UK: Scope Of Equality Act Widened To Cover Corporate Claimants

Last Updated: 16 November 2015
Article by Clare Gilroy-Scott

The Employment Appeal Tribunal (EAT) has held that a limited company that was a member of an LLP could bring a claim alleging the LLP had directly discriminated against it based on the age of its principal shareholder in the case of EAD Solicitors LLP and Others v Abrams (UKEAT/0054/15).

Previously only individuals were considered to have the benefit of protection from discrimination under the Equality Act 2010 (EqA 2010) and legal practitioners have been left wondering whether this will open the flood gates with discrimination claims from corporate claimants. To fully understand the reasoning of the EAT and the potential impact of the decision, we set out the facts as follows:

Facts

  • Mr Abrams was a member of an LLP.
  • For tax reasons, Mr Abrams set up a limited company (of which he was sole director and shareholder) to take his place as a member of the LLP, and then he withdrew his membership.
  • The limited company, as a member of the LLP, was entitled to receive the profit share Mr Abrams would have received had he continued as member, and in return the company agreed to supply the services of an appropriate fee earner to the LLP. Though the parties expected that these services would be provided by Mr Abrams himself, there was no obligation that this would be the case. Consequently, Mr Abrams was neither an employee of the LLP, nor was he a worker, nor did he have any continuing contractual relationship with the LLP.
  • When Mr Abrams was a member of the LLP it had been agreed that he would retire at 62.
  • The LLP objected to the limited company continuing to offer Mr Abram's services once he had reached 62. Consequently, the LLP objected to the limited company continuing as a member of the LLP.
  • The limited company brought a claim in the Employment Tribunal that it had been directly discriminated against, having suffered detrimental treatment due to the protected characteristic (age) of someone with whom it was associated (Mr Abrams).
  • The Employment Tribunal allowed the claim, and the LLP then appealed to the EAT.

Decision of the EAT

The EAT dismissed the LLP's appeal based upon the following reasoning:

  • S.4 of the Limited Liability Partnership Act 2000 provides that a corporate body may be a member of an LLP. This was a well established principle by the time the EqA 2010 was drafted.
  • S.45(2) EqA 2010 provides that an LLP (A) must not discriminate against a member (B) as to the terms on which B is a member, by expelling B, or by subjecting B to any other detriment.
  • S.13(1) provides the definition of direct discrimination: A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others. The EAT held that 'another' plainly means 'another person'.
  • While the EA 2010 is silent on the definition of 'person', the Interpretation Act 1978 defines 'person' as including a body corporate, unless contrary intention appears in the Act. The EAT found no contrary intention in the EA 2010, and held that person may include a corporation. The EAT accepted the Claimant's argument that since it has long been recognised that that the discriminator can be a corporation, there did not seem to be any reason why the person on the receiving end of the discrimination must necessarily be an individual.
  • The EAT rejected the LLP's argument that since only an individual can have a protected characteristic, it follows that only individuals can be discriminated against. The EAT found on the contrary that the EqA 2010 does not protect individuals on the basis of their own characteristics but identifies discrimination as being detrimental treatment caused by/related to the protected characteristic.
  • The EAT reviewed case law demonstrating the long accepted principle that the protected characteristic does not have to be enjoyed by the person who is subject to the detrimental treatment.
  • The EAT reviewed the fact that s.27(4) EqA 2010 applies a specific exclusion, whereby to bring a claim for victimisation, the person subjected to a detriment must be an individual. However the EAT held that such an exclusion was only necessary to qualify the rest of the act under which the word 'person' is capable of including a corporation.
  • The EAT commented that protecting corporate bodies from discrimination would be 'entirely consistent' with EU provisions. In particular, the EAT noted the Race Discrimination Directive which recites the importance of member states providing protection for legal persons where they suffer discrimination on the grounds of the race or ethnicity of their members.
  • Finally the EAT considered various scenarios, contrary to public policy, which would have no legal redress were the appeal allowed, for example, a company being shunned commercially because it is seen to employ a Jewish or ethnic workforce.

The decision has undoubtedly considerably widened the scope of the EqA 2010 by evolving the concept of direct discrimination to cover corporate complainants but legal practitioners are divided as to its impact. It is possible that this decision has limited impact in terms of employment law as the provisions of the EqA 2010 covering discrimination at work rely upon the Claimant being in 'employment' (under a contract of employment or apprenticeship, or a "contract personally to do work") and it is difficult to envisage a company fulfilling these pre-requisites.

Notwithstanding this, it is a decision that should be noted by businesses. It is possible that this case could have a more significant impact in the commercial and property spheres than in the employment field, specifically in relation to the provision of goods, services or facilities, or the disposal of premises. After all, a non-natural person associated with individuals with protected characteristics could now sue in a whole host of discriminatory scenarios. For example, a refusal to sell premises to an LGBT rights charity, or a refusal to provide services to a company due to its owner's race could both fall within the new remit.

The case has been remitted back to the Employment Tribunal for a decision on the discrimination. We are left waiting for a decision on merits of the claim and how the tribunal addresses the question of compensation that could be awarded.

This article was written by Clare Gilroy-Scott, Senior Solicitor, Employment department with the assistance of Emily Kearsey, Trainee Solicitor.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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