20 March 2018
The Equality Act 2010 (the ‘Act’) (which has been in force since 1 October 2010) was intended to provide a consolidated framework of protection against direct and indirect discrimination, harassment or victimisation in connection with a number of ‘protected characteristics’ (including sex, race, disability, sexual orientation and age).
In September 2010, shortly before the Act came into force, the Charity Commission published ‘summary guidance’, primarily focussed on the Act’s ‘charities’ exception’. This provision, in s 193 of the Act, sets out the circumstances in which a charity may restrict the provisions of its benefits to people who share a ‘protected characteristic’. We commented at the time that ‘summary’ was an accurate description as the guidance did not address some of the key concerns arising out of the new provision in any depth.
The Commission issued fresh guidance 31 August 2011, replacing that summary. The fuller guidance helpfully clarifies the Commission’s position on several matters arising from the Act, but – like its predecessor – general guidance such as this is likely to leave some charities uncertain as to whether their objects and activities are compliant with the new law.
The ‘Charities’ Exception’
The ‘charities’ exception’ allows a charity to restrict its benefits to people with a shared ‘protected characteristic’ only where:
- it is acting in accordance with a ‘charitable instrument’ (such as a Trust Deed or Memorandum and Articles) which effectively limits its activities; and
- the restriction on its beneficiary class meets one of two tests.
Test A will be met if the benefits the charity provides prevent or compensate for a disadvantage linked to a protected characteristic. The Guidance gives the example of a charity established to help unemployed people of a particular national or ethnic origin. The charity can only follow this restriction if unemployment is particularly high for this group (compared to the population at large) and it is permitted to do so under the terms of its Trust Deed etc.
Test B will be met if the restriction of the charity’s benefits (to people with a shared protected characteristic) is a ‘proportionate means of achieving a legitimate aim’ (or is ‘objectively justified’). The Guidance makes a number of statements explaining how the Charity Commission will assess ‘legitimate aims’ and interpret this test. It is clear that the restriction of benefits to a group which shares a protected characteristic will only be justified by ‘particularly convincing and weighty reasons’ (echoing the High Court in relation to an application by the charity Catholic Care to amend its objects).
It is notable that, in explaining its interpretation of the test, the Commission has adopted a reasonably robust approach, taking a clear position on questions which are the subject of ongoing debate in other areas of the law where concepts of ‘proportionality’ and ‘legitimate aim’ are also found. For example, the Guidance is unequivocal that cost or funding considerations (for example, a donor’s requirements) cannot be the only justification for applying this test, whereas in the employment sphere, the question of whether cost alone can justify a particular measure that is otherwise discriminatory, is the subject of a case in the Court of Appeal. It remains to be seen whether this element of the ‘charities’ exception’ will be the subject of further judicial interpretation. As it stands, while the Charity Commission’s Guidance on this point is welcome, the question of what will constitute a legitimate aim for individual charities is not definitively answered (if, indeed, it ever could be answered by general guidance).
The Guidance does resolve a number of other issues arising from the bare text of the statute. For example, it confirms the Charity Commission’s view that a charity whose governing document does not contain a restriction on who the charity can help is not able to rely on the charities’ exception, because the exception only applies where benefits are restricted.
It states the Commission’s view that if a charity has sufficiently wide objects to enable it to choose any charitable purpose and as a matter of practice limits its benefits to a group of people with a shared protected characteristic, that charity cannot rely on Test A. So, for example, an organisation with general charitable purposes that limits its activities to those that benefit women or visually impaired people would not, in the Commission’s view, be entitled to turn to Test A (as tackling a disadvantage), because women or visually impaired people are unlikely to face more disadvantage in relation to every possible charitable purpose and it would be unclear which particular disadvantage was being tackled.
Similarly, there had been concerns that, where a charity did restrict its services but not by reference to a protected characteristic (the Guidance gives an example of a housing charity providing services for people living in a particular town), this could be indirectly discriminatory, for example if the geographic area in which the charity provides its services contains a underrepresentation of people from minority ethnic backgrounds (when compared to the population at large). The Guidance suggests that indirect discrimination against people of minority ethnic backgrounds is unlikely to arise if the charity can show (i) that there is a rational link between the charitable purpose and restricting its services to inhabitants of that area and (ii) inhabitants with any ethnic background (or any other protected characteristic) can benefit from the charity’s services.
The Guidance also clarifies that restricted funds (ie funds which are given with specific restrictions attached) will also need to be justifiable under the charities’ exception. It gives the example of a scholarship charity whose governing document restricts benefits to student engineers with particular nationalities. Charities will therefore need to be satisfied that they will be able to justify a donor’s stipulated restriction (for example, restricting the benefits to people from a particular country) using either Test A or Test B.
The Commission also makes clear that, in its view, the making of a grant in furtherance of a charity’s aim, counts as the provision of a service (which would therefore be covered by the Act and, as applicable, would need to be justified using the charities’ exception, if not one of the other exceptions in the Act).
The Guidance reminds charities of other exceptions which may be relevant to them, including:
- membership of associations (associations – as defined in the Act – may restrict membership to people who share a protected characteristic, provided that membership is not based solely upon a person’s colour);
- the ‘positive action’ exception (where charities provide services only to those with a particular ‘protected characteristic’ and those persons:
- suffer a disadvantage connected to that characteristic; or
- have needs that are different from people without that characteristic; or
- are disproportionately under-represented in a given activity.
- the ability under the Act to treat disabled people generally more favourably than non-disabled people;
- provisions for organisations relating to religion or belief;
- provisions on single sex and religious schools.
Practical Guidance for Trustees
The Guidance reminds charities of their legal duty to comply with the Act and recommends that all charities check that they are doing so as part of any routine review of the charity’s operations. Trustees should:
- review the Charity’s governing document to establish whether it restricts who may benefit on grounds of a protected characteristic;
- if it does, consider whether the restriction can be justified using either Test A or Test B in the charities’ exception, or one of the other exceptions permitted by the Act.
Charities should ensure that this review is carried out regularly, to take account of changing circumstances. In the example of a charity aiming to relieve poverty by improving employment prospects of people of particular national or ethnic origin, its restriction can be justified only for so long as unemployment remains higher for that group (or disadvantages related to unemployment remain more acute for the group). If that is no longer the case, the trustees may need to consider changing the charity’s purposes.
The Guidance answers some of the questions that are likely to have been in the minds of trustees since publication of the summary guidance. However it does not by any means answer all the questions that are likely to arise in this potentially tricky area. Trustees will need to be prepared to take professional advice where the Guidance does not address their specific concerns.
The Guidance can be found here.