Judgments - Regina v. Secretary of State For Employment (Original Appellant and Cross-Respondent) Ex Parte Seymour Smith (A.P.) and Another (Original Respondents and Cross-Appellants)

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    It is on this point that my noble and learned friends part company, and it is necessary for me to explain why I respectfully prefer the reasoning of Lord Nicholls. First I observe that the European Court did not, as it did in relation to the statistics as at 1985, give guidance as to the conclusion to be reached on the statistics as at 1991. However in para. 61 the Court expressly left it to the national court to determine the conclusions to be drawn from statistics revealing a "lesser but persistent and relatively constant disparity". It follows, in my opinion, that the absence of any guidance from the Court on the conclusion to be reached on the relevant statistics in the present case is consistent with the Court having formed the view that on these statistics the national court was entitled to conclude, if it so wished, that the test was satisfied. Second, and more important, I do not, with all respect, share the understanding of my noble and learned friend Lord Slynn of the passage in which the Court of Appeal expressed their conclusion on this point. They said (see [1995] I.C.R. 889 at p. 953B):

    "Despite our anxieties, however, we have been forced to the conclusion that on the material before us it has been demonstrated that for the period leading up to the dismissals of the two applicants there had been and continued to be a considerable and persistent difference between the numbers and percentages of men and women in the groups that did comply and the groups that did not comply with the two-year qualification period."

My noble and learned friend concludes that the Court of Appeal were proceeding on the basis that the percentage of women who qualified in the beginning was considerably smaller, and that that considerable difference "continued"; and comments that, if in the beginning that was not so, the conclusion does not necessarily follow. I very respectfully suggest that this is reading too much into the Court of Appeal's judgment. The Court of Appeal stressed that they were impressed by the "persistency and consistency of the figures from 1985 to 1991 inclusive" (see p. 952D). If they had believed that the statistics as at 1985 were sufficient of themselves to justify the considerable disparity, they would doubtless have said so; moreover it would have been unnecessary for them to invoke the persistence and consistency of the figures from 1985 to 1991 unless they considered that, in such circumstances, a lesser disparity over that period would satisfy the "considerably smaller" requirement. It is therefore my understanding that the Court of Appeal regarded the persistence and consistency of the disparity as essential to their decision and so concluded, on the statistics over the period leading up to the dismissals, that (to adopt the words of the European Court) a "lesser but persistent and relatively constant disparity" existed over that long period. I strongly suspect (I can say no more) that the European Court interpreted the Court of Appeal's judgment in the same way.

    It follows that, in my opinion, the approach of the Court of Appeal was entirely in accordance with the test laid down in paragraph 61 of the judgment of the Euorpean Court. It is true that the Divisional Court did not reach the same conclusion; but they did not consider the matter, as with hindsight they should have done, in accordance with that test. In these circumstances, I am most reluctant to depart from the finding of fact by the Court of Appeal on this point. In any event, like my noble and learned friend Lord Nicholls, I would unaided have myself reached the same conclusion.

    I should add that, on the second issue of objective justification, I find myself to be in agreement with the reasoning and conclusion of my noble and learned friend Lord Nicholls.

LORD JAUNCEY OF TULLICHETTLE

My Lords,

    I have had the advantage of reading in draft the speeches prepared by my noble and learned friends Lord Goff of Chieveley and Lord Nicholls of Birkenhead. I agree with them, and for the reasons which they have given I, too, would allow this appeal.

LORD NICHOLLS OF BIRKENHEAD

My Lords,

    An employee's right not to be unfairly dismissed by his employer is an established part of the employment law of this country. It was introduced into English law by the Industrial Relations Act 1971, and is now to be found in section 94 of the Employment Rights Act 1996. But this right does not apply to every unfair dismissal. In order to qualify for protection an employee must have been working for his employer for a prescribed minimum period.

    The length of the qualifying period has been changed several times. Initially the period was two years, then it became six months, then one year. The period was changed again in October 1980. Under the Employment Act 1980 the period was lengthened from one year to two years in cases of employers employing fewer than twenty employees. On 1 June 1985 the position changed yet again, by virtue of the Unfair Dismissal (Variation of Qualifying Period) Order 1985 (S. I. 1985 No. 782). The effect of this Order was to extend the qualifying period to two years' continuous employment in all cases.

    This last change is under challenge in these proceedings. The 1985 Order, on its face, prevented Ms. Seymour-Smith and Ms. Perez from pursuing claims for unfair dismissal against their respective employers. They were both dismissed in 1991, at a time when each had worked for her employer for more than one year but less than two years. Were it not for this Order, the employment tribunal would have had jurisdiction to hear their claims.

    Since 1991 the length of the qualifying period has been changed once more. In 1999 the period was reduced to one year: see S. I. 1999 No. 1436. This change applied only where the effective date of termination was after 1 June 1999, so it did not help Ms. Seymour-Smith or Ms. Perez.

    The court proceedings initiated by Ms. Seymour-Smith and Ms. Perez have been protracted. The history is summarised in the speech of my noble and learned friend Lord Slynn of Hadley. This further hearing of this appeal to your Lordships' House concerns the impact of European Community law on this legislation. As is well known, article 119 (now re-numbered as article 141) of the E C Treaty enshrines a right of equal pay for equal work. The Court of Justice of the European Communities has now confirmed that a judicial award of compensation for breach of the right not to be unfairly dismissed constitutes pay within the meaning of article 119. The European Court has also held that the conditions governing entitlement to obtain compensation for unfair dismissal fall within article 119. The question which now has to be decided is whether the extension of the qualifying period effected by the 1985 Order was compatible with article 119.

    This is not a case of direct discrimination. The 1985 Order drew no distinction between men and women. The contention of Ms. Seymour-Smith and Ms. Perez is that the Order was indirectly discriminatory, because it introduced a qualifying condition which bore more hardly on women than men. Women were treated less favourably than men, because the proportion of women who could comply with the two year qualifying period was smaller than the proportion of men. Before your Lordships two issues arise for decision. The first is whether, at the time of the dismissal of Ms. Seymour-Smith and Ms. Perez in 1991, the 1985 Order did have a disparately adverse impact on women. If it did, the second issue calling for decision is whether the differential impact was objectively justified.

Disparately adverse impact

    One of the questions referred by your Lordships' House to the European Court sought guidance on the legal test for establishing whether a measure adopted by a member state has such a degree of disparate effect as between men and women as to amount to indirect discrimination for the purposes of article 119. The view of the European Court is set out in paragraphs 60 to 65 of its judgment: [1999] 2 A.C. 554, 597-598. These paragraphs are reproduced in the speech of my noble and learned friend Lord Slynn of Hadley. These paragraphs, especially the relationship between paragraphs 60 and 61, were much analysed and debated before your Lordships. The European Court, it was submitted, wavered uncertainly between what must be established as a substantive criterion and the evidence needed for that purpose. In paragraph 60 the court referred to statistical evidence that 'a considerably smaller percentage of women than men is able to satisfy the condition', and treated this as evidence of apparent sex discrimination calling for justification. However, in the next paragraph the court observed that statistical evidence revealing 'a lesser but persistent and relatively constant disparity over a long period' could also be evidence of apparent sex discrimination. In paragraph 61, unlike paragraph 60, the court gave no guidance on the extent of statistical disparity required to establish apparent sex discrimination. Nor did the court spell out, in so many words, how these two approaches fit together. Nor, on its face, does the answer given by the court to the referred question in paragraph 65 leave any room to apply the 'lesser disparity' approach envisaged in paragraph 61.

    As I see it, the reasoning underlying these paragraphs is that, in the case of indirect discrimination, the obligation to avoid discrimination does not consist of applying requirements having precisely the same impact on men and women employees. The obligation is to avoid applying unjustifiable requirements having a considerable disparity of impact. In this regard the European Court has adopted an approach similar to that provided in section 1(1)(b) of the Sex Discrimination Act 1975. A considerable disparity can be more readily established if the statistical evidence covers a long period and the figures show a persistent and relatively constant disparity. In such a case a lesser statistical disparity may suffice to show that the disparity is considerable than if the statistics cover only a short period or if they present an uneven picture.

    Having set out the applicable principles, the European Court addressed the facts in the present case. In doing so the court focused exclusively on the 1985 statistics: see paragraphs 62 to 65. This may have been because the court had foremost in mind the contention that the making of the 1985 Order was ultra vires. The relevant date for the purpose of deciding that issue was 1985, being the date when the Order was made. The 1985 statistics showed that 77.4 per cent. of men and 68.9 per cent. of women satisfied the extended qualifying period introduced by the 1985 Order. The court commented that, on its face, those statistics did not appear to show that a considerably smaller percentage of women than men was able to fulfil the extended requirement. In its formal answer to the referred question in paragraph 65, the court repeated the considerably smaller percentage test already stated in paragraph 60. However, I cannot believe that in doing so the court intended to repudiate the approach stated in paragraph 61. Nor do I think this can be taken as an indication by the court that the paragraph 61 approach was inapplicable in this case if a date later than 1985 was the appropriate date.

    Before your Lordships it was common ground that 1991, not 1985, was the relevant date for the purpose of the issue now being considered. The position at this later date was not considered by the European Court. I turn to the available statistics, covering the period from 1985 to 1993, extracted from the annual labour force surveys.

YearPercentage of men with
more than 2 years
Percentage of women
with more than 2 years
Disparity
198577.468.98.5
198677.268.48.8
198775.367.18.2
198873.465.67.8
19897263.88.2
199072.564.18.4
199174.567.47.1
199277.972.15.8
199378.474.14.3

    These figures show that over the period of seven years, from 1985 up to and including 1991, the ratio of men and women who qualified was roughly 10:9. For every ten men who qualified, only nine women did so. This disparity was remarkably constant for the six years from 1985 to 1990, but it began to diminish in 1991.

    These figures are in borderline country. The question under consideration is one of degree. When the borderline is defined by reference to a criterion as imprecise as 'considerably smaller' it is inevitable that in some cases different minds may reach different conclusions. The decisions of the two courts below illustrate this. My own impression differs from the majority of your Lordships. I find myself driven to the conclusion that a persistent and constant disparity of the order just mentioned in respect of the entire male and female labour forces of the country over a period of seven years cannot be brushed aside and dismissed as insignificant or inconsiderable. I agree with the Court of Appeal that, given the context of equality of pay or treatment, the latitude afforded by the word 'considerably' should not be exaggerated. I think these figures are adequate to demonstrate that the extension of the qualifying period had a considerably greater adverse impact on women than men.

    The reduction in the disparity, which started in 1991, continued in 1992 and 1993. By 1993 the ratio of men and women qualifiers was about 20:19. But, looking at the overall picture, I do not think the diminished disparity after 1991 is sufficient to displace the message of the figures for the earlier years. Accordingly it is for the government to show that the extension of the qualifying period was justified, to use the accepted nomenclature, by objective factors unrelated to any discrimination based on sex. On this issue I agree with the Court of Appeal.

Qualifiers and non-qualifiers

    Before turning to justification I must mention a point which was debated before your Lordships. In paragraph 59 of its judgment the European Court described the approach which should be adopted to the comparison of statistics:

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

    This statement appears to envisage that two comparisons should be made: a comparison of the proportions of men and women able to satisfy the requirement ('the qualifiers'), and a comparison of the proportions of men and women unable to satisfy the requirement ('the non-qualifiers'). Thereafter in its judgment the court considered only the proportions of men and women who were qualifiers.

    Some of the ramifications involved in looking at the composition of the disadvantaged group, as well as the composition of the advantaged group, were explored by the Divisional Court and the Court of Appeal in the present case. Suffice to say, I do not understand the European Court to have rejected use of the figures relating to the non-qualifiers in a suitable case. Indeed, the European Court has looked at the composition of the disadvantaged group in several cases, although in none of them was there an issue on this point: see, for instance, Bilka-Kaufhaus GmbH v. Weber von Hartz (Case 170/84) [1987] I.C.R. 110, 125, paragraph 31, Nimz v. Freie und Hansestadt Hamburg (Case C-184/89) [1991] E.C.R. 1-297, 319, paragraph 12, and Kowalska v. Freie und Hansestadt Hamburg (Case C-33/89) [1990] E.C.R. 1-2591, 2611, paragraphs 13-16. Having regard to the conclusion I have expressed above on the issue of disparate impact, it is unnecessary to reach a firm conclusion on this point. I prefer to leave this question open for another occasion.

Objective justification: the introduction of the 1985 Order

    Objective justification falls to be determined as at 1991. That was the date when the 1985 Order was applied to the two claimants and, in consequence, they were disqualified from making claims for unfair dismissal. But objective justification cannot be assessed in 1991 without regard to how the situation in 1991 came about. Thus, in the present case, objective justification has to be approached in two stages. The first stage is to consider whether the government was justified in introducing the 1985 Order. This calls for examination of the factual position in 1985. The second stage is to consider whether the government was justified in keeping the Order in force six years later. This involves consideration of the position from 1985 to 1991.

    The Divisional Court and the Court of Appeal [1995] I.C.R. 889 held that the Secretary of State had failed to discharge the burden of proving that the 1985 Order was objectively justified. In reaching this conclusion the test applied by both courts was whether the Order was shown to be a suitable and requisite means to achieve the admittedly legitimate aim of encouraging employment. Thus, the test applied by the Court of Appeal was whether the threshold of two years had been 'proved to result' in greater availability of employment than would have been the case without it. The Court of Appeal declined to incorporate into this formulation any margin of appreciation: see [1995] I.C.R. 955.

    The answer given by the European Court to the fifth question referred to the court by this House ([1999] 2 A.C. 554, 599) has now shown that this test was too stringent. The burden placed on the government in this type of case is not as heavy as previously thought. Governments must be able to govern. They adopt general policies, and implement measures to carry out their policies. Governments must be able to take into account a wide range of social, economic and political factors. The European Court has recognised these practical considerations. If their aim is legitimate, governments have a discretion when choosing the method to achieve their aim. National courts, acting with hindsight, are not to impose an impracticable burden on governments which are proceeding in good faith. Generalised assumptions, lacking any factual foundation, are not good enough. But governments are to be afforded a broad measure of discretion. The onus is on the member state to show (1) that the allegedly discriminatory rule reflects a legitimate aim of its social policy, (2) that this aim is unrelated to any discrimination based on sex, and (3) that the member state could reasonably consider that the means chosen were suitable for attaining that aim.

    There is no difficulty with the first two requirements. The object of the 1985 Order was to encourage recruitment by employers. This was a legitimate aim of the government's social and economic policy, and this aim was unrelated to any sex discrimination. Whether the third requirement was satisfied in 1985 is more debatable. In March 1985 the Secretary of State, Mr. Tom King, stated with regard to the proposed change in the qualifying period:

    'The risks of unjustified involvement with tribunals in unfair dismissal cases and the cost of such involvement are often cited as deterring employers from giving more people jobs. This change which now puts all new employees on the same basis as that already existing for those small firms should help reduce the reluctance of employers to take on more people.'

The relevant question is whether the Secretary of State was reasonably entitled to consider that the extension of the qualifying period should help reduce the reluctance of employers to take on more people.

    This question raises an issue of fact, to be decided on the basis of the extensive documentary evidence adduced by the parties. The Secretary of State relied on several reports. These are itemised in the judgment of Balcombe L.J. at [1995] I.C.R. 907F-H. One report, 'Burdens on Business', was published by the Department of Trade and Industry in March 1985. This report identified, as one of the available options, increasing employees' qualifying periods in unfair dismissal cases from one year to two years in firms employing more than twenty employees:

    'Our field work confirmed that the present one year period is too short for many smaller businesses, and is distorting dismissal decisions.'

This is the high watermark of the Secretary of State's evidence. I think it is fair to say that overall, echoing the words of Balcombe L.J., these reports indicated that various small percentages of employers considered that employment protection legislation in general, and the provisions relating to unfair dismissal in particular, might inhibit the recruitment of employees.

    On balance, I consider the Secretary of State discharged the burden of showing his view was reasonable. It is apparent that obtaining hard evidence, including evidence of employer perceptions, is essentially a difficult task in this field. But this is not a case of a mere generalised assumption, as occurred in Rinner-Kuhn v. F.W.W. Spezial-Gebaudereinigung GmbH & Co. K.G. (Case 171/88) [1989] E.C.R. 2743. Here, there was some supporting factual evidence. To condemn the minister for failing to carry out further research or prepare an impact analysis, as recommended in 'Burdens on Business', would be unreasonable.

Objective justification: the continuing operation of the 1985 Order

    The requirements of Community law must be complied with at all relevant times. A measure may satisfy Community law when adopted, because at that stage the minister was reasonably entitled to consider the measure was a suitable means for achieving a legitimate aim. But experience of the working of the measure may tell a different story. In course of time the measure may be found to be unsuited for its intended purpose. The benefits hoped for may not materialise. Then the retention in force of a measure having a disparately adverse impact on women may no longer be objectively justifiable. In such a case a measure, lawful when adopted, may become unlawful.

    Accordingly, if the government introduces a measure which proves to have a disparately adverse impact on women, the government is under a duty to take reasonable steps to monitor the working of the measure. The government must review the position periodically. The greater the disparity of impact, the greater the diligence which can reasonably be expected of the government. Depending on the circumstances, the government may become obliged to repeal or replace the unsuccessful measure.

    In the present case the 1985 Order had been in operation for six years when the two claimants were dismissed from their jobs. The Divisional Court and the Court of Appeal noted there was no evidence that the extension of the qualifying period in 1985 led to an increase in employment opportunities. Ought the government to have taken steps to repeal the 1985 Order before 1991? In other words, had the Order, lawful at its inception, become unlawful by 1991?

    Here again, the matter is debatable. As time passed, the persistently adverse impact on women became apparent. But, as with the broad margin of discretion afforded to governments when adopting measures of this type, so with the duty of governments to monitor the implementation of such measures: the practicalities of government must be borne in mind. The benefits of the 1985 Order could not be expected to materialise overnight, or even in a matter of months. The government was entitled to allow a reasonable period to elapse before deciding whether the Order had achieved its objective and, if not, whether the Order should be replaced with some other measure or simply repealed. Time would then be needed to implement any decision. I do not think the government could reasonably be expected to complete all these steps in six years, failing which it was in breach of Community law. The contrary view would impose an unrealistic burden on the government in the present case. Accordingly I consider the Secretary of State discharged the burden of showing that the 1985 Order was still objectively justified in 1991.

    I too would allow this appeal.

LORD STEYN

My Lords,

    I have had the advantage of reading the speech of my noble and learned friend, Lord Slynn of Hadley. I agree with it. I would also make the order which Lord Slynn of Hadley proposes.

 
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