Unfair dismissal

The European Court of Justice issued its judgment in the case of R. v Secretary of State for Employment, ex parte Nicole Seymour-Smith and Laura Perez in February.  Seymour-Smith and Perez worked in the United Kingdom for their respective employers from February 1990 to May 1991 and they were then dismissed.  They both made complaints to the Industrial Tribunal that they had been unfairly dismissed and sought compensation; however the Tribunal refused to consider their complaints of unfair dismissal and claims for compensation on the ground that the relevant UK legislation affords protection against unfair dismissal only after a qualifying period of two years’ continuous employment and that they did not fulfil this condition.  The provisions considered by the Court of Justice were contained in the Employment Protection Consolidation Act 1978; similar provisions on unfair dismissal and compensation are contained in the Employment Rights Act 1996, but these were not in force at the time of the dismissals in this case.

UK legislation challenged

The dismissed employees challenged the legality of the UK legislation on the basis that it was incompatible with Community law.  They argued that women are discriminated against under the UK rules and relied on statistics to demonstrate that the proportion of women with two years’ employment is lower than the proportion of men satisfying the requirement.

Meaning of “pay”

The case was referred by the House of Lords to the Court of Justice for a preliminary ruling on several questions concerning the interpretation of the EC Treaty and the equal pay and equal treatment directives.  The House of Lords asked whether a judicial award of compensation for the breach of the right not to be unfairly dismissed constituted pay within the meaning of Article 119 of the EC Treaty; Article 119 sets out the principle that men and women should receive equal pay for equal work.  Referring to its previous case law, the Court of Justice stated that pay within the meaning of Article 119 comprises any other consideration, whether in cash or in kind, whether immediate or future, provided the worker receives it, albeit indirectly, in respect of his employment from his employer.  The Court noted that the compensation awarded to an employee for unfair dismissal, which comprises a basic award and a compensatory award, is designed in particular to give the employee what he would have earned if the employer had not unlawfully terminated the employment relationship.  The Court went on to hold that the compensation for unfair dismissal is paid to the employee by reason of his employment, which would have continued but for the unfair dismissal, and that therefore a judicial award of compensation for breach of the right not to be unfairly dismissed constitutes pay within the meaning of Article 119 and is thus governed by the principles of equal pay for men and women.

Indirect discrimination

The Court of Justice then considered the legal test for establishing whether a measure adopted by a Member State has a disparate effect on men and women to such an extent as to amount to indirect discrimination prohibited by the Treaty.  Article 119 on equal pay not only prohibits the application of provisions which constitute direct sex discrimination, but it also prohibits the application of provisions which maintain different treatment between men and women at work as a result of the application of criteria not based on sex where those differences of treatment are not attributable to objective factors unrelated to sex discrimination.  It was agreed that in the case in question the two-year rule did not constitute direct sex discrimination and the Court therefore had to consider whether it amounted to indirect discrimination.As regards indirect discrimination, the Court stated that the first question is whether a measure such as the two-year rule in question has a more unfavourable impact on women than on men.  It then said that the best approach is to compare the relevant statistics by considering, on the one hand, the respective proportions of men in the workforce able to satisfy the requirement of two years’ employment under the disputed rule and of those unable to do so, and, on the other, to compare those proportions as regards women in the workforce.  It must be ascertained whether the statistics indicate that a considerably smaller percentage of women than men is able to satisfy the condition of two years’ employment.  Such a situation would be evidence of apparent sex discrimination unless the two-year rule were justified by objective factors unrelated to any discrimination based on sex.

Up to national courts to decide

The Court, however, declined to decide whether the two-year rule did in fact amount to indirect discrimination and held that it is for the national court hearing the case to assess the relevance and validity of any statistics, the degree of disparity between the men and women affected, and the length of time the disparity has existed.  It is also for the national court to establish whether, and to what extent, a rule which has a more detrimental impact on women than on men is justified by objective reasons unrelated to any discrimination based on sex.  The case will therefore now be referred back to the House of Lords to decide whether the statistics in the UK indicate that a considerably smaller percentage of women than men is able to fulfil the requirements of the two-year rule; so, the rule will constitute indirect discrimination unless it can be justified by objective factors unrelated to any discrimination based on sex.

National measures of social policy

Finally, the Court pointed out that, although social policy is essentially a matter for the Member States, the pursuit of a social policy aim, such as encouraging recruitment of employees, cannot have the effect of frustrating the implementation of a fundamental principle of Community law, such as that of equal pay for men and women.  It was argued in this case that the two year rule encouraged recruitment since without such a condition employers would be exposed to claims from employees who had only been employed for short periods and they would therefore be reluctant to recruit new employees.  Mere generalisations to the effect that a rule is designed to encourage recruitment, by limiting the risk that employers will be exposed to proceedings for unfair dismissal brought by employees who have only fairly recently been engaged, do not in themselves constitute objective justification for measures that may be regarded as discriminatory.

Copies of the judgment are available on the European Court of Justice website - http://www.curia.eu.int-wwwcuria.eu.int - or from the Society.