The boardroom is quiet. A senior executive retires gracefully as a "good leaver", only to discover months later that the parent company has altered the rules of the group-wide bonus scheme. Because he has already left, he is cut out of a £1.2 million payout. He wants to sue for age discrimination. But the subsidiary that employed him didn't make the decision, and the parent company that made the decision isn't his employer.
This is the Liability Gap. And in the recent Court of Appeal decision in Fasano v Reckitt Benckiser Group Plc, the court had to decide if the Equality Act could bridge that gap. Their answer is going to change how every corporate group structures its incentive plans.
Section 109 and the Common Law
To understand the trap Mr. Fasano fell into, we need to look at Section 109 of the Equality Act. Section 109 is the vicarious liability catch-all. It says that an employer is liable for the acts of its employees. But crucially, Section 109(2) says that a "principal" is also liable for anything done by its "agent." Usually, we think of this flowing upwards or outwards—a company being liable for a recruiter acting on its behalf.
Mr. Fasano’s legal team tried to flip the script. They argued that when the parent company manages a group-wide Long-Term Incentive Plan (LTIP), it is acting as an agent for the subsidiary. Therefore, if the parent company’s LTIP rules are discriminatory, the subsidiary (the actual employer) is liable under Section 109(2). It was a highly creative attempt to pierce the corporate veil. If successful, it would mean that every subsidiary in the UK could be dragged into the Employment Tribunal for decisions made by a parent company sitting in Delaware or Geneva.
A £1.2 Million Cut-Off
Mr. Fasano was a senior executive at Reckitt Benckiser Health Ltd (the subsidiary). In June 2019, he retired. He was a "good leaver," meaning he kept his rights under the Reckitt Benckiser Group Plc LTIP scheme. But 2019 was a turbulent year for the group. The original performance targets for the LTIP were almost certainly not going to be met. To stop senior management from jumping ship, the parent company changed the rules in September 2019. They guaranteed a 50% payout, but they added a catch: to get the money, you had to be employed on the 18th of September 2019. Because Mr. Fasano had retired in June, he missed the cut-off date.
He sued his employer—the subsidiary—for indirect age discrimination. His argument was elegant: requiring people to be employed on a specific date puts older people at a particular disadvantage, because older people are far more likely to have retired. But to make the claim stick against the subsidiary, he had to prove the parent company was acting as the subsidiary’s "agent" when it changed the rules.
The Court of Appeal struck the argument down. They ruled that "agency" in the Equality Act means agency under the strict common law definition. For the parent to be an agent, the subsidiary had to give it authority. But in the real world of corporate governance, authority flows down, not up. The parent derived its power from its own shareholders, not from the subsidiary. The parent was not the agent. The subsidiary was not liable.
The Tactical Edge
Fasano confirms that the corporate veil remains incredibly strong in discrimination law. If you are representing a claimant who has been disadvantaged by a group-wide policy—like a share scheme, a pension change, or a global redundancy matrix—you must identify exactly which legal entity made the decision. If the parent made the decision, and the subsidiary employs the claimant, you might be looking at a total liability gap. You cannot automatically use Section 109 to blur the lines between corporate entities.
Even though the agency argument failed, the Court of Appeal still looked at the discrimination claim itself. They found that even if the rule was indirectly discriminatory against older retired workers, it was objectively justified. Why? Because the company’s legitimate aim was staff retention. They were facing a crisis and needed to lock in their current leadership. Paying £1.2 million to someone who had already left wouldn't help retain anyone.
The framework can see the gap clearly enough. It just lacks the tools to close it.
Table of Authorities
| Case | Relevance |
|---|---|
| Fasano v Reckitt Benckiser Group Plc KB → | Authority confirming that a parent company is not an agent for a subsidiary under s.109(2) EqA when administering group-wide incentive plans, and establishing staff retention as justification for indirect age discrimination cut-offs. |