Lord Chancellor v McCloud

The Court of Appeal upheld the Employment Tribunal’s finding that the transitional provisions in the Judicial Pension Regulations 2015 and in the Firefighters Pension Scheme 2015 treated younger members less favourably than older members by reference to age and that the respondents failed to show the treatment was a proportionate means of achieving a legitimate aim under section 13(2) of the Equality Act 2010 and Article 6 of Council Directive 2000/78. The court held that a government margin of discretion in social policy exists but cannot validate an irrational aim or substitute for the evidential requirement to show that a discriminatory measure is appropriate and necessary.

Key legal principles applied included the distinction between legitimate social policy aims and employer-operational aims; the need for objective justification and proportionality of means under section 13(2) and Article 6, the test in Seldon v Clarkson Wright & Jakes for assessing social policy measures, and the requirement that generalised assertions unsupported by evidence are insufficient to discharge the burden of justification. Related claims under the sex equality rule (equal pay) and indirect race discrimination were addressed as consequential upon the failure to justify the age-based measures.

This appeal bundle concerned challenges to transitional protections adopted when public service pension schemes were reformed following the Hutton Report and the Public Service Pensions Act 2013. Judicial and firefighter claimants alleged that Schedule 2 to the Judicial Pension Regulations 2015 and equivalent transitional provisions in the Firefighters Pension Scheme 2015 produced direct age discrimination and, additionally, equal pay and indirect race (and some sex) discrimination in breach of the Equality Act 2010 and the EU framework Directive 2000/78.

The issues for the court included:

• Whether the transitional provisions amounted to direct age discrimination;
• If so, whether the discriminatory treatment could be objectively justified as a proportionate means of achieving a legitimate aim under section 13(2) of the Equality Act 2010 and Article 6 of Directive 2000/78;
• The appropriate weight to be given to the government’s margin of discretion in social policy decisions and the standard of judicial scrutiny;
• Consequential issues of equal pay under the sex equality rule (section 67) and indirect race discrimination under section 19;
• Remedies and whether matters should be remitted to the Employment Tribunal for remedy hearings.

Procedural posture: the appeals came from Employment Tribunal decisions (16 January 2017) and rulings of the Employment Appeal Tribunal (29 January 2018). The Court of Appeal heard cross-appeals and consolidated issues arising from the judges’ and firefighters’ litigation.

The court’s reasoning was: (i) governments are entitled to a margin of discretion when formulating social policy but that margin does not relieve them of the obligation to show that an age-differentiated measure is a legitimate aim in the particular employment context and that the means chosen are appropriate and necessary; (ii) where the asserted aim is not rationally explained and is supported only by generalisations or political/moral assertions, the justificatory burden is not discharged; (iii) on the facts the transitional protections (ten-year protection and tapering) were adopted for reasons that did not justify treating those least affected more favourably and the appellants had failed to demonstrate proportionality or necessity; (iv) the Employment Tribunal in the judges’ case had correctly rejected justification and its decision was upheld; (v) in the firefighters’ appeals the Court of Appeal concluded that the purported social policy aims were not established on evidence and substituted findings that the firefighter claimants had suffered unlawful age discrimination; (vi) equal pay and indirect race discrimination claims were treated as consequentially successful or remitted where appropriate, subject to further consideration of remedy and certain prima facie issues.

The court remitted the issues of remedy to the Employment Tribunal (stay ordered pending any further appeals to the Supreme Court) and ordered costs in favour of the claimants on the appeals upheld.

The appeals by the Lord Chancellor and government respondents were dismissed in substance. The Court of Appeal held that the transitional protections in the Judicial Pension Regulations 2015 and in the Firefighters Pension Scheme 2015 constituted direct age discrimination and that the respondents failed to show the treatment was a proportionate means of achieving a legitimate aim. The court reiterated that a government margin of discretion in social policy exists but cannot validate an irrational aim or substitute for the evidential and proportionality requirements; equal pay and indirect race discrimination claims were consequentially successful or remitted as set out in the order, and remedies were remitted to the Employment Tribunal.

This litigation progressed from the Employment Tribunal (judgments delivered 16 January 2017 by Judge Williams and Judge Lewzey in the respective lead hearings) to the Employment Appeal Tribunal (Sir Alan Wilkie, 29 January 2018) and thence to the Court of Appeal (Civil Division) [2018] EWCA Civ 2844 (judgment delivered 20 December 2018).