Age discrimination claim fails despite unfair change to Long Term Incentive Plan

Background

In the case of Fasano v Reckitt Benckiser Group (1) and Reckitt Benckiser Health (2), the claimant was a former senior employee of Reckitt Benckiser Health (Subsidiary), which is a wholly-owned subsidiary of the Reckitt Benckiser Group (Parent Company). The claimant was entitled to participate in the Parent Company's LTIP. He retired in 2019 and remained entitled to a pro-rated amount of the 2017 award, that would ordinarily vest at the end of 2019, subject to the financial performance of the Parent Company's shares.

During 2019, it became clear that the performance of the Parent Company's shares meant that the 2017 award would not vest at the end of 2019. In order to offer a staff retention incentive to current employees, the Parent Company changed the rules of the LTIP in order to allow a proportion to vest despite the poor share performance. As the claimant was not an employee at the relevant date, he did not benefit from the rule change and accordingly received nothing in respect of his 2017 award. He brought an Employment Tribunal claim for indirect age discrimination.

An indirect discrimination claim arises where a provision, criterion or practice (PCP) is applied across the board but causes a particular disadvantage to persons with a relevant protected characteristic (in this case, age). Indirect discrimination can be justified if the PCP can be shown to be a proportionate means of achieving a legitimate aim.

Outcome

The Tribunal dismissed the claim. It identified the PCP as the requirement that LTIP participants had to be employed on 18/9/19 in order to benefit from the amended terms. It then found that the rule change was a proportionate means of achieving the legitimate aim of retaining staff. The claimant appealed to the EAT.

Despite disagreeing with the Tribunal's reasoning, the EAT dismissed the appeal, acknowledging that this creates a frustrating result and perhaps highlights a gap in the current legal framework:

• The Tribunal's findings on indirect discrimination were wrong. Whilst making changes to the LTIP was a means of achieving the legitimate aim of retaining staff, the PCP that caused the disadvantage (ie the requirement that LTIP participants had to be employed on 18/9/19) was not itself a means of achieving the aim. This was because those who were excluded had already left employment and so could not be retained. The only real justification for the PCP was to save money, but this was not part of the pleaded defence to the claim. The PCP therefore was not justified.
• However, the Parent Company was not acting as the Subsidiary's agent, which was necessary in order for liability to be engaged. Whilst the Parent Company was providing a benefit to the employees of the Subsidiary, the Subsidiary had no control over the LTIP. It is essential in order for agency to apply that the principal has authorised the relevant act. Committing an act for another party's benefit is not sufficient to show agency. This being the case, the appeal had to fail.

Learning points

The EAT acknowledged that its decision results in a frustrating outcome for the claimant, because whilst the LTIP rule change was unfair, liability could not be engaged. The EAT decision speculates that this could be something that Parliament looks to address in future.

In the interim, the EAT's analysis of the PCP and objective justification is interesting. The decision demonstrates that in the absence of pleadings around cost savings, the PCP in this case was not justified, so that it caused an unfair disadvantage to the claimant on the grounds of his age.

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