What does @PregnantThenScrewed vs HM Treasury mean for the future of indirect discrimination?

In February 2021, I posted about the judgment of the High Court in R (Motherhood Plan) v HM Treasury [2021] EWHC 309 (Admin), where Whipple J found that the government’s coronavirus Self-Employment Income Support Scheme did not discriminate against ‘recent mothers‘ in breach of Article 14 of the European Convention on Human Rights (‘ECHR’) by calculating compensation on the basis of their preceeding 3 years’ profits. I expressed some concern at the conclusion on indirect discrimination and questioned whether that point was correctly decided.

On 24 November 2021, in R (Motherhood Plan) v HM Treasury [2021] EWCA Civ 1703 the Court of Appeal found that:

1. The SEISS had a disproportionate impact on recent mothers and the High Court’s conclusion to the contrary was wrong. The Claimants had established that on the face of it, the SEISS indirectly discriminated against those self-employed women who had taken maternity leave or had a child in the 3 years prior to the SEISS;
2. However, the indirect discrimination was justified due to the emergency of the pandemic and essentially for the same reasons as those identified by Whipple J.

The Court of Appeal’s judgment provides guidance on the law of indirect discrimination, relevant to equality lawyers in the areas of public law, employment, services and education. I’ll weave in some of my previous commentary on the High Court judgment as I go along. And I promise not to use the phrase ‘I-told-you-so‘.

Background

On 30 April 2020, in response to the economic fallout of the coronavirus pandemic, the Treasury introduced the Self Employment Income Support Scheme (‘SEISS’).

The Claimants, an NGO (better known as ‘Pregnant then Screwed’) and a self-employed energy analyst, challenged the SEISS via a judicial review. As SEISS payments were based on average trading profits (‘ATP’) in the last 3 full tax years, the claimants argued that the scheme unlawfully discriminated against women who had taken maternity or pregnancy related leave in that time period (contrary to Article 14 read with Article 1, Protocol 1) of the ECHR.

The Claimants’ Article 14 ECHR challenge was two-pronged:

• Firstly, they argued that the SEISS had a disproportionate impact on women who had not worked for maternity reasons in a relevant years, by making payments to them which were less than they would have been otherwise;
• Secondly, they argued that the Treasury had failed to treat such women differently to other eligible persons, despite the fact that these women were in a materially different situation (applying Thlimmenos v Greece (2000) 31 EHRR 15). Put simply, different cases should be treated differently (per Lord Wilson JSC in R (DA) v Secretary of State for Work and Pensions [2019] UKSC 21). What the Treasury had done wrong was to equate women who had not been working due to pregnancy / maternity with those who were not working for other reasons.

Guidance on the law of indirect discrimination

The combined judgment of Underhill and Baker LJJ, with which Nicola Davies LJ agreed, offers the following general guidance on the law of indirect discrimination.

At § 56, the Court confirmed that the principles that underlie indirect discrimination under the ECHR, EU law and domestic law are broadly similar and that Courts are able to take into account EU and domestic case law when considering an Article 14 ECHR claim. While this has been happening in practice in other cases, the process has been less structured and more haphazard. What the Court of Appeal seems to be sculpting (as embodied at §§ 60-63 of the judgment) is a harmonised set of principles that apply across these areas and help to illuminate the concept as a whole.

There is an interesting discussion of the appellant’s definition of the protected group at § 64. The Court notes that although the claimants defined the group as recent mothers who have not worked in the preceding 3 tax years due to maternity reasons, the protected group could have been defined as:

• women eligible for the SEISS who had been pregnant or given birth during the period regardless of whether or not they had stopped work, or alternatively
• women eligible for the SEISS regardless of maternity; or
• ‘recent parents‘, so as to include any disadvantage to self-employed recent fathers affected by the ATP formula.

This is a helpful illustration of what I see as a key feature of indirect discrimination law in practice. Identifying the protected group is (a) not always straightforward and (b) can be put differently in order to test the impact of a measure in different ways. In brief, the larger and more generally drawn the protected group is, the more diluted the disproportionate impact is likely to be (albeit the Court may benefit from a broader horizon of statistical data). A narrower and more specific protected group may produce a starker results in terms of disproportionate impact, but provide less context in which to assess the overall significance of the alleged disparity of outcomes.[1]

The Treasury argued that there may be other groups at particular risk of their earnings not being representative over the 3-year period, such as those who have suffered temporary illness or taken care of a relative. The Court rejected this argument. The fact that other groups may have experienced disadvantage was not a reason to deny the disadvantage to recent mothers (§ 66).

This argument is often made by defendants seeking to deflect attention from the impact of a measure on one particular group. But the law doesn’t require a zero-sum game where claimants must show they are the most disadvantaged of all protected groups. This is perhaps best illustrated in Lady Hale’s discussion of the salient features of indirect discrimination law in Essop at § 27:

…there is no requirement that the PCP in question put every member of the group sharing the particular protected characteristic at a disadvantage… Obviously, some women are taller or stronger than some men and can meet a height or strength requirement that many women could not. Some women can work full time without difficulty whereas others cannot. Yet these are paradigm examples of a PCP which may be indirectly discriminatory.

Lady Hale, Essop v Home Office [2017] UKSC 27 at § 27

One of the reasons why the High Court rejected the indirect discrimination claim was that it found that the SEISS applied the same formula to all applicants and did not contain any ‘hidden barriers‘ that were harder for recent mothers to satisfy than others. The Court of Appeal queried the meaning of the High Court’s reference to a requirement of ‘hidden barriers‘ to accessing welfare benefits (§§ 71 and 94(2)). They observed:

…many or most [provisions, criteria or practices, ‘PCPs’] are far from “hidden”; and even the reasons why they have a disproportionate impact on the group in question are in many, though not all, cases obvious…

per Underhill and Baker LJJ § 94(2)

As I commented previously, a hidden barrier may well amount to indirect discrimination (and is considered a classic example of it), but it is not a requirement of the statutory framework:

In my view, these recent cases should not be misunderstood as indicating that a claimant in an indirect discrimination claim must always show a ‘hidden barrier’ or a requirement that is harder for them to satisfy. While that is one (classic) form of indirect discrimination, as discussed by Lady Hale in Essop v Home Office; Naeem v Secretary of State for Justice [2017] UKSC 27 at § 25, it’s unlikely to be the only kind…

Pregnant then Screwed? blog post on High Court judgment, 18 February 2021

Was there a disproportionate impact on recent mothers?

Underhill and Baker LJJ went on to find that the High Court had not grappled with the essence of the Claimants’ case, namely, that under the SEISS, recent mothers were at disproportionate risk of receiving payments that were unrepresentative of their normal self-employed earnings (§§ 73-74). The Court also quizzed Whipple J’s conclusion that: ‘the reasons for lower earnings in past years, in the context of this Scheme with its stated purpose, are not relevant‘. This seemed to go against the grain of the judgment of Lady Hale in Essop at § 24, which makes clear that under the domestic law it is not necessary to show the reason why a measure has a disproportionate impact on a protected group.

The Court considered the pre-Equality Act 2010 case law in Barry v Midland Bank [1999] 1 WLR 1465 (which the Defendant and Whipple J relied on). In that case, the claimant had moved from full-time to part-time employment following child-birth. Redundancies ensued and under her employer’s scheme, she received a redundancy payment from her employer which was calculated by reference to their final salary on the date of termination, multiplied by years’ service. The claimant argued that women were more likely to work part-time due to maternity and were therefore disproportionately at risk of lower severance payments under such a scheme. The House of Lords dismissed the claimant’s appeal which was based on her indirect discrimination claim.

Unpicking Barry, the Court found that the key point of the majority was that:

It is essential to a claim of indirect discrimination that the group to which the claimant belongs should be differently treated from persons not in that group. In deciding whether there has been such a difference of treatment it is necessary to identify the true substance of the measure which gives rise to the claim, and that may involve a consideration of its purpose. 

per Underhill and Baker LJJ § 84

The problem with the High Court’s decision was that it applied the factual reasoning from Barry despite the very different purposes of the employer’s redundancy scheme (seeking to compensate for losses upon dismissal from employment) and the SEISS (which sought to compensate the self-employed for lost profits due to the pandemic).

The Court then considered the more recent Divisional Court case of R (Adiatu) v HM Treasury [2020] EWHC 1554 (Admin), another case on which the defendant and Whipple J relied, where the claimants there alleged that during the pandemic the rate of statutory sick pay (‘SSP’) disproportionately affected women and ‘BAME‘ persons who were over-represented in low income employment. The Divisional Court dismissed the claim on the basis that the calculation of SSP was the same for everyone and that the claimants had failed to show that the calculation of SSP caused any particular disadvantage (rather than disadvantages caused by unrelated circumstances or economic factors). The Court found that the reasoning in Adiatu could not support Whipple J’s conclusion. That was for similar reasons as with Barry, namely, that while the Divisioinal Court in Adiatu was correct to conclude that the rate of SSP was unrelated to the economic circumstances of protected individuals, the key point, in light of Barry, was that the purpose of SSP was not to mitigate low incomes.

By contrast, the purpose of the SEISS was to mitigate for lost income and to use past earnings as a measure of hypothetical loss in doing so. As such, the High Court was wrong to conclude that past earnings were immaterial (§ 92-93).

As I wrote previously:

It seems unusual to deny a discrimination claim on the basis that it relates to a protected characteristic held in the recent past when the scheme under challenge refers to records from the past.

Pregnant then Screwed? blog post on High Court judgment, 18 February 2021

The High Court had also misidentified the nature of the disadvantage being alleged (see §94(1)).

For all these reasons, the Court reversed the High Court’s finding that the SEISS was not prima facie indirect discrimination. Therefore, the Claimants had established that the scheme had a disproportionate impact on new mothers and it was over to the Defendant to justify the scheme as a proportionate means of meeting a legitimate aim.

Thlimmenos discrimination

Whipple J had dismissed the Claimant’s Thlimmenos discrimination ground of challenge, in other words the alleged failure to treat unique cases uniquely, because the disadvantage that the Claimants alleged related to earning less in the past. The law did not require them to be compensated now for historical disadvantages. The Court of Appeal observed that this approach was based on the same reasoning that it had already found to be flawed. However, it was unnecessary for the Court to provide a definitive view because its findings on indirect discrimination meant that the defendant would need to justify the measure in any event.

Was the indirect discrimination justified?

The High Court had approached this issue on the footing that in an Article 14 claim concerning discrimination in the provision of state benefits, claimants must show that the scheme in question is ‘manifestly without reasonable foundation’ (‘MWRF’). Looked at through that prism, Whipple J had concluded that the Treasury’s five-fold justifications, (namely, the purpose of SEISS to compensate for lost profit due to Covid-19 rather than to correct perceived historic inequalities, the need for rapid policy delivery, mitigating the risk of fraud, avoiding perverse outcomes and minimising cost) were not manifestly without reasonable foundation and therefore any indirect discrimination was justified.

The Court of Appeal reviewed the recent UK Supreme Court judgment in R (SC) v Secretary of State for Work and Pensions [2021] UKSC 26, concerning the MWRF formulation in which Lord Reed’s judgment summarised at the outset that the approach of the European Court of Human Rights was not fully reflected by the domestic law on MWRF and in some cases a more intense form of scrutiny is required.

The Court helpfully reviewed the key points of Lord Reed’s judgment on the nuances of the test of justification in claims for indirect discrimination in cases which raise social welfare issues (in particular §§ 142, 145, 158 and 161-162 of R (SC)).

In light of the submissions from both parties, the Court concluded:

1. Whipple J’s consideration of justification was appropriately nuanced. She applied the correct level of scrutiny to the measure, notwithstanding the subsequent guidance in R (SC). Since her assessment was not tainted by any error of principle or flaw of reasoning which undermined the cogency of the conclusion, it was not open to the Court to decide the question of proportionality for itself, applying R (Z) v Hackney London Borough Council [2020] UKSC 40 at § 56 (§ 125);
2. A less intense level of review was appropriate here in light of the social and economic policy decided by a democratically elected and accountable minister and due to the indirect nature of the discrimination – applying AM (Somalia) v Entry Clearance Officer [2009] EWCA Civ 634 at § 61 per Elias LJ – even where the discrimination concerned a ‘suspect ground‘ (§ 127);
3. The scheme was developed in ‘extreme if not unique circumstances‘ (§ 130). The Court concluded that ‘…given the cardinal features required of the scheme – and above all speed and simplicity – the first respondent was in our view justified in introducing the scheme in a form which did not contain special provision for the position of recent mothers.‘

The appeal was therefore dismissed.

Conclusions

The key points to be derived from the judgment appear to be:

• When considering a claim for indirect discrimination, Courts may take into account the case law decided under the ECHR, EU law and domestic law (§56);
• The fact that other groups may be disadvantaged by a measure is not a reason to deny the impact on another protected group (§66);
• There is no requirement that the measure in question creates a ‘hidden barrier‘ to an applicant seeking to access some benefit. Some forms of indirect discrimination may be unhidden and fairly obvious in appearance (§§71 and 94(2));
• The purpose of a measure is relevant to the Court’s determination of whether the measure has a disproportionate impact on a protected group (§84);
• On justification, applying R (SC), the ‘manifestly without reasonable foundation‘ formulation which has been used in domestic cases concerning Article 14 challenges to the provision of state benefits does not fully reflect the Europeant Court of Human Rights case law which provides for a more nuanced approach, taking into account multiple factors in order to arrive at the appropriate level of review / margin of appreciation for any given measure. As such it should not be applied mechanically in social welfare cases (§110-112).

Practitioners should also note in particular the discussion of the different ways in which the protected group can be defined in order to test the measure in question (at §§ 64), as discussed above.

The judgment offers something for both sides. Government lawyers will find the discussion of justification of assistance when it comes to considering the impact of emergency measures on protected groups. Claimant lawyers can take vindication from the reversal of the High Court’s findings on indirect discrimination (albeit that the measure was found to be justified).

Welcoming the judgment, Joeli Brearley said:

We were devastated when we lost the case earlier this year and felt we had no choice but to appeal. When The Chancellor was questioned in Parliament about the SEISS calculation method, he said that maternity leave is the same as sick leave, and later claimed it is the same as taking a holiday. This demonstrates how little this Government values women and care. The judgment is a huge win for all of us and what makes this victory even sweeter is that this was a collective action. Over a thousand women (and some men) came together to get this ruling. Women had to advocate for themselves when the Government failed to advocate for them. As the ruling itself does not force the Government to reimburse the women impacted by their poor planning, we will now be calling on the Government to do the right thing, and give these new mums the top up payment they deserve. We will also be asking for a gender expert to scrutinise any new guidance or policy to ensure this can never happen again.

Joeli Brearley, founder and CEO of Pregnant Then Screwed

The Chancellor, Rishi Sunak was quoted in the Guardian as stating that ‘self-employed people had “ups and downs” in their earnings “for all sorts of reasons … whether through maternity, ill health or others”‘.

NOTES

[1] Note however, that indirect disability discrimination is dealt with somewhat differently because under domestic legislation the law requires a protected group with a disability to share the particular disability of the claimant in question. See section 6(3)(b) of the Equality Act 2010.