Fasano v Reckitt Benckiser Group Plc & Anor

Factual and Procedural Background

The appellant, a former employee of Company B, ceased employment on 30 June 2019. The appellant participated in a long term incentive plan ("the LTIP") operated by Company A, the parent company within the group. The 2015 LTIP provided for awards of shares or share options to senior personnel, vesting in May 2020 subject to performance conditions linked to earnings per share over three years. The appellant was entitled to a pro-rata award under the original terms if performance conditions were met; however, they were not met and no award was received.

On 18 September 2019, Company A amended the LTIP rules to require participants to be employed as of that date to benefit from amended performance conditions, which included a 50% award vesting irrespective of performance. The appellant was not eligible as he was not employed on that date. The appellant brought a claim alleging indirect age discrimination under sections 19 and 39 of the Equality Act 2010 ("the 2010 Act"), asserting that the amended requirement was a provision, criterion, or practice ("PCP") disadvantaging him due to age.

The employment tribunal found Company A was acting as agent for Company B in amending the LTIP but held the PCP pursued a legitimate aim of staff retention and was proportionate, dismissing the claim. The Employment Appeal Tribunal ("EAT") held the PCP was not capable of achieving the legitimate aim and was unjustified but found Company A was not acting as agent for Company B, dismissing the appeal on that basis. The appellant appealed the agency finding, and the respondents sought to uphold the EAT's decision or cross-appeal on justification grounds.

Legal Issues Presented

1. Whether Company A acted as agent for Company B in amending the LTIP rules, thereby rendering Company B liable under sections 109 and 110 of the 2010 Act.
2. Whether the PCP requiring employment as at 18 September 2019 to benefit from amended LTIP conditions constituted indirect age discrimination and, if so, whether it was justified as a proportionate means of achieving a legitimate aim.

Arguments of the Parties

Appellant's Arguments

• Company B, as the appellant's employer, authorised Company A to provide, operate, and amend the LTIP on its behalf, including granting awards and modifying rules.
• The key factor for agency was consent or assent, not control; the employment tribunal correctly found such consent existed.
• The EAT erred by concluding the employment tribunal had impermissibly adopted a purposive approach to agency, as the tribunal's conclusion was based on common law principles and factual findings.

Respondents' Arguments

• "Agent" in sections 109 and 110 of the 2010 Act has its ordinary common law meaning, requiring a fiduciary relationship where the agent acts on behalf of the principal, usually affecting the principal's legal relations with third parties.
• Control is a relevant factor, and no authority was granted by Company B to Company A to operate or amend the LTIP or grant awards on its behalf.
• Company A acted under its own authority granted by its shareholders and directors; thus, it was not acting as agent for Company B when amending the LTIP.
• The EAT was correct to reject the employment tribunal’s agency finding and to apply a strict common law interpretation.
• Regarding justification, the PCP was a proportionate means of achieving the legitimate aim of retaining staff, as former employees could not be retained and extending awards to them would not serve the retention purpose.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ministry of Defence v Kemeh [2014] ICR 625	Common law definition of agency; agency requires principal's authority and agent acting on principal's behalf.	The court relied on Kemeh to emphasize that agency requires authorization and that mere benefit to another does not create agency; applied to reject agency finding.
Blackwood v Birmingham & Solihull Mental Health NHS Foundation Trust [2016] IRLR 878	Ordinary common law meaning of agency in context of discrimination law.	Confirmed that agency concepts in Equality Act 2010 should be given their ordinary legal meaning; supported the respondents' position.
Unite the Union v Nailard [2019] ICR 28	Agency principles applied in employment discrimination context.	Reinforced the approach that agency requires principal's authorization and agent acting on principal's behalf; cited in support of respondents' submissions.

Court's Reasoning and Analysis

The court analysed the agency relationship under sections 109 and 110 of the 2010 Act, emphasizing that these provisions incorporate the ordinary common law meaning of agency. Agency requires the principal's express or implied assent and the agent acting on behalf of the principal, typically affecting the principal's legal relations with third parties. Mere benefit to another party or acting for another's benefit is insufficient to establish agency.

Applying these principles, the court found that Company A derived its authority to operate and amend the LTIP from its own shareholders and directors, not from Company B. There was no evidence of Company B authorizing Company A to act as its agent in relation to the LTIP amendments. The corporate structure of separate legal entities further militated against an agency relationship. The employment tribunal's conclusion that Company A was acting as agent was a legal conclusion unsupported by findings of fact or evidence of authorization.

Regarding the PCP, the court considered the requirement that participants be employed as at 18 September 2019 to benefit from amended performance conditions. The court held that the PCP as a whole aimed to retain staff by ensuring employment continuity from that date through to the vesting date in May 2020. The PCP was therefore connected to the legitimate aim of retention. The employment tribunal's finding that the PCP was a proportionate means to achieve this aim was upheld. The EAT's narrower analysis, which separated parts of the PCP and disregarded its overall retention purpose, was rejected.

The court noted that the PCP excluded former employees who could not be retained, which was consistent with the retention aim. The exclusion was not merely a cost-saving measure but a legitimate part of the retention strategy. The court recognized the limits of the appeal, which concerned post-employment conduct and did not address potential liability for conduct during employment.

Holding and Implications

The appeal is dismissed.

The court held that Company A was not acting as agent for Company B when it amended the LTIP rules on 18 September 2019; therefore, Company B is not liable under section 109 of the 2010 Act for those amendments. Additionally, the court upheld the employment tribunal's finding that the PCP was a proportionate means of achieving a legitimate aim of staff retention and thus did not constitute unlawful indirect age discrimination. The direct effect is that the appellant's claim fails, and no new precedent altering the established common law meaning of agency or the application of justification in indirect discrimination claims is established.