SECTION 83, EMPLOYMENT EQUALITY ACT, 1998
T.S.B. ESOP TRUSTEES LTD.
(REPRESENTED BY MS M BOLGER, B.L. INSTRUCTED BY MCCANN FITZGERALD SOLICITORS)
IRISH LIFE & PERMANENT PLC
(REPRESENTED MR. GALLAGHER S.C. INSTRUCTED BY MR. MCCARTHY, GROUP CHIEF LEGAL OFFICER)
MANDATE, ATGWU & SIPTU
(REPRESENTED BY O'DONNELL SWEENEY SOLICITORS)
- AND -
MARY BRADY & OTHERS AND MS FIONNULA MCGIVERN
(REPRESENTED BY MS. M. HONAN, B.L. INSTRUCTED BY RONAN DALY JERMYN SOLICITORS)
Chairman: Mr McGee
Employer Member: Mr Carberry
Worker Member: Ms Ni Mhurchu
1. Appeal against Equality Officers Decision No: DEC-E2004-007.
2. The complainants, all female, were employed by Irish Life & Permanent Plc (now Permanent TSB) in a part-time capacity. They contended that they were individually discriminated against on the grounds of gender when shares were allocated to them on a pro rata basis proportionate to hours worked during the 12 months preceding the notional allocation date. They were seeking equal remuneration in the form of a similar share allocation to named comparators who were full time employees (male) under the provisions of Section 19 of the Employment Equality Act, 1998.
The claim was referred to the Director of Equality Investigations on 30th April 2003 under the Employment Equality Act, 1998. The Director delegated the case to an Equality Officer, who held a preliminary hearing on 20th November, 2003 and a full hearing on the 28th January, 2004. On 11th February 2004, the Equality Officer issued her Decision, finding that the Trustees, the Bank and the Unions did not indirectly discriminate against the complainants in relation to pay on the grounds of gender when they provided for the allocation of shares to be pro-rata based on the hours worked.
The Complainants appealed this decision on 19th March, 2004, and a Labour Court hearing took place on 14th September, 2004.
The material facts of this case are fully and accurately recited in the Decision of the Equality Officer and are not in dispute. For the purpose of this Determination they may be summarised as follows:
This dispute arose as a result of the sale of the TSB Bank (hereafter TSB) to Irish Life and Permanent Plc (hereafter ILP). As a result the TSB obtained agreement from the Department of Finance to the introduction of an employee share option plan for employees of TSB in line with Government policy on the allocation of shares to employees on the disposal of State Companies (hereafter referred to ESOP).
Negotiations ensued between the TSB and the Trade Unions representing its staff. Agreement was reached on a share allocation which was approved by the Minister for Finance. The shares allocated were to be held in trust for the beneficiaries by TSB Bank ESOT (Employee Share Ownership Trust). The ESOT was approved by the Revenue Commissioners.
The principle underlying the ESOP was that the monies representing 14.9% of the sale proceeds to be utilised in the purchase of shares for the benefit of the employees would be allocated in two ways:
•5% would be allocated to employees in return for concessions by way of work practice changes and improved flexibility/productivity.
•9.9% would be purchased by way of foregoing certain increases due under the National Wage Agreements.
It was agreed between the parties to the ESOP agreement that the beneficial interest in the shares held by the ESOT would be allocated on the basis that all staff who were contracted to work 35 hours per week or more in the 12 months preceding the allocation would receive an equal allocation. Staff who worked less than 35 hours per week in the relevant period would receive an allocation in proportion to the hours they worked weekly relative to 35 hours.
The practical effect of this arrangement was that all full-time workers received an equal allocation and all part-time workers and job-sharers received a lesser allocation, pro-rata to the hours which they were contracted to work.
All of the staff in the part-time /job sharer category are women and the majority of staff in the full-time category are men.
Positions taken by the parties:
The complainants contend that by distinguishing between full and part-time employees for the purpose of share allocation, the respondents have indirectly discriminated against them on ground of their gender. They argue that the benefit at issue is pay within the meaning of Article 141 of the EC Treaty and Directive 75/117EEC and Section 2(1) of the Employment Equality Act 1998 (the Act). They also contend that since a group comprising predominantly women is treated differently to a group which is not so constituted, the criterion for the allocation offends against the principle of equal treatment enshrined in Directive 76/207. Thus, they contend that the agreement establishing the ESOP is a nullity by operation of Section 9(1) of the Act. They further contend that the impugned allocation constitutes discrimination contrary to Section 19 of the Act, and that the criterion (work practice changes, productivity/flexibility) for the issue of shares is an individually measurable contribution and not amenable to a share issue based on the principle of pro-rata to hours worked.
First Named Respondent:
The first named respondent is a subsidiary of TSB and holds the disputed shares as trustee. As such, it points out, its duty is to the beneficiaries of the trust. As a matter of law that duty of a trustee is to administer the trust in accordance with the trust instrument. The instrument, in this case, incorporates the terms of the agreement reached between TSB and the unions representing its staff, including the terms relating to the allocation of beneficial interest in the shares. The first named respondent pointed out that it had no power to deviate from the terms of the trust instrument or to amend it so as to accommodate the claims of the complainant’s.
The first named respondent has submitted that it is settled law that it is not discriminatory to reduce pay pro-rata to hours actually worked. The first named respondent further submits that the issue in contention is clearly one of pay and cannot simultaneously come within the scope of Directive 76/207.
Second Named Respondent
The second named respondent argues that it is a fundamental principle underlying the scheme that the shares being allocated to employees would be earned by them in two ways, namely, 5% would be allocated in return for changes in work practices and for improved flexibility and productivity and 9.9% would be purchased by foregoing future increases in pay. Thus, it contends, the pro-rata allocation of shares reflects the proportionate benefit accruing to the employer from the respective contribution made by full-time and part-time staff. They say that even if the criterion adopted is indirectly discriminatory (which is denied) it is objectively justified by the requirement to provide an equitable allocation as between staff whose contribution to productivity, flexibility and by way of wage increases foregone is different, depending on their hours worked.
The Court is indebted to the parties in this matter for the extremely helpful and extensive submissions they have furnished. They have been fully considered and have been of great assistance to the Court in reaching its conclusions.
Pay or Equal Treatment
The first question the Court must answer is whether this case falls within the bounds of article 141 of the EC treaty and Council Directive 75/117 (the Equal Pay Directive), or within the bounds of Council Directive 76/207 providing for the implementation of the principle of equal treatment.
In Article 141 (2) pay is defined as follows:
- “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”.
“Equal Pay without discrimination based on sex means:
a. that pay for the same work at piece rates shall be calculated on the basis of the same unit of measurement;b. that pay for work at time rates shall be the same for the same job”.
The definition of remuneration in section 2(1) of the 1998 act is consistent with that in Article 141 and defines it as:
"any consideration which the employee receives directly or indirectly from the employer in respect of the employment”.
The Court accepts that the allocation of shares by an employer to a scheme such as this whereby an employee may benefit by cashing in the shares is remuneration within the meaning of the Act and falls to be considered under Article 141 and Council Directive 75/117. The Court does not regard these provisions as falling within the bounds of Council Directive 76/207.
The central question which must be answered is:
Does the allocation of the shares proportionately to the hours worked constitute discrimination either direct or indirect against the part-time workers? It is only if a finding of discrimination is made that the question of objective justification arises.
Direct discrimination occurs when a person is treated differently from, or less favourably than another person on the grounds of their gender.
In this particular case, the alleged discrimination occurred because of the decision of the company to allocate shares to the employees in proportion to the number of hours worked by them. In the view of the Court that decision cannot be regarded as directly discriminatory as it is not directly linked to the gender of the parties concerned and on the face of it, appears to equally affect both women and men. Therefore no question of direct discrimination arises.
Indirect discrimination is defined by Section 19(4) of the Act as follows:
(4) Where a term or a contract or a criterion applied to employees (including A and B)-
(a) applies to all the employees of a particular employer or to a particular class of such employees (including A and B)
(b) is such that the remuneration of those employees who fulfil the term or criterion is different from that of those who do not,
(c) is such that the proportion of employees who are disadvantaged by the term or criterion is substantially higher in the case of those of the same sex as A than in the case of those of the same sex as B, and
(d) is not appropriate and necessary and cannot be justified by objective factors unrelated to A’s sex,
- then, for the purpose of subsection (1) A and B shall each be treated as fulfilling or, as the case may be, as not fulfilling the term of the criterion, whichever results in the higher remuneration.
A generally accepted definition of discrimination is that formulated by the European Court of Justice (the ECJ) in Finanzant Koein- Altstadt v Schumacher  ECR 1-225 as follows:
"It is settled law that discrimination can arise only through the application of a different rule to comparable situations or the application of the same rule to different situations."
Indirect discrimination occurs wherever a requirement or condition on the face of it applies equally to both men and women, but on closer examination in fact has a disproportionate adverse impact on members of one sex rather than another.
It is accepted by all sides in this case that the part-time workers are almost exclusively female whereas the full-time workers are both male and female. However, it is not alone sufficient to show that. The Complainant must also show that the provision in question operates to their disadvantage vis a vis their male full time comparators. It is only when they can demonstrate that they have been placed at a disadvantage that a finding of discrimination may be made. In essence, the complainant's claim is that they received a lesser allocation of shares then the full-time comparators and this, coupled with the fact that they are, in the main, female, is sufficient by itself to raise a prima facie case of discrimination. The onus must then switch to the respondents to objectively justify their treatment, which, the Complainants contend, the respondents cannot do.
They rely on the opinion of Advocate General Pergola in Hill and Stapleton –v- the Revenue Commissioners and the Department of Finance (1998) IRLR 466 in which he stated as follows:
- "different treatment of part-time and full-time workers is not justified where it is assumed, in a general way, and merely on the basis of strictly proportional criteria, that the workers in the first category are per se less deserving of pay supplements".
The respondents contend that the decisions of the ECJ are directly applicable in this case and therefore the Complainants have not been discriminated against either directly or indirectly.
The pro rata principle has been extensively considered by the ECJ in, amongst others, the cases of;
- Lewen V Lothar Denda  ECR 1-07243 (Lewen);
- Helmig v Deutsche Angestellten-Krankenkasse ECR1-5727(Helmig) ;
- Hill and Stapleton V the Revenue Commissioners and Dept of Finance ECR 1- 03739 (Hill and Stapleton);
- Kowalska V Frie und Hansestadt Hamburg 1990 ECR 1-259;
- Schonheit v Stadt Frankfurt am Main  C/402; and by
- This Court in Eason and Sons Limited v Browne ADE 02/12
"an employers refusal to award a bonus, even one reduced proportionately to workers on parental leave from work during the year in which the bonuses granted on the sole ground that the contract of employment is in suspense when the bonus is granted ,places them at a disadvantage.
In Hill and Stapleton the ECJ gave a preliminary ruling on a number of questions referred by this Court pursuant to article 234 of the treaty. The Court stated:
“The regression to which workers are subject when entering or the returning to full-time work directly affects their pay. They are in fact paid less than double what they would have earned had been job sharing. Consequently, their hourly rate of pay is reduced. Reference to the criterion of hours worked during the period of job sharing employment, as provided for under the scheme applicable here, seems to take account neither of the fact that job sharing, as pointed out in paragraph 26 of the present judgment, is in a unique category as it does not involve a break in service, or of the fact, as stated in paragraph 27 of the present judgment, that a job-sharer can acquire the same experience as a full-time worker. Furthermore, a disparity is retroactively introduced into the overall pay of employees performing the same functions so far as concerns both the quality and the quantity of the work performed. The result of this disparity is that employees working full-time but who previously job shared are treated differently from those who have always worked on a full-time basis.”
“where there is indirect discrimination in a clause in a collective agreement the class of persons placed at a disadvantage by reason of that discrimination must be treated in the same way and made subject to the same scheme, proportionately to the number of hours worked, as other workers to such scheme as remaining, for want of a correct transposition of article 119 of the EC treaty into National law, the only valid point of reference"
“only if these two questions are answered in the affirmative does the question arise of the existence of objective factors unrelated to discrimination which may justify such a difference in treatment.
There is unequal treatment wherever the overall pay of a full-time employee is higher than that of part-time employees for the same number of hours worked on the basis of an employment relationship.
In the circumstances in these proceedings, part-time employees do receive the same overall pay as full-time employees for the same number of hours worked."
- “to establish whether there is indirect discrimination, it is necessary to ascertain whether the provisions at issue have a more unfavourable impact on women then men”.
“it should be stated at the outset that, as the Advocate General has noted at Point 102 of his opinion, community law does not preclude a retirement pension being calculated pro rata temporis in the case of part-time employment”.
“it is now well established since the decision of the ECJ in Van Colson and Kamann V Land Nordrheirn-Westfalen ECR 1 819 that legislation adopted to implement a Directive is to be interpreted and applied in the light of the wording and purpose of the directive so as to ensure the result envisaged by the directive. This interpretative obligation was subsequently approved in this jurisdiction by the Supreme Court in Nathan V Baily Gibson (1998)2 IR 162. Consequently, section 19 of the act must be interpreted having regard to the jurisprudence of the ECJ on the interpretation of directive 75/117 and article 141 on which it is based.
Accordingly, on the basis of the authorities reviewed, the court is satisfied that the complainant's entitlement to the same rate of remuneration as that paid to the compressor can be met if they are both subjected to the same rules or criteria in the calculation of their overall pay and in fact receive the same remuneration relative to hours worked ”.
Signed on behalf of the Labour Court
7th March 2005______________________
Enquiries concerning this Determination should be addressed to Jackie Byrne, Court Secretary.