to find lawyers to advise pro bono by around 14 November 2013. I understand that they believe that the grounds should be amended and in the circumstances, and given that the Treasury Solicitor has helpfully indicated that it would await our amended grounds before providing grounds of resistance, the Claimant requests the Court’s permission to amend the statement of facts and grounds.
APPLICATION FOR A PROTECTIVE COSTS ORDER
In addition to the information set out above, I have set out further information in my second witness statement of even date in support of the Claimant’s application for a Protective Costs Order.
I BELIEVE THAT THE FACTS STATED IN THIS STATEMENT ARE TRUE
Signed:
Alex Monaco, Director, Compromise Agreements Ltd
Dated 10 December 2013
On 24 December 2013 we issued this revised statement of facts and grounds.
Statement of Facts & Grounds
IN THE HIGH COURT OF JUSTICE CO/16163/2013
QUEEN’S BENCH DIVISION (ADMINISTRATIVE COURT)
B E T W E E N : –
THE QUEEN on the application of COMPROMISE AGREEMENTS LTD
Claimant
— and —
SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLS
Defendant
CLAIMANT’S AMENDED STATEMENT OF FACTS AND GROUNDS
References to page numbers in the Claimant’s bundle of evidence filed with these Grounds appear as [D / page number]; references to paragraph numbers in witness statements are given as [witness’ initials / paragraph number].
Introduction and summary
On 28 July 2013 the Defendant made the Unfair Dismissal (Variation of the Limit of Compensatory Award) Order 2013 (‘the Order’). [D79-D81] The Order imposes a cap of one year’s pay on compensatory awards for unfair dismissal (‘the one-year cap’). By these amended grounds (which replace the original grounds in their entirety), the Claimant challenges the lawfulness of the Order.
In summary, the Order is unlawful because, in making it, the Defendant:
(i) failed to comply with the public sector equality duty (‘PSED’) set out in section 149 of the Equality Act 2010; [D75-D76] and
(ii) breached his obligation under section 6 of the Human Rights Act 1998 (‘the HRA’) [D72-D74] to act compatibly with Article 14 of the European Convention on Human Rights (‘ECHR’). [D4]
As to the breach of the PSED, the Defendant failed to have any regard — let alone “due regard” — to the likely or possible differential impacts of the one-year cap on pregnant women, mothers of young children, the disabled, people from ethnic minorities and women. Some or all of these groups may be more likely than others to remain out of work for more than a year after being unfairly dismissed, and if so would be disproportionately affected by the one-year cap. Moreover, some or all of these groups may in general have lower pay than others, which would result in the one-year cap generally resulting in a lower cap (and a greater restriction on recovery of actual losses) for members of these groups than for others. The Defendant’s consideration of the differential impact of the cap on older workers was seriously flawed and did not amount to “due regard”. These are all groups with protected characteristics for the purposes of section 149 and who thereby have the benefit of its operation.
As to the failure to act compatibly with Article 14, the one-year cap:
(i) falls “within the ambit” of Article 1 of the First Protocol (‘A1P1’) to the ECHR [D5] since, but for the cap, those who have been unfairly dismissed would have a right, enforceable under domestic law, to receive fuller compensation for losses suffered as a result of their unfair dismissal;
(ii) discriminates:
(a) indirectly on grounds of age (which falls within the protection in Article 14 against discrimination on grounds of “other status”), since older workers are more likely than others to remain out of work for more than a year after being unfairly dismissed[1];
(b) directly on grounds of level of earnings (which is also a “status” for the purposes of Article 14 [D4]), since it imposes greater limitations on full recovery of losses on those with low pay than it does on those with higher pay;
(c) indirectly on grounds of sex (which is expressly prohibited as a ground of discrimination by Article 14 [D4]), since the pay of women is in general lower than the pay of men (median weekly pay for male employees is 56% higher than it is for female employees[2]), so the one-year cap will in general result in women being subject to a lower cap than men;
(iii) has not been shown by the Defendant to be justified.
Facts
The Claimant and its standing to bring this claim
The Claimant is a private limited company which provides specialist employment law advice to employees.
The Claimant’s founder and its guiding mind, Mr Alex Monaco, established the business with the aim of promoting access to justice and protection of employees’ rights. Its motive in bringing this claim is to protect such rights.
It is possible that the Claimant also has a small financial interest in the claim, and is directly affected by the one-year cap, since the cap may lead to a contraction in the market for the services provided by the Claimant. See Second Witness Statement of AM paragraph 5.
As to the timing of the claim, it has been brought within three months of the making of the Order. The Claimant issued this claim only after trying, without success, to find others who would be willing to challenge the one-year cap. It issued the original claim on 24 October 2013. It then secured the services of counsel acting pro bono and solicitors acting under a conditional fee agreement. The conditional fee agreement was signed on 14 November 2013. These Amended Grounds were then drafted. In all the circumstances the claim has been brought promptly. Alternatively, to the extent that the Court thinks that it is required, the Claimant applies for any necessary extension of time. This is a matter of high public importance, which potentially affects all UK employees. Further, neither the Defendant nor any other party has suffered detriment by any alleged lack of promptitude.
Protection against unfair dismissal is contained in Part X of the Employment Rights Act 1996.[D6-D38] It is an extremely important right, first introduced by the Industrial Relations Act 1971. As the leading textbook on employment law, Harvey on Industrial Relations, puts it (Div DI, para 3):
Protection against unfair dismissal
“it marked a trend towards recognising that the employee has an interest in his job which is akin to a property right. A person’s job can no longer be treated purely as a contractual right which the employer can terminate by giving the appropriate contractual notice. So it provides a greater element of job security than is afforded at common law ….”[B258]
In summary, the protection operates as follows.
The right to claim unfair dismissal is dependent, in most cases, on the employee having accrued two years’ continuous employment: sections 94 and 108. [D7 and D34-D37 respectively]
Upon dismissal, an employee may present a claim to an employment tribunal that he or she has been unfairly dismissed: section 111. [D39-D40]
If the employment tribunal finds that the claimant was unfairly dismissed then (subject to issues such as mitigation and contributory fault) it will make an award of compensation consisting of two elements, namely:
(i) the compensatory award: this is designed to compensate the claimant for the actual losses (e.g. loss of wages) he or she has suffered as a result of being unfairly dismissed. Only this element is affected by the cap;
(ii) the basic award: this is calculated by multiplying (a) the number of years, capped at 20, for which the claimant was continuously employed by the employer by (b) his or her weekly pay, subject to a cap currently set at £450 by (c) an age-related factor of 0.5 or 1 or 1.5. The effect is that the basic award will fall within the range £0 to £13,500.
The tribunal also has the power to make orders for reinstatement and re-engagement (combined with compensation), though these are rarely exercised. See in particular sections 112, 118, 119 and 123. [D40, D45-D46, D48-D49]
The compensatory award has always been subject to a fixed cap in terms of an amount of money, which is adjusted by secondary legislation from time to time (‘the fixed cap’). The fixed cap is currently set at £74,200: section 124. [D49-D50] The amount of the fixed cap was not altered by the Order.
In September 2012 the Defendant’s department, the Department for Business, Innovation and Skills (‘BIS’), published “Unfair Dismissal Compensatory Awards: Impact Assessment”. [B89-B110] This document described two proposals which were being considered by the government: first, to cap compensatory awards for unfair dismissal at one year’s pay, in addition to retaining the fixed cap, so that the maximum payable would be the lower of the one-year cap and the fixed cap; or second, to reduce the fixed cap. The stated aims of the proposals were to set an “appropriate cap”, to “improve certainty of the amount of award that businesses will pay” and to “make expectations of awards more realistic among claimants”. [B91] The latter aim arose out of unfair dismissal claimants said to be expecting awards which were high compared with average awards.
At page 15, the Defendant’s overall conclusion as to the equality impact of the proposed one-year cap was summarised as follows:
The Defendant’s proposal to introduce a one-year cap and impact assessment
“Wider impacts
We are unable to determine whether … the introduction of a limit linked to earnings would have a disparate impact on any particular group which shares a protected characteristic.” [B104]
Annex A to the impact assessment was an “equality impact assessment” (‘EIA’) which gave further consideration to this issue. [B105-B109]
In relation to gender, the EIA merely stated:
“Gender
60% of employment tribunal claimants and 65% of UD claimants in SETA [Survey of Employment Tribunal Applicants] 2008 were male. This is higher than the proportion in the workforce as a whole (51 per cent), as given in the LFS [Labour Force Survey].
Men are also more likely to earn higher annual salaries than women so they may be more likely to be affected by a reduction in the cap, for example 13% of men earn over £50,000 a year compared to only 6% of women (based on gross full-time annual salary data from ASHE [Annual Survey of Hours and Earnings]).”[B106]
The EIA therefore contained no analysis of the possible differential impacts of the one-year cap on by gender. Further, it contained no analysis of the impact of the one-year cap on pregnant women and mothers, despite the fact that pregnancy and maternity are protected characteristics under for the purposes of the PSED.
In relation to ethnicity, the EIA merely stated:
“91% of UD claimants in SETA were white. This is the same as the workforce in general in 2008 where 91% of LFS respondents reported being white, 4% of UD claimants were black, compared to 1% in the workforce, 3% Asian compared to 5% in the workforce and 1% mixed race compared to 2% in the workforce. Eight-six per cent of employment tribunal claimants across all jurisdictions were white, 5% black, 5% Asian, 2% mixed race and 2% other.”[B106]
The EIA therefore contained no analysis of the possible differential impacts of the one-year cap on people from particular ethnic groups. For example, there was no consideration of whether re-employment rates are or might be relatively low amongst particular ethnic groups and/or amongst minority ethnic people generally, and (if so) whether that would result in the cap having a differential adverse affect on those groups.
In relation to disability, the EIA merely stated:
“Disability
In SETA 2008 twenty per cent of unfair dismissal claimants and 22% of employment tribunal claimants overall had a long-standing illness, disability or infirmity at the time of their employment claim, which is very close to the proportion among employees in general (22 per cent). Twelve per cent had a long-standing illness, disability or infirmity that limited their activities in some way, again similar to the workforce as a whole (10 per cent) and slightly lower than employment tribunal claimants overall (15 per cent).” [B106]
Again there was no attempt to deal with the possible differential impact of the cap on disabled people.
In relation to age, the EIA stated the following:
“Age
47% of respondents on the SETA (2008) claimant survey were 45+ compared to 38% of respondents to the Labour Force Survey and this was higher still for claimants whose primary jurisdiction was unfair dismissal at 52%.
This may be because older people are less likely to find another job quickly after leaving one.
ONS [Office for National Statistics] redundancy figures20 show that in 2012 Q4 the re-employment rate for individuals aged 50+ was 21.9% 3 months after being made redundant, 11% lower that for all aged 16+ (32.9%).21 If re-employment rates are still lower for individuals aged 50+ one year after leaving a job then they may be adversely affected by a cap based on annual salary as their losses may be greater than for one year. However this analysis is not possible due to the methodology used in LFS22…” [B106]
The footnotes to this passage read as follows:
“20. ONS redundancy figures 2012, based on ONS [Office of National Statistics] analysis of LFS data.
21. This trend is present in previous quarters and years where there is data available.
22. LFS is a rotating panel survey based on 5 quarters and lot of people would have ‘rotated out’ of the panel 1 year after having been made redundant.” [B106]
Under the heading “Summary”, the EIA stated:
“The data indicates that certain groups who share a protected characteristic are more likely to bring an unfair dismissal claim than other groups (e.g. men more likely to bring a claim than women, those over 45 years old more likely to bring a claim than those under 45 years). However, the data does not tell us the protected characteristics of those claimants who were successful at the Employment Tribunal. Similarly, the data does not tell us what protected characteristics were present in those claimants who received certain levels of award (e.g. we do not know how many of the compensatory awards above £30,000, £40,000, or £50,000 were awarded to men and how many to women). As a result, we are unable to determine whether … the introduction of a limit linked to earnings would have a disparate impact on any particular group which shares a protected characteristic. However, as the Economic Impact Assessment notes, the vast majority of awards currently made are below the proposed levels for a reduced cap and therefore the impact on claimants will be slight in any event.”[B107]
Consultation and government response
Also in September 2012 BIS commenced a 10-week consultation on various proposed changes to employment law, including the introduction of the one-year cap. [B34-B88]
In January 2013 BIS published the government’s response to the consultation,[B157-B204] in which the Minister for Employment Relations and Consumer Affairs stated that she was recommending the introduction of the one-year cap, but no change to the fixed cap. The response records that, during consultation:
“A number of trade unions and legal representatives (around 22% of all responses) felt that certain groups are more likely to take longer than 12 months to find a new job. These groups included older workers, younger workers, and disabled workers. One legal representative remarked that, based on figures from the Office of National Statistics, ‘the older the worker, the higher the chance that they will be out of work for longer than one year.’” [B186]
In response, the government stated:
“We have no evidence on whether certain groups are systematically more likely to receive an award higher than 12 months’ salary. However, we do know that the majority of awards currently amount to significantly less than 12 months’ pay, with the median award less than a fifth of median earnings. We therefore do not believe that there will be a disproportionate impact on these groups.” [B186]
The government’s final impact assessment
On 17 January 2013, BIS published the government’s “final impact assessment” of the proposals. [B205-B226] This was largely a word-for-word repetition of the September 2012 impact assessment. The passages from the September 2012 impact assessment which are quoted at §§15 to 23 above were repeated in the final impact assessment. Amongst those minor changes which were made was the addition of a passage on the consultation, which stated:
“… Many trade unions and a number of legal representatives felt there would be a discriminatory impact on certain groups of claimants on introducing a pay based cap. As the Equality Impact Assessment in Annex 1 notes, there is no evidence that supports this argument.”[3] [B217]
The wording of the EIA annexed to the final impact assessment was largely unchanged from the wording of the EIA annexed to the September 2012 impact assessment. Apart from the provision of updated figures on salaries by age, the only significant change was the addition of a paragraph which contained substantially the same text as that quoted at §26 above (from the consultation response), preceded by following:
“Several responses, from trade unions and legal representatives, to the consultation highlighted that certain groups, including older and younger workers and the disabled, may be systematically more likely to take longer than 12 months to find a new job following an unfair dismissal, in which case a 12 months’ salary cap may have a disproportionate negative impact. However, it should be stressed that awards can often be much lower than lost earnings, and that therefore the cap may not come into play even where a claimant has not been in employment for over 12 months.” [B225]
The introduction of the one-year cap
On 28 July 2013 the Defendant made the 2013 Order, which imposes the one-year cap by inserting in section 124 of the Employment Rights Act 1996 a provision that the compensatory award for unfair dismissal cannot exceed “52 multiplied by a week’s pay of the person concerned”[4]. [D79] The one-year cap will apply in addition to the fixed cap which is currently set at £74,200, so that the lower of the two caps will be imposed in any claim.
The Order came into effect on 29 July 2013. It applies in relation to all dismissals where the effective date of termination was on or after 29 July 2013.
The Order was accompanied by an “explanatory memorandum” written by BIS. [D82-D85] As to the reasons for introducing the one-year cap, the memorandum states:
“7.2 … This additional cap is intended to address unrealistic expectations of the level of award that can be expected in unfair dismissal claims…
7.3 Claimants, with widely varying circumstances, may expect £74,200 at tribunal when in reality awards are rarely anywhere near this amount. The perception created by this gap means employers are less likely to take on staff, for fear of being liable for huge sums.
7.4 The Government has concluded, after public consultation and considering various options, that changing the legislation is the most effective means of addressing this issue. Simply publicising information about average levels of award does not impact on perception and expectation as long as the legislation still permits for a very high level of award…”[D83]
As to the consultation, the memorandum states:
“8.2 … There was broad support for introducing a pay based cap.
8.3 Of the 119 respondents who answered, 48% were in favour of the introduction of a cap based on 52 weeks’ pay, 45% were opposed and 7% were not sure. Three of the respondents did not favour the proposal, however, based on that [sic] fact that 52 weeks was too long. If these respondents were considered as in favour of this cap (but just concerned about the number of weeks’ [sic] chosen), then overall 50% of all respondents would have favoured the introduction of a pay cap; comprising 95% of all of the business respondents…”[D84]
The memorandum refers to the 17 January 2013 final impact assessment. [at § 10.3, D85]
The effect of the one-year cap is to reduce compensation which would otherwise be payable to individuals who have been unfairly dismissed and who:
The effect of the one-year cap
(i) lose, or are likely to lose, more than a year’s pay because of their dismissal, typically because they are out of work for more than approximately a year[5]; and
(ii) earn less than such sum as would entitle them to £74,200 or more in respect of one year’s lost employment; i.e. people whose compensation would be limited by the fixed cap in any event. Since median national weekly earnings are £26,462[6], for the vast majority of the national workforce, a loss of one year’s earnings will not be caught by the fixed cap.
The cap directly affects such individuals where they are found by an employment tribunal to have been unfairly dismissed. However, it also affects the value of undetermined claims and potential claims for unfair dismissal by such persons. It therefore may well dissuade some individuals from presenting claims for unfair dismissal; for example, if they are on a very low annual salary, the one-year cap may dissuade lawyers from taking on their case on a contingency fee basis. Further it is likely to cause a proportion of employees to settle unfair dismissal claims for lower sums than they otherwise would: the Defendant’s impact assessment recorded that 41% of tribunal claims are the subject of ACAS-conciliated settlements; and that 25% of claims are withdrawn, a proportion of which are likely to be withdrawn on terms of settlement. [B95] It also reduces the disincentive against employers unfairly dismissing employees who are unlikely to find work within a year. It may therefore mean that more employees who are likely to have difficulty finding alternative employment lose their jobs unfairly.
The cap has a disproportionate adverse effect on groups of people who are less likely than others to obtain alternative and equally remunerative employment within 12 months of being unfairly dismissed.
Older people, i.e. those over 50 years of age, are more likely than others to remain unemployed for more than 12 months after being unfairly dismissed. The likelihood that someone will remain unemployed for 12 months is liable to increase with any increase in age above 50, e.g. those aged 63 are even less likely than those aged 50 to find another job. These conclusions are based on the following.
First, the Employment Appeal Tribunal, in a division chaired by its then President, held in MacCulloch v Imperial Chemical Industries PLC [2008] ICR 1334 that the employment tribunal – which has specialist expertise in this field – was entitled to find, without the need for evidence, that older workers find it harder to find work than younger workers. Elias P stated at §§15 and 48:
Older people
“A second aim relied upon by the employers, also accepted by the tribunal, was that it was legitimate to give a larger financial payment to older workers because they were more vulnerable in the job market and it gave them some protection from the stress which losing employment would otherwise create. The tribunal concluded that it did not require evidence from any express research study to support that conclusion. The tribunal observed that it had ample evidence, from its own knowledge, that older workers out of a job had real difficulty in obtaining new employment…
It was also submitted that the employers should have led evidence about this. We do not agree. The tribunal was fully entitled to draw from its own experience—shared we would suggest by all in the industrial relations’ field—that older workers find it harder to find work than younger workers, notwithstanding the existence of age discrimination laws.”
This Court should follow the approach in MacCulloch and/or itself take judicial notice of the fact that it is harder for older workers to find work than younger workers. This means that they are more likely to be out of work for more than one year following unfair dismissal, and are therefore disproportionately adversely affected by the one-year cap.
Second, such statistical evidence as was referred to by the Defendant before making the Order supports the conclusion that older workers are less likely to find alternative and equally remunerative work within a year. The ONS statistics from Q4 of 2012 described in the EIA indicated that, within three months of being made redundant, 32.9% of adult workers found another job, whereas only 21.9% of workers over the age of 50 found another job. [B106] Put another way, the average person who was made redundant was 1.5 times as likely to find another job within three months as the average redundant worker over the age of 50. Of course, this is a comparison between the over-50s and all adults, the latter being a group which includes the over-50s. Therefore the disparity would be even greater if a comparison were to be drawn between the over-50s and the under-50s. There is no basis for thinking that this disparity would be smaller in relation to re-employment rates after 12 months: on the contrary, the Defendant’s consultation response referred to statistical evidence that 40% of unemployed individuals over the age of 50 have been unemployed for more than a year. [B186]
Third, there is additional statistical evidence, not referred to in the EIA, which indicates that older workers are less likely to find alternative and equally remunerative work within a year.
(i) ONS data show that a lower re-employment rate for the over-50s is not unique to Q4 of 2012. On the contrary, those data indicate that re-employment rates for the over-50s were lower in every single quarter for which data were available, i.e. from 1997 onwards[7].
(ii) The ‘OECD Employment Outlook 2013’[8], which includes analysis of re-employment data from a number of different countries, including the UK, states:
“In most of the countries examined, older workers… take longer to get back into work and suffer greater (and more persistent) earnings losses… Young workers generally find work relatively quickly after displacement…
Older workers… also tend to suffer greater-than-average earnings losses after displacement.”[9]
“However, older people (aged 55-64 years) are less likely to be working within a year of displacement than prime-aged people in all the countries examined…”[10]
As to the UK specifically, graph C in figure 4.4 of the OECD report shows that the ratio of (a) the re-employment rate for those aged 55 to 64 to (b) the re-employment rate for those aged 35 to 44 is about 0.75:1.
Fourth, consultees’ responses supported the view that certain groups — which “included older workers, younger workers, and disabled workers” — find it more difficult to find alternative work.
Women are, in general, paid less than men, as is apparent from the following.
Women
(i) ONS research[11] has found that the “gender pay gap” — defined as the difference between men’s and women’s median hourly pay excluding overtime for full-time employees — stood at 9.6% in 2012. [B227]
(ii) The same research found that, looking at all employees (part-time and full-time), the hourly gender pay gap is even larger, namely 19.7% in 2012[12]. That is because more women than men work part-time, and working part-time generally involves lower hourly rates of pay.
(iii) The gender pay gap for all employees’ weekly / annual pay is yet larger because more women work part-time and because, by definition, part-timers are paid for fewer hours’ work each week / year than full-timers. According to the same research[13], in 2012, median gross weekly earnings for all male employees were £497.60, and for all female employees were £319. This means that the weekly median pay for employed men is 56% higher than it is for employed women[14].
Because women are generally paid less than men, the one-year cap has a differential adverse impact on women. The lower someone’s pay, the lower the level of the one-year cap (and therefore the greater the potential bar to full recovery of actual losses) in their case. Therefore the one-year cap generally imposes a lower cap on compensation for women than it does on compensation for men. Applying the percentage difference at 42(iii) above, the median one-year cap (calculated as 52 multiplied by a week’s pay) for men is likely to be 56% higher than it is for women.
The Claimant also believes that pregnant women and young mothers, people from ethnic minorities and disabled people are less likely than others to find new work within a year of being unfairly dismissed. Moreover, if these groups are generally paid less than others then the one-year cap is liable to have a differential adverse impact on them; the lower someone’s pay, the lower the level of the one-year cap (and therefore the greater the potential bar to full recovery of actual losses) in their case. At the very least, it is plainly possible that such groups would be disproportionately disadvantaged by the one-year cap.
The public sector equality duty (‘PSED’) is set out in section 149 of the Equality Act 2010. [D76-D77] Section 149(1) states: [part missing]
Grounds of claim
Ground 1: breach of the public sector equality duty
The law
(1) A public authority must, in the exercise of its functions, have due regard to the need to—
(a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act;
(b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it;
(c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it. [D75]
Section 149(3) states:
“(3) Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to—
(a) remove or minimise disadvantages suffered by persons who share a relevant protected characteristic that are connected to that characteristic;
(b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it…” [D75]
By section 149(7), the relevant “protected characteristics” are: age; disability; gender reassignment; pregnancy and maternity; race; religion or belief; sex; and sexual orientation. [D76]
“Due regard” is the “regard that is appropriate in all the circumstances”: R (Baker) v Secretary of State for Communities and Local Government [2009] PTSR 809 at §31 per Dyson LJ.
The Divisional Court at §§90 – 96 in R (Brown) v Secretary of State for Work and Pensions [2009] PTSR 1506 set out a number of principles governing the PSED, including the following:
“…
Secondly, the “due regard” duty must be fulfilled before and at the time that a particular policy that will or might affect disabled people is being considered by the public authority in question. It involves a conscious approach and state of mind… Attempts to justify a decision as being consistent with the exercise of the duty when it was not, in fact, considered before the decision, are not enough to discharge the duty…
Thirdly, the duty must be exercised in substance, with rigour and with an open mind. The duty has to be integrated within the discharge of the public functions of the authority. It is not a question of “ticking boxes”…
…
Fifthly, and obviously, the duty is a continuing one.
…”
It is important to note the words “or might” in the second principle from Brown (the duty must be fulfilled when a particular policy “will or might” affect disabled people). In R (Hurley) v Secretary of State for Business Innovation & Skills [2012] Eq LR 447 Elias LJ accepted at §96 that “if there is any doubt about whether a particular statutory objective is engaged, the issue needs to be explored before any conclusion can be safely reached that it is not.” This means that it is not a necessary part of the Claimant’s case to show that the one-year cap would definitely have a disparate adverse impact on protected groups. On the contrary, it is the very purpose of the PSED to discover, on analysis by the public body, whether there would be such an impact.
Where the protected characteristics are potentially affected by a proposed measure, “the decision-maker is obliged to conduct a rigorous examination of the measure’s effects, including due enquiry where that is necessary. He does not, however, have to undertake a minute examination of every possible impact and ramification”: R (MA) v Secretary of State for Work and Pensions [2013] Eq LR 972 at §72 per Laws LJ.
Indeed, it is a fundamental principle of public law, as enunciated by Lord Diplock in Secretary of State for Education v Tameside [1977] AC 1014, at 1065, that the decision-maker must “ask himself the right question and take reasonable steps to acquaint himself with the relevant information to enable him to answer it correctly.” Accordingly, in order to comply with the PSED, the public authority must “have due regard to the need to take steps to gather relevant information in order that it can properly take steps to take into account disabled persons’ disabilities in the context of the particular function under consideration” (per Aikens LJ in Brown at §85). As the Court explained in R (Lunt) v Liverpool City Council [2010] 1 CMLR 14 Admin at §44: a “lawful exercise of discretion could not have been performed unless the Committee properly understood the problem, its degree and extent”.
To similar effect, chapter 5 of the ‘Technical Guidance on the Public Sector Equality Duty England’,[B1-B33] issued by the Equality and Human Rights Commission under its powers to provide information and advice under s.13 of the Equality Act 2006[15] [D77-D78] and which continues in effect, emphasises the importance of a “sound evidence base” for the purpose of public decisions which engage the PSED. (See §§5.15 – 5.36). [B9-B19] §5.20 of the guidance states:
“It is not acceptable for a relevant body to say that it cannot meet the duty because it does not have evidence about a relevant issue. If a body subject to the duty does not have sufficient evidence to have due regard it will need to obtain this.” [B12]
“If a risk of adverse impact is identified, consideration must be given to measures to avoid that impact before fixing on a particular solution”: R(W) v Birmingham [2011] BGLR 1 at §151.
The standard of review when the court assesses whether or not there has been compliance with the PSED is not the ‘Wednesbury’ standard; it is higher than that. The court should reach its own conclusion as to whether or not “due regard” was had: see R (Williams) v Surrey CC [2012] EqLR 656 (Admin) at §§18 – 25. However, the “weight” to be attached to equality needs when making a decision is primarily a matter for the decision-maker.
The Defendant’s breach of the PSED
The Defendant breached the PSED in the following ways.
First, he gave no consideration at all to the likely or possible impact of the one-year cap on pregnant women and mothers, even though these are two of the characteristics which are “protected” under section 149, [D76] and despite the potential impact of the cap on such people. The EIA did not even mention these characteristics when assessing the equalities impact of the one-year cap. There was therefore a clear failure to give “the conscious consideration of the full range of the statutory criteria which the law requires” (per Elias LJ in Hurley at §91). At the very least, the one-year cap “might” adversely affect pregnant women and mothers, which meant the Defendant was under a duty to consider this issue: see §44 above.
Second, similarly, he gave no consideration at all to whether disabled people would be adversely affected by the one-year cap on account of difficulty in finding alternative work after they are unfairly dismissed.
Third, similarly again, he gave no consideration at all to whether people from particular ethnic groups, or minority ethnic people generally, would be adversely affected by the one-year cap on account of any difficulty in finding a