Out of the quagmire of the crisis in the global financial markets, the woes of HBOS and the heroic rescue by Lloyds TSB came an interesting topic for this blog, particularly to employees of the banks who are now facing the prospect of compulsory redundancies.

Apparently the deal struck between HBOS and Lloyds included a provision that the 'management focus is to keep jobs in Scotland'.  This begs the somewhat glaring question; is this race discrimination and if so will employees be able to use this against the newly formed bank when the redundancies are made?

On the face of it the answer seems obvious - yes, it is discrimination, as it is giving Scottish employees preference.  If you choose a Scottish employee over for example a Welsh employee you will be discriminating.  That is exactly why this has caused so much controversy.  Of course that's not what was reported to have been contained in the deal document and the answer to the question of whether this is unlawful discrimination is not that straightforward.

Unlawful discrimination

There are two forms of unlawful discrimination which could be invoked: direct and indirect.

Direct discrimination

Direct discrimination applies when you treat someone less favourably on racial grounds.  The provision in itself is unlikely to give rise to an act of direct discrimination as it is not, for example, expressing a desire to retain Scottish rather than English employees meaning there is no direct differential treatment (although this does depend on what happens at the time).  One could compare this to a desire to set up a business in a particular country or the intention to outsource to another country - which would probably not be viewed as negatively.  There are of course shades of grey and some may say these are semantics but these differences do matter for discrimination purposes.

The more likely form of discrimination for which employees to rely upon is indirect discrimination.  This, in short, involves doing or requiring certain things which look neutral on the face of it (therefore not treating someone overtly differently on racial grounds) but which in fact put people of a particular race at a disadvantage.  In this case the practice of keeping jobs in Scotland will have a disproportionate impact on non-Scottish employees.  If there are fewer redundancies in Scotland, you are more likely to be adversely affected if you not Scottish as you are less likely to live there and as the consequence is that jobs are more likely to be lost outside Scotland.  Of course employees will have to demonstrate that that policy has been implemented - and you may well find an argument that it has not and in fact there were other reasons for the decisions.

Indirect discrimination

Unlike direct discrimination, indirect discrimination is capable of being justified where the policy is a proportionate means of achieving a legitimate aim.  If it was necessary for the new bank to justify this policy (or later decisions) it will be interesting to see how this is framed and what comes out of the Employment Tribunal process.  This would necessitate scrutinising the business rationale behind the policy.  The content of the deal document and the surrounding correspondence may be subject to disclosure in the Employment Tribunal.  It has been reported that Gordon Brown did not ask for the concession - would an Employment Tribunal order that Gordon Brown's involvement in the negotiations be revealed, particularly in light of Government intervention on other aspects of the deal such as the competition waiver?

So how will this impact on the redundancy process and will it put the newly formed bank at risk of claims? Certainly employees and unions will be alert to the discrimination dimension to the deal given the press coverage.  HBOS and Lloyds may have shot themselves in the foot by including this provision in the deal - had it not been made explicit then it may not have been an issue.  It could be the wording used - it may not have been so controversial if the statement was on the geographical focus of the new bank, rather than specifically mentioning jobs. There may well be legitimate and carefully considered reasons for this decision which are not apparent from what we know.  It also begs the question of whether the banks were aware of the legal risks of the inclusion of this intention.

The redundancies are some way off and therefore we will have to wait to see what, if anything, comes of this.