EDA1315

FULL RECOMMENDATION

ADE/11/25

DETERMINATIONNO.EDA1315

INDUSTRIAL RELATIONS ACTS, 1946 TO 1990
SECTION 83, EMPLOYMENT EQUALITY ACTS, 1998 TO 2011

PARTIES :

HOSPIRA
(REPRESENTED BY MATHESON ORMSBY PRENTICE)

- AND -

MARY ROPER, PHYLLIS NEEDHAM, MARGARET BRYSON, BREEGE WARD AND EVELYN DUNNION
(REPRESENTED BY SERVICES INDUSTRIAL PROFESSIONAL TECHNICAL UNION)

DIVISION :

Chairman: Mr Duffy
Employer Member: Ms Doyle
Worker Member: Ms Ni Mhurchu

SUBJECT:
1. Appeal Under Section 83 Of The Employment Equality Acts, 1998 To 2011.

BACKGROUND:

2. This is an appeal by Hospira against the decision of the Equality Tribunal in claims by Mary Roper, Phyllis Needham, Margaret Bryson, Breege Ward and Evelyn Dunnian. They each claim to have been discriminated against on grounds of their age in the redundancy settlement which they received on the termination of their employment on the closure of the plant at which they worked. In this Determination the parties are referred to as they were at first instance. Hence, Hospira is referred to as the Respondent and the workers are referred to as the Complainants.

DETERMINATION:

Background

The events giving rise to this dispute can be traced to a decision taken by the Respondent, in 2005, to close its plant in Donegal. The Complainants worked there for various periods ranging from 16 to 25 years. Negotiations on redundancy terms took place between the Respondent and SIPTU, the trade union that represented the staff, including the Complainants. Redundancy terms were agreed on or about 30^thAugust 2005. The closure was on a phased basis extending over 18 months. The Complainants herein were made redundant on various dated between June and October 2006.

The agreed redundancy terms provided for a payment of five weeks’ pay per year of service in addition to statutory redundancy payments. However, in the case of those employees who were close to retirement age it was agreed that they would receive either the terms of the agreed package or the amount of salary that they would have earned had they remained in employment until the normal retirement age of 65, whichever was the lesser. Each of the Complainants were in an age category in which their proximity to retirement age meant that they would receive an amount equal to their potential earnings up to age 65 which, in their case, was less than the amount paid to younger workers.

Each of the Complainants was paid an amount calculated as aforesaid on the termination of their employment. They each signed a discharge agreement in the following terms: -

I hereby acknowledge receipt in full of the sum of [amount stated]. I am satisfied that I have received all entitlements due to me. I accept this payment, therefore, in full and final settlement of all claims, under both statute and common law, arising out of my employment with Hospira.

The Complainants subsequently referred the within claims to the Equality Tribunal on 5^thOctober 2006. The Equality Officer commenced his investigation on 8^thMay 2009. In a decision dated 26^thApril 2011 the Equality Officer upheld the complaints. He awarded each of the Complainants amounts being the difference between that which they received by way of non-statutory redundancy payments and the amount that they would have received had the full package agreed with the Union been applied to them.

The Respondent appealed to this Court.

Position of the parties

The first point taken by the Respondent is that the Complainants are estopped for proceeding with their claim by the terms of the discharge agreement that each of them signed, the terms of which are recited above. The Respondent contends that the Complainants had the advice of their trade union available to them at all times and with the benefit of that advice they accepted the amounts proffered to them by the Respondent in full and final settlement of all claims. It is the Respondent’s contention that the reference in the discharge agreement to “all claims under both statute and common law” included the within claims.

Without prejudice to its position in that regard the Respondent relies on the provisions of s.34(3) of the Act, which provides: -

In an occupational benefits scheme it shall not constitute discrimination on the age ground for an employer—
- (a) to fix ages for admission to such a scheme or for entitlement to benefits under it,
  (b) to fix different such ages for all employees or a category of employees,
  (c) to use, in the context of such a scheme, age criteria in actuarial calculations, or
  (d) to provide different rates of severance payment for different employees or groups or categories of employees, being rates based on or taking into account the period between the age of an employee on leaving the employment and his or her compulsory retirement age,
provided that that does not constitute discrimination on the gender ground.

It is the Respondents case that what is in contention in this case is a severance payment provided for by an occupational benefit scheme. It contends that paragraph s.34(3)(d) provides it with a complete defence to the within claim and operates so as to deprive the Complainants of any cause of action.

The Complainants

SIPTU, on behalf of the Complainants, contends that the document which they signed on receiving the disputed redundancy payment was not a valid wiaver of their claim. They say that on the conclusion of the negotiations an issue arose as to whether or not the proposal concerning those workers who were close to retirement age was lawful. The Official dealing with the matter sought advice from the Equality Authority. At first he was advised that the proposal would not offend against equality law. This advice was later revised and he was advised that on the basis of certain decisions of the CJEU the Authority had reservations as to the legality of what was in contemplation.

The Respondent was informed of the nature of the advice received and was further advised that if the proposals were accepted, the Union would pursue claims under the Employment Equality Acts on behalf of those adversely affected by the proposal. The Union contends that it was in the interest of all parties that the redundancy settlement be brought to finality. Consequently the proposal was put to a ballot of members on the understanding that the Union would pursue the claims of those affected by the proposed limitation of the amount payable. According to the Union, the Respondent did not demur from that proposal.

The Union contends that the purported waiver was included in the discharge documentswithout reference to it and in the knowledge that it was pursuing claims of discrimination on behalf of the Complainants herein. They say that the discharge documents were presented to each of the Complainants together with a cheque for their redundancy payment. They were not given an opportunity to study or reflect on its content nor was the import of the document explained to them.

With regard to the substance of the claim it was submitted that s.34(3) of the Act must be interpreted and applied in accordance with what is often referred to as the principle of conforming interpretation. That is to say, it must be interpreted and applied in light of the wording and purpose of the European Directive which it was enacted to transpose.

Reliance was placed on Article 6 of Directive 2000/78/EC which provides: -

Justification of differences of treatment on grounds of age

1. Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary. Such differences of treatment may include, among others:
- (a) the setting of special conditions on access to employment and vocational training, employment and occupation, including dismissal and remuneration conditions, for young people, older workers and persons with caring responsibilities in order to promote their vocational integration or ensure their protection;
  (b) the fixing of minimum conditions of age, professional experience or seniority in service for access to employment or to certain advantages linked to employment;
  (c) the fixing of a maximum age for recruitment which is based on the training requirements of the post in question or the need for a reasonable period of employment before retirement.
2. Notwithstanding Article 2(2), Member States may provide that the fixing for occupational social security schemes of ages for admission or entitlement to retirement or invalidity benefits, including the fixing under those schemes of different ages for employees or groups or categories of employees, and the use, in the context of such schemes, of age criteria in actuarial calculations, does not constitute discrimination on the grounds of age, provided this does not result in discrimination on the grounds of sex.

It was submitted that this Article makes it clear that differences in treatment on grounds of age must be objectively justified and that s.34(3) of the Actmust be similarly construed. It is the Union’s case that there are no objective grounds justifying the impugned unequal treatment of the Claimants.

Conclusion

The Court heard evidence from each of the Complainants, from Mr Sean Reilly, who was a senior official of SIPTU at the time and who negotiated the redundancy package on behalf of the Union, The Court also heard evidence from Mr Colm Ryan who was the personnel manager of the Respondent. They each gave evidence in relation to the circumstances in which the waiver in issuewas proffered to the Complainants. In light of the attitude taken by the Court to the substantive matter in dispute it is unnecessary to express a concluded view on the question of whether the Complainants are estopped from seeking redress under the Act. Suffice it to say that the Court is satisfied, on the evidence, that Mr Reilly made it clear at all times that the Complainants did not accept that they could lawfully be paid a reduced redundancy ex-gratia lump sum because of their proximity to the normal retirement age in the employment. The Court is satisfied that this was known and accepted by the Respondent in the course of the negotiations. The Court is further satisfied that it was never expressly or implicitly brought to the Complainants’ attention that the signing of the document in issue would extinguish their claim under the Act. Nor was it indicated to them that the amount which they received by way of redundancy pay was intended as consideration in compromise of that claim.

The substantive claim

As previously noted in this Determination, s.34(3)(d) of the Act provides that it shall not constitute discrimination on the age ground “to provide different rates of severance payment for different employees or groups or categories of employees, being rates based on or taking into account the period between the age of an employee on leaving the employment and his or her compulsory retirement age, provided that that does not constitute discrimination on the gender ground.”

It is the Respondent’s case that this provision provides it with a complete defence to the within claims. In response Ms Kimber B.L, for the Complainants, drew the Court’s attention to the provision of subsection (3A) of s.34 which provides: -

In subsection (3)—
“occupational benefits scheme” includes any scheme (whether statutory or non-statutory) providing for benefits to employees or any category of employees on their becoming ill, incapacitated or redundant but does not include any occupational pension scheme providing for pensions, gratuities or other allowances payable on retirement or death;
“severance payment” means a sum paid voluntarily by an employer to an employee otherwise than as pay when the employee leaves the employment.

Counsel relied on the final paragraph of this subsection which excludes a sum paid in the nature of pay from the application of subsection (3). Counsel submitted, in reliance on authority, that a voluntary redundancy payment of the type in issue in this case is to be regarded as pay for the purposes of the Act.

Neither the Act nor Directive 2000/78/EC provides a definition of the term‘pay’. The term is defined at Article 157 (2) TFEU as follows: -

For the purpose of this Article, ‘pay’ means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his employment, from his employer.

That definition is derived from the jurisprudence of the CJEU and is widely applied for the purpose of European Union law. Based on that broad definition the Court of Justice, in Case C 262/88Barber v Guardian Royal Exchange Assurance[1990] ECR 1-1889, held that a voluntary redundancy payment constitutes pay for the purposes of Article157 (ex Article 119) of the Treaty and the now repealed Equal Pay Directive.

If the term‘pay’as it is used in s.34(3A) of the Act is to be ascribed the same broad European Law meaning, the subsection, read literally, would exclude redundancy payments of the type in issue in this case from the ambit of subsection (3)(d) of s.34 of the Act. However, in the Court’s view that would result in a manifest absurdity and would render the final paragraph of subsection (3A) self-defeating in that any sum paid voluntarily by an employer to an employee on leaving employment would have to be regarded as pay and therefore excluded from the ambit of the subsection. The subsection would therefore be devoid of any meaning.

It is a well settled principle of statutory construction that a provision in a statute cannot be interpreted in a way that produces an absurd result. That common law rule is now reflected in s.5 of the Interpretation Act 2005, which provides: -

In construing a provision of any Act (other than a provision that relates to the imposition of a penal or other sanction)
- (a) that is obscure or ambiguous, or
  (b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of—
  - (i) in the case of an Act to which paragraph (a) of the definition of “Act” insection 2(1) relates, the Oireachtas, or
    (ii) in the case of an Act to which paragraph (b) of that definition relates, the parliament concerned,
    the provision shall be given a construction that reflects the plain intention of the Oireachtas or parliament concerned, as the case may be, where that intention can be ascertained from the Act as a whole.

In the Court’s view, the literal construction of s.34(3A) contended for by the Complainants must be rejected in favour of a construction that reflects the intention of the Oireachtas ascertained from the Act as a whole.

It is noted that while the Act does not define what constitutes pay it does define the term‘remuneration’as follows: -

“remuneration”, in relation to an employee, does not include pension rights but, subject to that, includes any consideration, whether in cash or in kind, which the employee receives, directly or indirectly, from the employer in respect of the employment.

This definition includes, as does the definition at Article 157 TFEU, a worker’s ordinary basic pay and any other payment or allowance which the worker receives from his or her employer in respect of employment. Consequently, the term ‘pay’ as used in s.34(3A) should be understood as a reference to basic pay which is one component of remuneration. On that interpretation pay does not include redundancy payments of the type in issue. It then follows that s.34(3)(d) of the Act applies to the payments giving rise to this dispute.

A further point taken on behalf of the Complainants is that s.34(3)(d) must be read in conjunction with Article 6 of Directive 2000/78/EC. It was submitted that on such a reading the aforementioned statutory provision only applies where the Respondent provides objective justification for the impugned difference in treatment. It is the Complainant’s contention that there is no such objective justification.

Objective Justification

Paragraph 1 of Article 6 of the Directive provides that Member States, rather than individual employers, may provide for differences in treatment on grounds of age where it is “objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary”.

InR (Age concern England) v Secretary of State for Business, Enterprise, and Regulatory Reform[2009] IRLR 37, the CJEU held that the absence of precision in the legislation as to what aims were being pursued did not preclude justification provided those aims could be ascertained from a reading of the legislation as a whole. The Court held, at pars 44 & 45: -

[I]t cannot be inferred from Article 6(1)of Directive 2000/78 that a lack of precision in the national legislation as regards the aims which may be considered legitimate under that provision automatically excludes the possibility that the legislation may be justified under that provision (see, to that effect, Palacios de la Villa, paragraph 56).
In the absence of such precision, it is important, however, that other elements, taken from the general context of the measure concerned, enable the underlying aim of that measure to be identified for the purposes of review by the courts of its legitimacy and whether the means put in place to achieve that aim are appropriate and necessary(Palacios de la Villa, paragraph 57).

The Court went on to hold that the standard of objective justification required under Article 6(1) of the Directive is different to that required in order to justify indirect discrimination under Article 2(2)(b). The Court pointed out that Article 6 is addressed to the Member States and allows them to derogate from the requirement of Article 2(1) by permitting less favourable treatment that would otherwise constitute direct discrimination. It repeated the oft stated principle that a derogation must be interpreted strictly and given no wider scope than the language providing for it suggests. On this point the Court held: -

Article 6(1)of Directive 2000/78 allows member states to introduce into their national law measures providing for differences in treatment on grounds of age which fall in particular within the category of direct discrimination as defined in Article 2(2)(a) of that Directive. It is indeed to that extent, in particular, that Article 6(1) must be interpreted as applying, in accordance with the first subparagraph thereof, notwithstanding Article 2(2)' of that Directive. That option, in that it constitutes an exception to the principle prohibiting discrimination, is however strictly limited by the conditions laid down in Article 6(1) itself(par 62).

The Court further held that the type of objectives referred to in Article 6 upon which reliance can be placed in allowing different treatment on grounds of age are of a public nature. Consequently, the Court held, the legitimate aim in pursuance of which the derogation is invoked must relate to the social policy objectives of the Member State. The Court pointed out: -

It is apparent from Article 6(1) of Directive 2000/78 that the aims which may be considered 'legitimate' within the meaning of that provision, and, consequently, appropriate for the purposes of justifying derogation from the principle prohibiting discrimination on grounds of age, are social policy objectives, such as those related to employment policy, the labour market or vocational training. By their public interest nature, those legitimate aims are distinguishable from purely individual reasons particular to the employer's situation, such as cost reduction or improving competitiveness, although it cannot be ruled out that a national rule may recognise, in the pursuit of those legitimate aims, a certain degree of flexibility for employers.(par 46)

The Court went on to point out that Article 6(1) of the Directive imposes on the Member States the burden of establishing to a high standard of proof the legitimacy of the aim pursued. At par 65 it said the following:-

However, since the referring court is uncertain as to the existence of a difference in the application of the criteria set out inArticle 2(2)(b)of Directive 2000/78 as compared with the application of the criteria in Article 6(1), it must be stated that the latter provision gives member states the option to provide, within the context of national law, that certain forms of differences in treatment on grounds of age do not constitute discrimination within the meaning of that Directive if they are 'objectively and reasonably' justified. Although the word 'reasonably' does not appear in Article 2(2)(b) of the Directive, it must be observed that it is inconceivable that a difference in treatment could be justified by a legitimate aim, achieved by appropriate and necessary means, but that the justification would not be reasonable. Accordingly, no particular significance should be attached to the fact that that word was used only in Article 6(1) of the Directive. However, it is important to note that the latter provision is addressed to the member states and imposes on them, notwithstanding their broad discretion in matters of social policy, the burden of establishing to a high standard of proof the legitimacy of the aim pursued.

The Oireachtas has made provision for a difference in treatment based on age in respect to severance payments in enacting section 34(3)(d) of the Act. It appears to the Court that the underlying rationale for this provision is that workers close to retirement are in a substantially different position than those who have longer periods in which they could have expected to remain in the active labour force and that, as a matter of social and labour market policy, this difference can be legitimately reflected in constructing redundancy packages.

A worker who is made redundant many years before their expected retirement date loses the expectation of a continuing income up to that date and the redundancy pay that they receive is unlikely to fully compensate them for the loss which they may suffer in consequence of losing their employment. Furthermore, such a worker will be entitled to receive social security payments while seeking alternative employment but the continuance of these payments is now limited to a period of nine months. By contrast, a worker who is made redundant at a time in close proximity to their retirement date and who receives a redundancy payment equal to the earnings that he or she could have expected up to that date suffers no pecuniary loss. Moreover, where, as in this case, the retirement age coincides with the age at which retirement social security pensions become payable the worker will normally have an alternative source of income for their lifetime.

Against that background it appears that the Oireachtas considered it reasonably and objectively justifiable, within the meaning of Article 6(1) of the Directive, to provide for the differences in treatment allowed for by s.34(3)(d) of the Act. The Court cannot see any basis upon which it could be held that the Oireachtas was precluded from reaching that conclusion by a provision of Directive 2000/78/EC as interpreted in the jurisprudence of the CJEU.

A similar arrangement in respect to differences based on age in the calculation of redundancy payments was recently upheld by the UK Employment Appeals Tribunal (per Underhill P.) inKraft Food (UK) v Hastie[2011] 3 All ER 956,[2010] ICR 1355. The EAT held that a cap on awards made under a redundancy scheme was justified even though it led to direct and indirect age discrimination. The EAT considered that the aim of preventing employees who were nearing retirement from receiving a windfall was legitimate—the aim of the scheme being to compensate employees who were made redundant for the loss of earnings which they had a legitimate expectation to receive had their employment continued. The cap was said to be a proportionate means of achieving that objective.

In Case C-152/11,Johann Odar v Baxter Deutschland GmbH. (Unreported, CJEU, Second Chamber 6^thDecember 2012), the Court had to consider if a redundancy payments scheme in Germany which differentiated between workers on grounds of age offended against Article 6 of Directive 2000/78/EC. The Court considered that the arrangements in issue were objectively justified on the basis,inter alia, that they allowed for a fair distribution of limited financial resources as between younger and older workers. In the Court’s view such a consideration is also appropriate in the instant case.

Determination

For all of the reasons set out herein the Court has reached the conclusion that the differences in redundancy payments made to the Complainants as compared to their comparators is saved by s.34(3)(d) of the Act. Accordingly the Respondent is entitled to succeed in its appeal.

The appeal is allowed and the decision of the Equality Tribunal is set aside and substituted with a finding that the Complainants were not discriminated against on grounds of pay.

Signed on behalf of the Labour Court

Kevin Duffy
29th April, 2013______________________
JMcCChairman

NOTE

Enquiries concerning this Determination should be addressed to Jonathan McCabe, Court Secretary.