In a recent landmark decision, the Court of Appeal delved deep into the nuances surrounding amendments to benefit schemes and the roles and responsibilities within corporate structures. This arose from a complex case involving post-employment entitlements where Mr. Fasano, a former employee of RB Health Ltd., challenged changes to a long-term incentive plan (LTIP) made by the parent company, Reckitt Benckiser (RB) Group. The judgment sheds light on important considerations for businesses—especially those contemplating structural changes, such as changing a company’s name—and how such decisions impact obligations and liability. Here, we explore the key facts and implications of this decision, with helpful insights for accountants and employers.
Background: The Complex Layers of Corporate Benefit Schemes
Mr. Fasano was employed by RB Health Ltd., a subsidiary within the RB Group, until June 2019. The RB Group operated a long-term incentive plan (LTIP) designed to provide shares or share options to senior employees across its corporate family. Crucially, the LTIP was administered at the group level, with terms set and amended by the RB Group rather than directly by RB Health Ltd.
On 18 September 2019, the RB Group amended the 2015 LTIP’s terms, introducing a requirement that participating employees must remain employed as of that date to qualify for awards based on new performance conditions. Since Mr. Fasano had left RB Health Ltd. before that date, he was excluded from benefiting under the amended scheme rules.
Legal Challenge: Indirect Discrimination and Agency Principles
Mr. Fasano presented a legal claim against RB Health Ltd. and the RB Group, asserting that the amendment constituted indirect discrimination based on age, in breach of sections 19 and 39 of the Equality Act 2010. The key legal question turned on the relationship between RB Health Ltd. and the RB Group, specifically:
- Was RB Group acting as an agent of RB Health Ltd. when making amendments?
- If yes, would RB Health Ltd. be liable under agency principles pursuant to sections 109 and 110 of the Equality Act?
The employment tribunal initially found that RB Group was indeed acting as RB Health Ltd.’s agent in amending the LTIP and that the provision, criterion, or practice (PCP) pursued a legitimate aim. On appeal, however, the court overturned part of this reasoning, concluding that the PCP as applied was not capable of achieving any legitimate aim such as staff retention and was therefore unjustified.
Despite this, the appeal was dismissed because the critical agency relationship was not established. The Court of Appeal agreed that RB Group was not acting as an agent for RB Health Ltd. when it amended the LTIP’s performance conditions, absolving RB Health Ltd. of liability for those changes.
Key Legal Principles on Agency and Liability for Parent Company Decisions
The judge emphasised that for agency to be recognised under common law—and by extension under the Equality Act—there must be clear authorisation from the principal (in this case, RB Health Ltd.) allowing the agent (RB Group) to act on its behalf with respect to third parties such as Mr. Fasano.
Although employees of RB Health Ltd. were beneficiaries of the LTIP scheme, this alone did not confer an agency relationship. This contrasts with a scenario where the direct employer alters benefit schemes applying directly to its own current employees; in such cases, liability would more likely arise.
This decision highlights a crucial practical point for businesses regarding corporate structure and accountability. For example, when changing a company’s name or restructuring subsidiaries, it’s important to understand how such changes may absolve a daughter company of certain obligations or liabilities if the parent company assumes direct control over policies or benefits.
Implications for Employers and Accountants: Ensuring Compliance and Fairness
The ruling offers several lessons for employers and professional advisors, including Simply Accounts, Accountant Chester, Accountant Manchester, Accountant Liverpool, Accountant Leicester, Accountant Leeds, and others supporting corporate clients:
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Responsibility Clarity: Companies must ensure there is clarity in who administers and owns employee benefit schemes. Ambiguity can create uncertainty about which entity holds liability—especially if amendments lead to potential discrimination claims.
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Justifiability of Policies: Any performance-related policies, like LTIPs or bonus schemes, must pursue legitimate aims and be justifiable to avoid indirect discrimination. The court scrutinises whether the policy is capable of achieving its stated purpose genuinely.
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Agency Relationships: Corporate groups should carefully consider whether a subsidiary authorises the parent company to act as its agent in decisions affecting employee terms. Clear documentation and governance can provide stronger legal positions.
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Post-employment Claims: Employers must exercise caution when making changes to benefits that may affect former employees, particularly regarding eligibility and performance-related criteria.
When Changing a Company’s Name Absolves a Daughter Company of Its Obligations
A broader takeaway relates to corporate restructuring scenarios. Changing a company’s name or its legal identity can sometimes create distance between the daughter company and its previous obligations, but this depends heavily on the details of governance and who controls policies. As the RB Group case illustrates, where the parent company acts independently and without clear agency authorization, the subsidiary may be absolved of liability—a factor that must be managed carefully to maintain fairness and legal compliance.
The RB Group and Mr. Fasano case exemplifies the complexity involved in benefit scheme amendments within corporate groups. It underscores that simply being part of the same group or benefiting from shared schemes does not automatically bind a subsidiary to decisions taken by the parent company. Clear agency relationships and explicit authorisation are fundamental to establishing liability.
Employers and accountants alike, such as those at Simply Accounts Accountant Chester, must meticulously review the structures and terms of benefit schemes to ensure compliance with employment and equality law. Changes to performance-related policies should be carefully justified and clearly communicated to avoid allegations of indirect discrimination.
Ultimately, this case is a timely reminder that corporate reorganisations, including changes like when changing a company’s name, can affect who holds responsibility for employee entitlements but do not excuse a lack of fairness or legal diligence in managing these benefits.