New guidance on how the Equality Act 2010 affects charities is urgently needed because of growing fears that existing restrictions on beneficiary classes might become unlawful, a group of charity lawyers has warned.
A working party of the Charity Law Association, chaired by Julian Smith of Farrer & Co, gave the warning in its response to the Equality and Human Rights Commission's consultation on draft codes of practice and guidance to support the implementation of the act. The act was passed by MPs during the pre-election ‘wash-up' period, immediately before Parliament was dissolved.
Under existing equality legislation, most of which is replaced by the new act, charities have typically relied on exemptions that allow them to restrict their beneficiary classes on the basis of a "charitable instrument", usually interpreted as a governing document or the terms of a restricted donation.
But the working party warned that section 193 of the Equality Act, which is expected to come into force in October, also explicitly requires that any restriction be "a proportionate means of achieving a legitimate aim" or "for the purpose of preventing or compensating for a disadvantage".
It said many existing charities might not have articulated the "legitimate aim" of any restrictions who their beneficiaries can be, and some older charities might struggle to identify their legitimate aims. Other charities might not even have previously considered the impact of discrimination legislation at all.
"These charities will need clear guidelines to make them aware of the act and its potential impact on their objects," the lawyers say.
The charities might inundate the Charity Commission with questions or apply unnecessarily to adopt new objects that do not restrict their beneficiary classes. Such widened objects might be difficult to adapt to in practice, the lawyers warned.
They said the Charity Commission should collaborate with the EHRC to produce guidance, particularly on what can constitute a "charitable instrument", "legitimate aim" and "proportionate means". It should also make clear that even if a charity passes the public benefit test it might still fall foul of the Equality Act, they said.