ADE/11/25 – Hospira versus Roper & Others – Retirement Age & Redundancy Payments
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)
Chairman:
Employer Member:
Worker Member:
Mr Duffy
Ms Doyle
Ms Ni Mhurchu
Subject:
Appeal Under Section 83 Of The Employment Equality Acts, 1998 To 2011.
Background
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 30thAugust 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 5th October 2006. The Equality
Officer commenced his investigation on 8th May 2009. In a decision dated 26th April 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 waiver 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
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.
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 Act must 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 issue was 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.
ii.
in the case of an Act to which paragraph (a) of the definition of “Act” insection 2(1) relates, the
Oireachtas, or
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 in Article 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 6thDecember 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
JMcC Chairman