EMPLOYMENT TRIBUNAL HAS JURISDICTION TO HEAR LIMITED COMPANY S CLAIM FOR DISCRIMINATION

Transcription

1 EMPLOYMENT TRIBUNAL HAS JURISDICTION TO HEAR LIMITED COMPANY S CLAIM FOR DISCRIMINATION In the first judgment of its type, an Employment Tribunal has ruled that it has jurisdiction to hear a claim for direct discrimination brought by a limited company. The decision in Garry Abrams Limited & Anor v- EAD Solicitors & Ors opens the door to companies bringing claims both before the Employment Tribunal and also for discrimination in the provision of goods and services before the High/County Court. By Steven Flynn, St John s Buildings In the case of Garry Abrams Limited & Anor v- EAD Solicitors LLP & Ors (ET /2014), an Employment Tribunal sitting in Liverpool has accepted that it has jurisdiction to consider a claim of associative age discrimination brought by a limited company. In giving judgment on the preliminary issue of whether a corporate entity could bring a claim for discrimination, Employment Judge Ryan decided that a limited company could pursue a claim for discrimination in its own right where the grounds upon which the action taken towards the company are claimed to be because of an associated individual s (or group s) protected characteristics. Background EAD Solicitors LLP ( EAD ) is a limited liability partnership as defined under the Limited Liability Partnerships Act 2000 ( LLP 2000 ). Prior to 30 th November 2011, Mr Garry Abrams was a member of EAD. On 30 th November 2011, Mr Abrams retired as a member of EAD and was by replaced by Garry Abrams Limited ( GAL ). GAL is a limited company that was established by Mr Abrams on the advice of his accountants. In what is an increasingly common method of operating for professional firms, Mr Abrams established GAL so as to benefit from the advantageous tax scheme applicable to limited companies. Broadly speaking, the scheme involves a member of an LLP setting up a limited company where they are the only shareholder. This limited company then becomes a member of the LLP instead of the individual. From that point on, the profit share from the

2 LLP previously paid to the individual is paid to the company instead. The scheme allows individuals to manage the payment of dividends from the limited company in the most tax effective way; often involving the gradual paying out of retained sums over the course of the individual s retirement. The same is recognised by HMRC as an acceptable method of operating. GAL was admitted to EAD on the basis that it would provide a solicitor to participate in management decisions and to generate fee income. Whilst it had been envisaged by all parties to the agreement that Mr Abrams would continue be the solicitor provided, this was found not to be a contractual requirement. GAL could supply any suitably qualified and experienced solicitor to fulfil this role. During 2013 EAD made it known to Mr Abrams that it expected him to cease working at the end of the financial year in which he turned 62 years of age, that being This expectation was based on a term of the LLP agreement that stated that every Member shall retire at the end of the LLP Year during which he shall attain the age of 62 years. At the end of the LLP Year in which Mr Abrams was 62, EAD stopped paying GAL its profit share. GAL was only 2 years old at the time. GAL s claim for associative discrimination was that it suffered detriment because Mr Abrams had reached the age of 62. GAL alleges that all members are entitled to a share of the profits and that to deny GAL the same because Mr Abrams has reached the age of 62 is unlawful direct discrimination as defined by section 13 EqA. The issue for determination before Employment Judge Ryan was whether or not a corporation is entitled to bring a claim of discrimination before the Employment Tribunal. GAL s case GAL argued that the Employment Tribunal had sole jurisdiction to determine a complaint of this nature; therefore it had no option other than to issue the same in this jurisdiction. Section 120(1)(a) EqA states that the Employment Tribunal alone has jurisdiction to determine a complaint relating to contraventions of sections 39 to 83 EqA. As it is section 45(2)(d) of the EqA that provides that An LLP (A) must not discriminate against a member (B) by subjecting B to any other detriment, any such claim by a member of an LLP needed to be brought before the Employment Tribunal.

3 GAL s membership of EAD was not in dispute. Section 46(4) defines LLP as a limited liability partnership within the meaning of the Limited Liability Partnerships Act The term member as referred to in section 45(2) is not defined by the EqA; however, member of an LLP is defined by section 4 of the LLP 2000 and includes corporate entities. As referred to above, GAL s case was that it has been the victim of direct discrimination by association contrary to section 13 EqA. In the context of section 45(2)(d), GAL argued that section 13(1) was required to be read in the following way: An LLP discriminates against a member if, because of a protected characteristic, an LLP treats a member less favourably than an LLP treats or would treat others. In support of its argument that section 45 EqA was intended to apply to corporate entities, GAL relied upon the following: Section 13 EqA defines direct discrimination as being where A person (A) discriminates against another (B). (B) is not described as a person or an individual. Support for this interpretation was drawn from the absence of any general provision in the EqA limiting its application to individuals. Instead, Parliament chose to limit only victimisation to individuals. Section 27(4) EqA provides that a claim for victimisation can only be brought by an individual. If Parliament had intended that discrimination claims could only be brought by individuals (as opposed to corporate entities) then this subsection would not have been required. It was argued that the only inference that can be drawn from the inclusion of section 27(4) EqA is that Parliament intended the other types of discrimination to be equally applicable to a corporate entity. Further, if Parliament had intended to limit the term member to individuals, then it could have inserted the same into section 45 or Section 46 (Interpretation) EqA. Membership of an LLP had always been open to corporate bodies. The LLP 2000 has been in force since April There could be little argument that Parliament had failed to appreciate that a limited company could be a member of an LLP when drafting section 45 EqA. Even if Parliament had not considered the possibility at the time the EqA was enacted, it would have done so by now. No attempt has been made to limit the term member to individuals.

4 Some support could also be drawn from the Race Equality Directive Paragraph 16 of the prelude to the Directive envisaged that corporate bodies could be subject to discrimination. Paragraph 16 of the prelude states that: Member States should also provide, where appropriate and in accordance with their national traditions and practice, protection for legal persons where they suffer discrimination on grounds of the racial or ethnic origin of their members. The Respondent s case EAD accepted that section 45 EqA prohibits an LLP from discriminating against a member. It also accepted that a member in the context of LLP 2000 can be a corporate entity. However, EAD argued that the protection afforded by the EqA was exclusively for individuals and that the protection afforded by the Act did not extend to corporations. EAD sought to argue that, whilst Schedule 1 of the Interpretation Act 1978 provides that the word person includes a body person incorporated or unincorporated, this was only so unless the contrary intention appears. It was argued that the EqA was intended for the protection of individuals and cannot have been intended for the protection of incorporations because they do not have protected characteristics. To emphasise this point, the Tribunal s attention was drawn to the Equal Treatment (Framework) Directive 2000/78/EC which was said to deal only with discrimination against individuals and that a purposive interpretation excludes the creation of a new class of discrimination being that against an incorporation. Employment Tribunal s Judgment In reaching his decision, Judge Ryan considered in detail the provisions of the Equal Treatment (Framework) Directive. Having done so, he concluded that what is important is to combat discrimination so that there shall be no direct or indirect detrimental treatment of any person on the basis of the protected characteristics of an individual. In light of this overarching principle, the question that needed to be asked was whether discrimination against a corporation could offend the principle of equal treatment. In answering this question, Judge Ryan concluded that discrimination against a corporation could potentially offend the principle in circumstances such as in this case where, on the facts peculiar to this case, the corporation in question reflects the characteristics of one individual

5 (or possibly the protected characteristics of more than one individual or a group of individuals) where the grounds upon which the action taken towards the corporation are claimed to be based on the individual s (or groups) protected characteristics. Having reached this conclusion, Judge Ryan described feeling somewhat obliged to conclude that persons includes corporation for the purposes of section 13 EqA and that as this was an associative discrimination claim with it not being essential that GAL had the protected characteristic, that this claim may be brought to a Tribunal as the correct venue, there being no other. Comment The possibility of a limited company brining a claim for discrimination initially sounds counterintuitive. However, when one looks at section 13 without the preconceived idea that it only applies to natural persons, then it is apparent that (B) is not expressly limited to being an individual. Schedule 1 to the Interpretation Act 1978 provides that person includes a body of persons corporate or incorporate unless there is a contrary indication (express or implied) in the particular context. By contrast, where the word individual is used it means only natural persons. Unlike the provisions relating to victimisation under section 27 EqA, there is no express requirement in section 13 EqA that the person directly discriminated against is an individual. Section 13 EqA was deliberately drafted so as to encompass associative discrimination. Associative discrimination does not require the victim of discrimination to possess the protected characteristic. If the person directly discriminated against does not have to possess the protected characteristic (or need to be an individual) then the possibility of a limited company bringing a claim for discrimination not only appears reasonable but, in this writer s opinion, entirely sensible. A limited company should not be subjected to less favourable treatment because of the protected characteristics of its directors, shareholders, employees or even customers. A narrow reading of Judge Ryan s judgment highlights the possibility that professional firms may be the subject of discrimination claims in circumstances where they seek to retire those former partners/members who have sought to benefit from the advantageous tax scheme that Mr Abrams adopted. LLP agreements may need to be redrafted to avoid the possibility.

6 However, this judgment may also assist companies who have been the subject of less favourable treatment because of a protected characteristic in the context of the supply of goods and services. Section 29(1) EqA states that A person (a service-provider ) concerned with the provision of a service to the public or a section of the public (for payment or not) must not discriminate against a person requiring the service by not providing the person with the service. If a person in the context of a service user can be a corporate entity, then companies are afforded greater protection than previously thought to be the case. Take for example a limited company that is refused banking services because of the protected characteristics of its directors. Such a decision would offend the overarching principle that there shall be no direct or indirect detrimental treatment of any person on the basis of the protected characteristics of an individual. On the basis of Judge Ryan s decision, such a company would have been discriminated against. Whilst this is a first instance decision, it does raise the interesting possibility that corporate entities can bring claims for direct discrimination, both before the Employment Tribunal and possibly in the context of the supply of goods and services. The judgment in Garry Abrams Limited & Anor v- EAD Solicitors & Ors opens the door to this possibility; only time will tell if other companies decide to walk through it. Steven Flynn was counsel for Garry Abrams Limited. He is a barrister practising at St John s Buildings specialising in commercial and employment disputes.