The House of Lords has handed down a judgment in the case of St Helen’s Borough Council -v- Derbyshire & Others [2007] UKHL16 which will have implications as to how employers should negotiate settlements of discrimination claims.

The Case

39 women employed as dinner ladies in St Helen’s Borough Council (“the Council”) brought equal pay claims against the Council. They complained that they were less well paid than male road sweepers doing comparable work in terms of skills required. Shortly before their claim was due to be heard by the Employment Tribunal, the Council sent two letters direct to the staff. One letter was sent to all catering staff, referring to the Tribunal hearing and the costs of a successful equal pay claim. It said that the cost of a school meal would rise and would make the provision of the service wholly unviable so that the Council would be forced to consider discontinuing the school meals service other than to children who were entitled to receive free school meals. The second letter, addressed to each of the 39 claimants, urged the claimants to consider the Council’s offer of settlement, stating that the Council could not “overstate the impact that the current course of action will have on the service and everyone employed within it.”

The claimants then brought a second Tribunal claim, arguing that they had been victimised pursuant to Section 4 Sex Discrimination Act 1975 (SDA) because of the sending of the 2 letters.

The Tribunal upheld the dinner ladies’ complaints and rejected the Council’s argument that the letters which they had sent to the claimants were a statement of their point of view and a necessary warning of the harmful consequences of pursuing their claim. The Tribunal found that the claimants suffered a detriment as a result of the letters which had caused distress to at least some of the claimants and “incurred for them some odium”; they were effectively a threat and were intimidating, affecting the claimants and not others who had settled their complaints. The letters therefore amounted to treating the claimants less favourably than those who had not continued with the equal pay proceedings, and this constituted victimisation contrary to the SDA.

The Employment Appeal Tribunal upheld the Tribunal’s findings but its decision was overturned by the Court of Appeal (Mummery LJ dissenting). In the Court of Appeal, Lord Nicholls said “employers acting honestly and reasonably ought to be able to take steps to preserve their position in pending discrimination proceedings without laying themselves open to a charge of victimisation).” The Court of Appeal held that the letters were honest and reasonable attempt by the Council to compromise proceedings. The House of Lords disagreed and upheld the Tribunal’s decision. In their view, an employer is entitled to make an honest and reasonable attempt to settle but, at the same time, must not seriously jeopardise the employee’s right to pursue his or her claim. It is necessary to look at the effect of the employer’s actions from the point of view of the employee and whether that act has caused a detriment. The object of the letters was to pressurise the claimants to settle and thus were intimidating. The claimants had suffered a detriment as a result of the letters being sent in the form in which they were sent and the claimants were therefore treated less favourably than those dinner ladies who had already settled their claims.

How will this decision impact on employers?

The law accepts that employers are entitled to take steps to avoid prejudicing their position in litigation without laying themselves open to a claim for victimisation. However, this must be balanced against the primary object of the victimisation legislation which is to ensure that employees are not penalised or prejudiced because they have taken steps to exercise their statutory rights or are intending to do.

So how far can employers go in attempting to settle a discrimination claim without being held to have applied undue pressure amounting to victimisation? How far employers can go will be a question of fact. In the first instance, a general test which can be used is whether the employer’s conduct has to be ‘honest and reasonable’. However, this test is not appropriate in all cases because, rather than concentrating on what the employer has done, the focus has to be on whether the employer’s act has caused the employee to suffer a detriment. The House of Lords said that employers should consider how the way in which they intend to conduct themselves will be perceived by the employee; employers must be sensitive to the wider effects of what they plan to do in order to encourage a settlement. The employer must therefore be aware of the employee’s right not to be victimised and should avoid doing anything that might make a reasonable employee feel that he or she is being unduly pressurised to concede his or her claim. It is worth noting, however, that the Courts have recognised that an unjustified sense of grievance cannot amount to a detriment.

The House of Lords indicated that in normal circumstances it would be appropriate if the employer’s solicitor were to write to the employee’s representative setting out, in appropriately measured and accurate terms, the financial or employment consequences of a claim, or the risks to the employees if the claim were to fail. Any distress caused to the employee by such a letter is unlikely to constitute victimisation as it does not cause the employee a ‘detriment’; some sort of distress or worry naturally flows from any discrimination claim. In this case however, the House of Lords said that the Council had gone too far. Indirect pressure creating fear of public hatred and reproaches by colleagues is not acceptable as it is just as likely to deter an employee from enforcing a claim as a direct threat would be.

This case will have an impact on all employers attempting to settle any discrimination proceedings whether the discrimination to which the proceedings relate was, actually or allegedly, on the grounds of age, race, sex, disability, sexual orientation.