It is well known that the Equality Act 2010 makes specific forms of discrimination, on the basis of protected characteristics, unlawful.
Although this is the starting point, some provisions of the Act provide for what are, in effect, exemptions or defences. Some allow for positive action (as set out in ss 158-159). Another is specific to charities, and allows a person acting in pursuance of a charitable instrument to provide benefits to people who share a protected characteristic if specific requirements are satisfied (s 193).
Section 158(2) provides: “This Act does not prohibit P [a person] from taking any action which is a proportionate means of achieving the aim of–
(a) enabling or encouraging persons who share the protected characteristic to overcome or minimise that disadvantage,
(b) meeting those needs, or
(c) enabling or encouraging persons who share the protected characteristic to participate in that activity.”
Section 193 provides an exemption for charities only. It provides:
“(1) A person does not contravene this Act only by restricting the provision of benefits to persons who share a protected characteristic if–
(a) the person acts in pursuance of a charitable instrument, and
(b) the provision of the benefits is within subsection (2).
“(2) The provision of benefits is within this subsection if it is–
(a) a proportionate means of achieving a legitimate aim, or
(b) for the purpose of preventing or compensating for a disadvantage linked to the protected characteristic.”
In R (on the application of Z and another) v Hackney London Borough Council  UKSC 40, the UK Supreme Court (“UKSC”) addressed both of these exemptions. The decision was significant for charities who use positive action and restrict the benefits or services they provide to a group with a shared protected characteristics.
How the claim arose
Agudas Israel Housing Association (“AIHA”) is a housing association and charity that provides social housing primarily for the Orthodox Jewish community in Hackney. Its charitable objective is to make social housing available primarily for members of the Orthodox Jewish community. It works with Hackney London Borough Council, a local housing authority with statutory functions in relation to allocating social housing. Hackney LBC also nominates applicants for social housing owned by housing associations such as AIHA, based on the needs of applicants.
Z was identified by Hackney LBC as having the highest level of housing need due to the vulnerability of her children, being a single mother with four children, two of whom had autism. Z was not a member of the Orthodox Jewish community.
No offer of housing was made to Z despite AIHA having surplus housing stock that met Z's needs. Hackney LBC did not put Z forward for consideration by AIHA and Z did not apply directly to AIHA. Z was allocated suitable accommodation during the course of the litigation.
Z issued proceedings for judicial review in the Divisional Court (High Court). The basis of Z's claim was direct discrimination, contrary to the prohibition in the 2010 Act, on the grounds of race and religion. The Divisional Court dismissed Z's claim and the Court of Appeal dismissed Z's appeal. The basis on which both courts proceeded was that AIHA fell within the exemptions in both s 158 and s 193 of the Act. Z appealed to the UKSC.
The relevant claim for the UKSC to consider was the lawfulness of AIHA's conduct of direct discrimination on grounds of race or religion. This turned on whether ss 158 and 193 applied. Specific parts of these sections rested on a proportionality assessment (ss 158(2) and 193(2)(a)); another relevant alternative for s 193 applying (s193(2)(b)) was also considered, including whether it contained an additional (and implicit) proportionality requirement, despite its wording not suggesting this.
The UKSC judgment
Lord Sales, delivering the lead judgment for a unanimous UKSC, recognised the limits of appellate courts when reviewing a finding of proportionality, which was the principal issue in the appeal. The Divisional Court's conclusions could only be set aside if it had misdirected itself on the applicable law or the conclusion it reached was wrong (paras 74-75).
In any event, the UKSC agreed with the Divisional Court's conclusions on proportionality under both s 158(2) and s 193(2)(a). Lord Sales's were, first, that AIHA's policy of offering housing primarily to the Orthodox Jewish community operated as a direct counter to discrimination suffered by that community; secondly, that AIHA's policy had some flexibility within it – in that it would allow AIHA in principle to provide or offer properties to individuals who were not part of the Orthodox Jewish community if there was a surplus compared to the demand from that community, however unrealistic a prospect that was.
In reaching their conclusions on the proportionality of AIHA's legitimate aim, the Divisional Court and the Court of Appeal rightly took account of the impact of AIHA's policy on groups other than the Orthodox Jewish community, with reference to the policy's aim. Those courts were entitled to weigh the benefits compared with the disadvantages at group level, rather than comparing the benefits of a group with the disadvantage of one person (in this case, Z). Support for this conclusion was drawn from the statutory scheme of ss 158 and 193, and in particular the fact that charities typically focus the benefits they aim to provide on defined groups. To carry out a proportionality assessment by comparing a group which benefits and the worst affected individual who does not benefit from the policy, would distort the proportionality assessment.
If AIHA changed its allocation policy to bring in members of the public who were not members of the Orthodox Jewish community, this would: “dilute the impact it could have on addressing the needs and disadvantages experienced by that community in connection with their faith. In light of the unmet need for social housing for that community and the small impact on other groups… it was proportionate for AIHA to focus its efforts on that community without diluting its beneficial impact for that community” (para 84).
Relying by analogy on case law about the state provision of social welfare benefits, the UKSC noted that it is a generally legitimate approach and consistent with proportionality for the state to use “bright line criteria” to determine the allocation of those benefits. It followed a fortiori for a proportionality assessment such as the one in this case that AIHA was entitled to use “bright line criteria”. The case for charities having “bright line criteria” was suggested to be stronger than that of the state. This was based on charities' lack of resources compared to the state and it being in the public interest that charities minimise their administrative costs to allow them to focus on their purposes.
Lord Sales then turned to another issue raised by Z. This was whether there was an implied additional requirement in s193(2)(b) that the measures taken within that provision by a charity must be proportionate. The Court of Appeal in this case held that there was no such implied requirement; the UKSC agreed.
In analysing this submission, the UKSC proceeded on the basis that AIHA's policy fell within article 8 of the ECHR (which meant that article 14 ECHR, on non-discrimination, applied). The first reason for rejecting Z's submission was that, in enacting s 193, Parliament established a regime that was proportionate and compatible with article 14. The second was that, in any event, it was not possible under s 3(1) of the Human Rights Act 1998, or under the Marleasing interpretative obligation under EU law, to read an additional proportionality requirement into the provision. Lord Sales referred to the legislative history in support of these reasons.
This was the first time the UKSC had considered positive action under s 158 and the charities exception under s 193 of the 2010 Act as a defence to unlawful direct religious discrimination. The outcome of this decision provides clarity to charities whose purposes provide benefits to a group with shared protected characteristics that they are complying with both statutory requirements. It also confirms that such charities may use “bright line criteria” to focus benefits on a particular group, and that there is no additional proportionality assessment requirement under s 193(2)(b).
The next steps for charities who take positive action to benefit a group with a shared protected characteristic would be to ensure that their governing documents accurately reflect the groups they are benefiting, and consider to what extent any blanket policy they have in place to benefit that group may be proportionate.
Sophie Mills is a trainee solicitor with the WS Society, currently on secondment to Eversheds Sutherland (International) LLP
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