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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Armstrong & Ors v Newcastle Upon Tyne NHS Hospital Trust [2004] UKEAT 0158_04_2211 (22 November 2004) URL: http://www.bailii.org/uk/cases/UKEAT/2004/0158_04_2211.html Cite as: [2004] UKEAT 0158_04_2211, [2004] UKEAT 158_4_2211

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APPEARANCES

 

For the Appellants	MISS MELANIE TETHER (of Counsel) Instructed by: UNISON Employment Rights Unit 1 Mabledon Place London WC1H 8AJ
For the Respondent	MR MICHAEL SUPPERSTONE QC and MR ANDREW BLAKE (of Counsel) Instructed by: Messrs Samuel Phillips & Co Solicitors Gibb Chambers 52 Westgate Road Newcastle upon Tyne NE1 5XU

SUMMARY

Equal Pay Act

Equal pay. No common terms of employment between different hospitals in the same Trust. No single source responsible for purposes of Article 141. Equality clause would survive a TUPE transfer.


 


HIS HONOUR JUDGE ANSELL

1. This is an appeal from a Decision of an Employment Tribunal sitting at Newcastle upon Tyne who, in Decision sent to the parties on 22 December 2003, unanimously decided that those Applicants who were not employed at the Royal Victoria Infirmary in Newcastle could not properly compare themselves with their chosen comparators employed at the Royal Victoria Infirmary for the purposes of Section 1 (6) of the Equal Pay Act 1970, either before or after 1 April 1998, and secondly the differences in the pattern of bonus payments were not due to material factors other than sex within the meaning of Section 1 (3) of the Equal Pay Act 1970. The hearing had taken place on dates between 11 and 15 November 2002 and 20 to 22 May 2003, with deliberations on 23 May 2003 and 10 November 2003. One of the grounds of appeal relates to the issue of delay in the promulgation of the Decision and we shall return to that matter below. We shall refer to the two preliminary issues determined as the "wrong comparator" defence and the "material factor" defence.
2. The Appellants are female ancillary workers employed by the Newcastle upon Tyne NHS Trust (the Trust) and they are test case Applicants identified as such by their union UNISON which supports their claim. They are employed at the four principal hospitals within the Trust, that is to say, the Royal Victoria Infirmary ("the RVI"), the Newcastle General Hospital ("the NGH"), the Walkergate Hospital ("the Walkergate") and the Freeman Hospital ("the Freeman"). They consist of domestic staff, telephonists, those employed in Central Sterile Services, those employed on linen, sewing and laundry, and catering staff. All the male comparators are employed at the RVI and the claims were made on the basis of either like work or work of equal value pursuant to Section 1 of the Equal Pay Act 1970, and the inequality alleged is the payment of bonuses to some but not all of the ancillary workers. The background to the claim is that until the early 1990s, all the four hospitals to which this claim relates were part of the Newcastle District Health Authority (NHA). Following the passing of the National Health Service and Community Care Act 1990, the hospitals became independent hospital trusts. The Freeman and Walkergate hospitals became the Freeman Trust, the RVI became the RVI Trust and the NGH became the NCH Trust, save for the acute services of NGH which were incorporated later within the RVI Trust. On 1 April 1998 the Freeman and RVI Trusts were amalgamated to form the Respondent Trust.
3. During their employment by the NHA, the Applicants and their comparators were employed under contracts of employment incorporating the Whitley Council Agreements, applicable to ancillary staff. From about 1968 the Whitley Council for ancillary staff agreed a policy which was aimed at improving the earnings of ancillary staff through incentive schemes and that policy was developed over the years through various national agreements. The policy was founded on the basis of the Government's price and incomes policy, whereby pay increases had to be in return for increases in productivity and thus staff who agreed to work more productively would qualify for an incentive bonus. By contrast, staff who were already working efficiently would not qualify for any enhancement of their earnings. The Tribunal found that the central feature of all schemes was that they had to be self-financing, either by staffing reductions or by the adoption of more efficient working practices. The Tribunal went on to find:

"that they were introduced through a process of local collective negotiations with individual departments or groups of workers or individual hospitals within the particular authority's area."

4. There were three principal types of scheme:

(1) A "Fixed" or "Measured Day Work" Scheme, whereby a fixed addition to the weekly or hourly rate was paid in return for the achievement of a given performance,

(2) A "Variable Scheme" in cases where a department's efficiency was easily measurable and where bonuses would be awarded on a sliding scale against targets for tasks performed in given periods

(3) An "Interim Scheme", pending the introduction of a fixed or variable scheme, where staff were eligible for a ten percent bonus in return for achieving corresponding staffing reductions.

Within the NHA, all bonus schemes introduced for ancillary workers were either Fixed or Measured Day Work Schemes, save for the laundry workers at the RVI who had a Variable Scheme. In 1981 the NHA published its procedural arrangements for the introduction of schemes, typically involving the following procedure:

"(i) Work Study Officers measured (a) the man-hours properly required to perform the tasks in question and (b) the man-hours in fact being taken to perform the tasks to determine the current levels of staff efficiency.

(ii) The current levels of staff efficiency were then measured against the British Standard Work Measurement, which prescribed a maximum efficiency rating known as "Standard Performance" and was found in a Work Study publication generally referred to as the Blue Book.

(iii) If the relevant department (or group of workers) was already operating to, or near to, Standard Performance they would not be offered the opportunity to participate in an incentive bonus scheme.

(iv) If the relevant department or group was not already oerating at or near to a Standard Performance the NHA's Management Services Unit would draft a Fixed Scheme for the Department of Health approval, offering bonuses in accordance with the Blue Book "Pay/Performance Relationship".

(v) The Pay/Performance Relationship entitles staff to a maximum bonus (generally in the region of 20% if they were prepared to work to or at Standard Performance and to a reduced bonus (on a sliding scale) if they were only prepared to work at less than the Standard Performance.

(vi) If approved by the Department of Health, the relevant department or group of workers voted on the adoption of the Scheme.

(vii) Throughout this process the unions representing any categories of staff affected were kept fully consulted and informed on the Report and on the proposals to be made.

(viii) Such schemes were thereafter reviewed annually by management in consultation with the relevant unions."

The Tribunal noted that they had seen for the RVI Laundry Service a fairly comprehensive set of documents including the Work Study Report, the proposed Scheme, confirmation of the implementation of the Scheme, and the periodic annual review.

5. The Tribunal noted that schemes were negotiated on a site and departmental basis and were not consistently adopted, for example for the RVI catering staff a scheme was adopted in 1981, for domestic staff in 1982/1983 and for CCSD staff in 1983. Staff in the RVI Linen Services had a Variable Bonus Scheme introduced in the early 1970s with a maximum bonus of 33%. The portering staff at Freeman Hospital did not qualify for a bonus because they were found to be already operating efficiently and the same position held for other ancillary staff at the Freeman Hospital.
6. As is well known, compulsory competitive tendering (CCT) was introduced by the NHS in the mid 1980s as a result of both Government pressure and the need to make cost savings and it was considered across the whole range of ancillary services. The decision to put one service to tender rather than another was based on the size of particular budget and therefore the saving that could be made, together with the ease of specifying the service required, the perceived capability of private contractors to bid for the tender, as well as the need to comply with Government policy. This resulted at the RVI in a decision being made to put out to tender domestic laundry and catering services, which were predominantly female, whereas portering, which was predominantly staffed by men, was not put out to tender. Managers drawing up the in-house bids for CCT had to decide whether it was necessary to adjust terms and conditions of staff in order to be competitive with the private sector and in certain cases this led to a decision to forego bonus arrangements. As a result the domestics of the RVI did lose their bonuses when a bid was put in based on the staff losing their entitlement within one year. Staff were given the option of either accepting the loss or redundancy. The RVI domestics were awarded a five year contract and on renewal in 1991 they were again successful in the tender, although to ensure success 15 minutes was cut from each shift for each employee. RVI Catering and Laundry Departments won tenders without the abandonment of their Bonus Scheme. Portering was never put out to tender which was justified on the basis that the budget was limited and the scope for saving small. It was also suggested that those responsible were not aware of local private sector companies, which offered services in the Newcastle area, and we will return to that issue below. The Tribunal also recorded that opposition from the porters to a proposal for competitive tendering was expected to be "more voluble".
7. In 1988, as part of the pay settlement, bonuses were frozen by reference to the 1988 salaries. Although in 1991 the Whitley Council proposed that hospitals should seek to agree arrangements for the conversion of existing Bonus Schemes into performance agreements, this was never adopted at the RVI, as there was no pressure from the Department of Health, the Trust or the Union to alter the status quo.
8. On the incorporation of the separate Trusts after 1991, there were no employees receiving bonus at the Freeman or Walkergate hospitals. At the RVI, the vast majority of ancillary staff were receiving bonuses, save for the domestics and, as a result of TUPE, staff transferred to these new Trusts with their terms and conditions protected. Thereafter the Tribunal found that the Freeman and RVI Trusts were effectively autonomous, developing their own terms and conditions and implementing their own pay and salary increases for staff.
9. On creation of the Respondent Trust on 1 April 1998, entry into the existing Bonus Schemes was stopped for new starters and for any employees accepting positions or altering terms and conditions of their employment. Since bonus schemes were seen as a financial drain on the new Trust it was intended to phase them out. Staff transferred to the new Trust from the old Trust with their terms and conditions intact. The new Trust inherited an underlying financial deficit of £9.4 million, mostly attributable to the RVI. As a result of this policy, the number of staff receiving bonuses was steadily decreasing. In April 1998, 56 RVI porters (55 male and one female) and 58 RVI caterers (14 male, 44 female) were receiving bonuses, as compared to September 2002 when there were only 18 RVI porters (all male) and 24 RVI caterers (9 male, 15 female) receiving them. The Tribunal recorded, however, that an analysis of the effective bonus arrangements, appended to the Applicants' closing submissions, showed that from 1988 onwards, once CCT started, they have had disparate adverse effect on women. In February 2002 at the RVI there were 62 men in the Scheme and 48 women in the Scheme, 111 men not in the Scheme and 368 women not in the Scheme. In percentage terms this produced a disparity of 24.3. Across all the hospitals in the Trust, 62 men and 54 women were in the scheme, 278 men and 796 women were not in the Scheme. The disparity in percentage terms was 11.8.
10. Before the Tribunal the first issue was whether Applicants who were not employed at the RVI were entitled to compare themselves to their chosen comparators who were all employed at the RVI, and it was agreed that the wrong comparator defence had to be considered in relation to three periods of time. Firstly, for the period prior to 1991 when the Applicants were employed by NHA, the Tribunal found that the non-RVI Applicants were neither in the "same employment" under Section 1 (6) of the Equal Pay Act 1970 nor could they bring themselves within the scope of Article 141 (formerly 119) of the E C Treaty because the pattern of bonus schemes could not be attributed to either collective negotiation or a single source. Further the Tribunal found that, even if the non-RVI Applicants could make that comparison, the effect of the equality cause would not have operated so as to continue the payment of bonus after the establishment of the separate Freeman and NGH Trusts because there was a significant alteration in the terms and conditions of the contract of employment. The Tribunal held that the non-RVI Applicants could not bring themselves within the definition of "same employment" contained in Section 1 (6) of the 1970 Act because they were not employed as the same establishment, nor did they have common terms and conditions.
11. For the period between 1991/1992 and 1998 when the non-RVI Applicants were employed by the Freeman or NCH Trust, it was conceded that they could not rely on Section 1 (6) of the 1970 Act but still relied on Article 141. The Tribunal again found that they could not do so because the separate Trusts were autonomous and therefore there was no single source or body which was responsible for or could remove the alleged inequality. There is no appeal against the Tribunal's Decision in relation to that period of time.
12. With regard to the third period since the establishment of the Respondent Trust in 1998, the Tribunal again found that the non-RVI Applicants could not bring themselves within the definition of "same employment" nor could they rely upon Article 141. With regard to the RVI Applicants, the Respondent Trust raised the material factor defence under Section 1 (3) of the Equal Pay Act 1970. The Tribunal's conclusions were contained in paragraphs 29-32 of their Decision as follows:

"29 Miss Tether relied upon the facts of the present case as being in important respect similar to those which form the backdrop to North Yorkshire County Council v Radclilffe and others [1995] ICR 833. The domestics of the RVI were exclusively, or almost exclusively, female and the labour market for domestics in the north east was almost exclusively female. The porters were male. It was considered that one of the reasons why portering was not put out to tender was that as it was not compulsory to do so a more robust industrial reaction might be experienced. We do see the decision not to put out the predominantly male area to tendering as being tainted by sex.

30 The respondent relies upon the following explanation for difference in treatment, namely:

(i) the porters were not put out to tender because it was not compulsory to do so and the NHA was philosophically opposed to the idea;

(ii) major savings would not be made in this area because the budget for portering was less than in other groups;

(iii) the NHA management was not aware of local companies who might have been interested in tendering in this area;

(iv) opposition to a proposal to put out to tendering an area which are not compulsory was expected to be more voluble.

31 In considering the above reasons given or the tests set out in Glasqow City Council case we can accept the first two of the above reasons might have been genuine at the time. We are concerned about the second two as there appears to have been little or no effort to explore the market and the male porters were in employment traditionally more heavily unionised and voluble because we know from our own experience of the local market more males tend to be full time than females and to be unionised. These two alleged justifications amount to significant and relevant factors tainted by sex and strike at the basis of the justification claimed.

32 However, even if the explanation had been genuine at the time the respondent then relies upon the historical basis for the introduction of bonus schemes and the reducing disparity but on our findings of fact there has been a smaller proportion of women entitled to receive a bonus at all material times since 1988 than the proportion of men. We accept the contention made for the applicants that no witnesses have been called properly to explain why the bonus schemes were being maintained in existence at the time when the applicants' claims were submitted. We accept that the historical factors are therefore not sufficient to justify the maintenance of differentials which have had a disparate impact on women for a period of nearly fifteen years."

The Law

13. Section 1 of the Equal Pay Act 1970 provides as follows:

"1. Requirement of equal treatment for men and women in same employment

(1) If the terms of a contract under which a woman is employed at an establishment in Great Britain do not include (directly or by reference to a collective agreement or otherwise) an equality clause they shall be deemed to include one.

(2) An equality clause is a provision which relates to terms (whether concerned with pay or not) of a contract under which a woman is employed (the "woman's contract"), and has the effect that --

(a) where the woman is employed on like work with a man in the same employment --

(i) if (apart from the equality clause) any term of the woman's contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and

(ii) if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman's contract shall be treated as including such a term;

(b) where the woman is employed on work rated as equivalent with that of a man in the same employment --

(i) if (apart from the equality clause) any term of the woman's contract determined by the rating of the work is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and

(ii) if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed and determined by the rating of the work, the woman's contract shall be treated as including such a term;

(c) where a woman is employed on work which, not being work in relation to which paragraph (a) or (b) above applies, is, in terms of the demands made on her (for instance under such headings as effort, skill and decision), of equal value to that of a man in the same employment --

(i) if (apart from the equality clause) any term of the woman's contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and

(ii) if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman's contract shall be treated as including such a term.

(3) An equality clause shall not operate in relation to a variation between the woman's contract and the man's contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor -

(a) in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the woman's case and the man's; and

(b) in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference.

…

(6) …

(c) two employers are to be treated as associated if one is a company of which the (directly or indirectly) has control, and men shall be treated as in the same employment with a woman if they are men employed by her employer or any associated employer at the same establishment or at establishments in Great Britain which include that one and at which common terms and conditions of employment are observed either generally or for employees of the relevant classes."

Ground 1: Section 1 (6) EPA: period before 1991

14. The Tribunal's conclusions as regards the wrong comparator defence were set out in paragraphs 9-20 of their Decision. The Tribunal firstly accepted the Respondents argument that it was not possible to construe "establishment" to refer to separate hospitals within the same Trust. There is no appeal against that conclusion. The Tribunal then went on to consider the issue as to whether there were common terms and conditions of employment between the non-RVI Applicants and their RVI comparators, dealing firstly with the post-April 1998 period, then moving back to the 1991/1998 period and concluding with the pre-1991 period. Their particular conclusion with regard to the pre-1991 period was set out in paragraph 20 of their Decision as follows:

"Prior to 1991/1992 the none RVI applicants were not in the same employment as their RVI comparators as they were not employed in the same establishment and the terms and conditions of employment varied and represented essentially different employment regimes."

However it seems to us that their conclusions on this period must be read in conjunction with paragraph 11, when they dealt with the post-1998 period, when they set out their conclusions as follows:

"Neither did we find that there were common terms and conditions under section 1 (6) Equal Pay Act 1970 in that notwithstanding the merger of the RVI and Freeman Trust in April 1998 the bonus agreements adopted at various hospitals and the individual departments were subject to collective negotiation on a departmental basis and had to be self funding. Once adopted, the bonus schemes constituted "essentially different employment regimes" (Leverton v Clwyd County Council [1989] ICR 33 and British Coal Corporation v Smith [1996] ICR 515). Also staff at the different hospitals had retained different protection provisions."

The reason that we refer back to paragraph 11 is simply to refer to the two authorities that the Tribunal clearly had in mind when dealing with the issue of different employment regimes, namely Leverton v Clwyd County Council [1989] ICR 33 and British Coal Corporation v Smith [1996] ICR 515.

15. The ground of appeal in relation to this conclusion is that the Tribunal erred in law by failing to consider whether the terms and conditions as a whole were broadly comparable and failing to weight the differences found in relation to incentive bonus against the identity of other terms and conditions. In Leverton the House of Lords dealt with the issue of common terms and conditions of employment referred to Section 1 (6). Lord Bridge, giving the leading speech, set out the position in this way;

"It seems to me, first, that the language of the subsection is clear and unambiguous. It poses the question whether the terms and conditions of employment "observed" at two or more establishments (at which the relevant woman and the relevant men are employed) are "common," being terms and conditions of employment observed "either generally or for employees of the relevant classes." The concept of common terms and conditions of employment observed generally at different establishments necessarily contemplates terms and conditions applicable to a wide range of employees whose individual terms will vary greatly inter se. On the construction of the subsection adopted by the majority below the phrase "observed either generally or for employees of the relevant classes" is given no content. Terms and conditions of employment governed by the same collective agreement seem to me to represent the paradigm, though not necessarily the only example, of the common terms and conditions of employment contemplated by the subsection.

But if, contrary to my view, there is any such ambiguity in the language of section 1(6) as to permit the question whether a woman and men employed by the same employer in different establishments are in the same employment to depend on a direct comparison establishing a "broad similarity" between the woman's terms and conditions of employment and those of her claimed comparators, I should reject a construction of the subsection in this sense on the ground that it frustrates rather than serves the manifest purpose of the legislation. That purpose is to enable a woman to eliminate discriminatory differences between the terms of her contract and those of any male fellow employee doing like work, work rated as equivalent or work of equal value, whether he works in the same establishment as her or in another establishment where terms and conditions of employment common to both establishments are observed. With all respect to the majority view which prevailed below, it cannot, in my opinion, possibly have been the intention of Parliament to require a woman claiming equality with a man in another establishment to prove an undefined substratum of similarity between the particular terms of her contract and his as the basis of her entitlement to eliminate any discriminatory differences between those terms.

On the construction of section 1 ( 6) which I would adopt there is a sensible and rational explanation for the limitation of equality claims as between men and women employed at different establishments to establishments at which common terms and conditions of employment are observed. There may be perfectly good geographical or historical reasons why a single employer should operate essentially different employment regimes at different establishments. In such cases the limitation imposed by section 1(6) will operate to defeat claims under section 1 as between men and women at the different establishments. I take two examples by way of illustration. A single employer has two establishments, one in London and one in Newcastle. The rates of pay earned by persons of both sexes for the same work are substantially higher in London than in Newcastle. Looking at either the London establishment or the Newcastle establishment in isolation there is no sex discrimination. If the women in Newcastle could invoke section 1 of the Act of 1970 to achieve equality with the men in London this would eliminate a differential in earnings which is due not to sex but to geography. Section 1(6) prevents them from doing so. An employer operates factory A where he has a long standing collective agreement with the ABC union. The same employer takes over a company operating factory X and becomes an "associated employer" of the persons working there. The previous owner of factory X had a long standing collective agreement with the XYZ union which the new employer continues to operate. The two collective agreements have produced quite different structures governing pay and other terms and conditions of employment at the two factories. Here again section 1 (6) will operate to prevent women in factory A claiming equality with men in factory X and vice versa. These examples are not, of course, intended to be exhaustive. So long as industrial tribunals direct themselves correctly in law to make the appropriate broad comparison, it will always be a question of fact for them, in any particular case, to decide whether, as between two different establishments, "common terms and conditions of employment are observed either generally or for employees of the relevant classes." Here the majority of the industrial tribunal misdirected themselves in law and their conclusion on this point cannot be supported."

16. In British Coal Corporation the Applicants were canteen workers, manageresses and cleaners, employed at 47 establishments of the employer in Great Britain who sought equality of pay with a number of proposed male comparators, mainly surface mine workers but including one clerical worker, employed at 14 different establishments. The Industrial Tribunal had found that each relevant class of employee at the different locations, including surface mine workers who were entitled to concessionary coal under a national agreement with variations at a local level and an incentive bonus that was not the subject of a national agreement but operated purely as a matter of local agreements, should be treated as having common terms and conditions of employment for the purposes of Section 1 (6). The Court of Appeal had allowed the employer's appeal in respect of the comparison with surface mine workers finding that an Applicant was to be treated as in the same employment as a mine worker employed at a different establishment only if he was employed at an establishment at which the terms of employment as regards both the payment of incentive bonus and/or incentive pay and the allowance of concessionary coal the were the same as those at the Applicant establishment. Allowing the cross-appeal, the House of Lords held that, subject to a misdirection in law, it was for the Industrial Tribunal to decide, on the evidence, what was or were the relevant class or classes of employees for whom common terms and conditions of employment were observed and, having regard to the nature of the work and the different pay structures, the Industrial Tribunal had been entitled to take the various categories of ancillary workers separately; that "common" meant not identical or all the same, but sufficiently similar for a fair comparison to be made; and that the Industrial Tribunal had correctly directed themselves that a broad comparison should be made. Lord Slynn set out his conclusions in this way at page 526:

"Common terms and conditions of employment must be observed either generally (i.e. for all or perhaps for most workers) or for employees of the relevant classes. Subject to a misdirection in law it is for the industrial tribunal to decide on the evidence what is or are the relevant class or relevant classes. It has been said by the corporation that the relevant class here is "ancillary workers" so that all the claimants must be treated as one relevant class. The effect of that would be that not all ancillary workers in the relevant class would be women, even though a majority might still be. In my view having regard to the nature of the work and the different ways in which their pay structures were established the industrial tribunal was perfectly entitled to take the various categories of worker separately. Thus canteen workers and cleaners are separate groups largely composed of women.

The real question, however, is what is meant by "common terms and conditions of employment" and between whom do such terms and conditions have to be common.

It is plain and it is agreed between the parties that the woman does not have to show that she shares common terms and conditions with her comparator, either in the sense that all the terms are the same, since necessarily his terms must be different in some respect if she is to show a breach of the equality clause, or in regard to terms other than that said to constitute the discrimination.

It is accepted by the corporation that for the purposes of this appeal as between the different establishments common terms and conditions do in any event apply to the two classes of claimants, canteen workers and cleaners. What therefore has to be shown is that the male comparators at other establishments and at her establishment share common terms and conditions . If there are no such men at the claimant's place of work then it has to be shown that like terms and conditions would apply if men were employed there in the particular jobs concerned.

The corporation contends that the claimants can only succeed if they can show that common terms and conditions were observed at the two establishments for the relevant classes in the sense that they apply "across the board" (see per May L.J. in Leverton v. Clwyd County Council [1989] I.C.R. 33, 44); in other words the terms and conditions of the comparators (e.g. surface mineworkers) are "common in substantially all respects" for such workers at her pit and at the places of employment of the comparators. This in effect means that all the terms and conditions must be common, i.e., the same, subject only to de minimis differences.

The claimants reject this and contend that it is sufficient if there is a broad similarity of terms rather than that they are strictly coterminous.

Your Lordships have been referred to a number of dictionary definitions of "common" but I do not think that they help. The real question is what the legislation was seeking to achieve. Was it seeking to exclude a woman's claim unless, subject to de minimis exceptions, there was complete identity of terms and conditions for the comparator at his establishment and those which applied or would apply to a similar male worker at her establishment? Or was the legislation seeking to establish that the terms and conditions of the relevant class were sufficiently similar for a fair comparison to be made, subject always to the employer's right to establish a "material difference" defence under section 1(3) of the Act.

If it was the former then the woman would fail at the first hurdle if there was any difference (other than a de minimis one) between the terms and conditions of the men at the various establishments since she could not then show that the men were in the same employment as she was. The issue as to whether the differences were material so as to justify different treatment would then never arise.

I do not consider that this can have been intended. The purpose of requiring common terms and conditions was to avoid it being said simply "a gardener does work of equal value to mine and my comparator at another establishment is a gardener." It was necessary for the applicant to go further and to show that gardeners at other establishments and at her establishment were or would be employed on broadly similar terms. It was necessary but it was also sufficient.

Whether any differences between the woman and the man selected as the comparator were justified would depend on the next stage of the examination under section 1 (3). I do not consider that the section 1(3) inquiry, where the onus is on the employer, was intended to be excluded unless the terms and conditions of the men at the relevant establishments were common in the sense of identical. This seems to me to be far too restrictive a test."

Later at page 528 he added this:

"In any event it seems to me that when dealing with the comparison of terms and conditions, the relevant classes having been established, the tribunal clearly adopted a broad common sense approach which seems to me to have been in accordance with the speech of Lord Bridge of Harwich. On this basis it concluded that surface mineworkers were governed by a nationally negotiated agreement which sets basic and overtime rates of pay, sick pay, holidays and other similar matters."

And finally at page 529 he said this:

"The corporation contends that on its findings of fact as to incentive bonus and as to concessionary fuel the tribunal could not properly conclude that there was a national agreement nor were there common terms and conditions as between mineworkers employed at different mines.

As to the incentive bonus it is true that differences resulted for surface mineworkers at various locations because of the fact that the pay of underground mineworkers at those locations varied. Yet, even if there was no binding national agreement, the industrial tribunal found that "The bonus percentage for this category of worker was and is uniform industry-wide at 40 per cent. of the figure received by underground mineworkers" (paragraph 20(1)(a)) at the various mines. The "model agreement" even if not formally agreed as a contract was adopted in the majority of areas and districts albeit modified to suit the needs of some local negotiations.

As to concessionary fuel it was clearly established by the national agreement of 2 March 1984 that surface workers should be entitled to concessionary fuel. True, the amount varied in accordance with pre-existing local agreements as was accepted in the national agreement. The essential term was, however, that all these surface mineworkers should receive concessionary fuel. It was for the industrial tribunal to decide whether the difference between the concessionary fuel allowances was sufficient to prevent there, on a broad comparison, being common terms. It found that "local variations in the entitlement do not destroy the centralised, industry-wide nature of the entitlement."

If, as I consider, the terms and conditions do not have to be identical, but on a broad basis to be substantially comparable, then it seems to me that the industrial tribunal did not err in law in the way it directed itself and there was clearly material on which it could base its finding that the claimants and their comparators were in the same employment. On this issue accordingly in my view the claimants' cross-appeal succeeds."

17. In the light of those authorities Miss Tether argued that there was before the Tribunal evidence that during their employment by the NHA, all the Applicants and comparators were employed under contracts of employment incorporating the Whitley Council Agreements applicable to ancillary staff and the Agreements in relation to incentive schemes applied to all ancillary staff regardless of the hospital at which they worked, although it was clearly envisaged that individual schemes would be the subject of local negotiation. However the procedures governing the application of bonus schemes were common to all the relevant establishments. The procedures therefore were the same at each of the relevant establishments ie hospitals, although the results of applying those procedures differed in as much as some groups of staff became entitled to incentive bonus and some did not. She therefore submitted that the Tribunal were in error in not finding that there was sufficient broad comparability, notwithstanding that some had the benefit of incentive bonuses and some did not.
18. Mr Supperstone argued that the Appellants were seeking, on this ground, to raise what was essentially a perversity challenge to the level of an appeal on a point of law, and he argued that the Tribunal had correctly directed themselves on the appropriate test by referring to the Leverton and British Coal tests and, in reaching their conclusion, took into account not just the pattern of bonus schemes but also the detailed procedures for their adoption, including collective negotiation, that the Tribunal had set out in paragraph 8 (i) of their findings of fact and also the fact that the schemes had to be self-funding.
19. We agree with Mr Supperstone's submissions. We are satisfied that the Tribunal did have in mind the correct test and took the view on the facts of this particular case that there was not a sufficient similarity of terms and conditions taking into account the difference in bonus arrangements. We note that in the British Coal case Lord Slynn had commented that the model agreement for incentive bonus, even if not formally agreed as a contract, had been adopted in a majority of areas and districts, albeit modified to suit the needs of some local negotiations and, with regard to the concessionary fuel, there was a finding that local variations in the entitlement did not destroy the centralized industry-wide nature of the entitlement. It seems to us that the Tribunal in this case were entitled to draw a distinction in the way that they did having set out in considerable detail, in paragraph 8, the arrangements and application of the Bonus Schemes and we cannot find any fault with their finding on that issue.

Ground 2: Article 141: Prior to 1991

20. Before the Employment Tribunal the non-RVI Applicants contended that they were entitled to invoke the direct effect of Article 141 in relation to the period during which they and the RVI comparators were employed by the NHA on the ground that all the hospitals maintained by the Health Authority formed part of the "same service" and the differences in pay could be attributed to a single source, namely a body who was responsible for the inequality and which could restore equal treatment. Similarly to the manner in which they dealt with their conclusions in relation to the Section 1 (6) issue, the Tribunal started with the latest period and concluded with the earliest one. In relation to the pre-1991 period, the Tribunal's conclusions on Article 141 were brief and set out in paragraph 17:

"In relation to the period of employment by the NHA, the non RVI Applicants rely upon both Article 141 and section 1(6) of the Equal Pay Act 1970. The same arguments apply as above in relation to Article 141."

Looking back in the Tribunal's Decision, their detailed findings in relation to Article 141 were made in relation to the post-1998 period and were set out in paragraphs 12-14, as follows:

"12 It was also argued for the applicants that they were entitled to rely upon Article 141 of the EC Treaty. We were referred in this respect in particular to Scullard v Knowles [1996] ICR 399 EAT and South Ayrshire v Morton [2002] ICR 956, but accepted, the contention that the leading case was Lawrence v Regent Office Care Ltd [2002] IRLR 822 to the effect that in a situation "in which the difference is identified in the pay conditions of workers of different sex performing equal work or work of equal value cannot be attributed to a single source" falls outside the scope of Article 141.

13 Accordingly we are not satisfied that the applicant's who were non RVI applicants were in the same establishment or service as the RVI comparators. "Service" cannot mean an entire industry because Article 141 was not intended to equalise pay across whole industries and the Regent Care case suggested the definition of "service" under Article 141 must be limited to cases where alleged inequality is attributable to and can be restored by a single source.

14 Reliance was placed by the applicants on the background to the introduction of bonus schemes and detailed procedures arising from Whitley Council guidance. However they arose as a result of a large number of local negotiations, the willingness of the NHA to implement a bonus scheme and a staff vote to adopt the offered scheme so that we do not find that they arrive directly from the Whitley Council guidance."

Again we are satisfied that those reasons were applicable to the pre-1991 period, since in both periods the Tribunal were considering a group of hospitals with a common employer.

21. Article 141 simply reads:

"Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied."

In Defrenne v Sabena [1976] ICR 547 the Court of Justice held that Article 141 was directly effective in cases in which men and women received unequal pay for equal work , which was carried out "in the same establishment or service". We refer to two passages from the Court's Decision. Firstly at paragraphs 16-24:

"16 Under the terms of the first paragraph of Article 119, the Member States are bound to ensure and maintain 'the application of the principle that men and women should receive equal pay for equal work'.

17 The second and third paragraphs of the same article add a certain number of details concerning the concepts of pay and work referred to in the first paragraph.

18 For the purposes of the implementation of these provisions a distinction must be drawn within the whole area of application of Article 119 between, first, direct and overt discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay referred to by the article in question and, secondly, indirect and disguised discrimination which can only be identified by reference to more explicit implementing provisions of a Community or national character.

19 It is impossible not to recognize that the complete implementation of the aim pursued by Article 119, by means of the elimination of all discrimination, direct or indirect, between men and women workers, not only as regards individual undertakings but also entire branches of industry and even of the economic system as a whole, may in certain cases involve the elaboration of criteria whose implementation necessitates the taking of appropriate measures at Community and national level.

20 This view is all the more essential in the light of the fact that the Community measures on this question, to which reference will be made in answer to the second question, implement Article 119 from the point of view of extending the narrow criterion of 'equal work', in accordance in particular with the provisions of Convention No 100 on equal pay concluded by the International Labour Organization in 1951, Article 2 of which establishes the principle of equal pay for work 'of equal value'.

21 Among the forms of direct discrimination which may be identified solely by reference to the criteria laid down by Article 119 must be included in particular those which have their origin in legislative provisions or in collective labour agreements and which may be detected on the basis of a pureley (sic) legal analysis of the situation.

22 This applies even more in cases where men and women receive unequal pay for equal work carried out in the same establishment or service, whether public or private.

23 As is shown by the very findings of the judgment making the reference in such a situation the court is in a position to establish all the facts which enable it to decide whether a woman worker is receiving lower pay than a male worker performing the same tasks.

24 In such situation, at least, Article 119 is directly applicable and may thus give rise to individual rights which the courts must protect."

And then later at paragraph 40 the Court said this:

"40 The reply to the first question must therefore be that the principle of equal pay contained in Article 119 may be relied upon before the national courts and that these courts have a duty to ensure the protection of the rights which this provision vests in individuals, in particular as regards those types of discrimination arising directly from legislative provisions or collective labour agreements, as well as in cases in which men and women receive unequal pay for equal work which is carried out in the same establishment or service, whether private or public."

In Lawrence v Regent Office Care Ltd [2003] ICR 1092 the Court of Justice again considered this issue. In that case school catering and cleaning staff who were employed by a local authority were, after the process of compulsory competitive tendering, transferred to the employment of the respondent companies who paid them less than their previous wages. The applicants, female staff so transferred and other employees of the respondents, brought proceedings seeking equality of pay with male comparators still employed by the local authority, whose work had been rated of equal value in a job evaluation study. An industrial tribunal held that the applicants could not rely on Article 119 of the E C Treaty (the predecessor of Article 141) as giving them the right to brings claims comparing themselves with staff currently employed by a different employer. The case was eventually referred to the Court of Justice on the question on whether the applicants could rely on Article 141 in the circumstances. The Court held that although there was nothing in the Article to suggest that the applicability of that provision was limited to situations in which men and women work for the same employer, where, as in the present case, the differences in pay of workers of a different sex performing equal work or work of equal value could not be attributed to a single source, such as a collective agreement, there was no one body responsible for the inequality which could restore equal treatment and that therefore such a situation did not come within the scope of Article 141, and the work and pay of the different workers could not be compared on the basis of that provision. The Court's conclusions were set out in paragraphs 14-19 of their Decision as follows:

"14 The council was according obliged to pay the employees concerned the amounts by which their pay had been reduced for the period during which they had continued to work for the direct service organisation in question.

15 While the proceedings against the council were still pending, the direct service organisation, in a second round of tendering which took place in 1993, lost the greater part of the catering and cleaning contracts to the respondents. Two of the three respondents were unaware that those transactions might come under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794), by which the United Kingdom had implemented Directive 77/187. The employees concerned were thus dismissed by the council, before being subsequently re-employed by those private undertakings. The employees were obliged to accept less favourable terms and conditions of employment than those which the direct service organisation had offered them thereto (terms and conditions which were already more unfavourable than those of "ordinary" council employees; the final judgment in the Ratcliffe case had not yet been delivered).

16 Commercial Catering Group alone took the view that the case did indeed involve the transfer of an undertaking. For that reason it directly employed the employees concerned without any interim dismissal.

17 A large number of employees of the private undertakings challenged the working conditions imposed on them, which were considerably more unfavourable than those which obtained-and obtain- for equivalent work with the council. They invoked article 141 EC.

18 The applicants in the main proceedings roughly fall into four separate categories: (i) those who were former employees of the council and who were then immediately employed by one of the respondents; (ii) those employed by the council who did not accept employment with one of the respondents, or who did accept employment with one of the respondents but left that employment more than six months before the main applications were brought; (iii) those employed by one of the respondents but who had never been employed by the council; and (iv) those who were previously employed by the council and subsequently became employees of one of the respondents, but who did not transfer directly when the activities were transferred.

19 The first category of employees invoke article 141 EC in the main proceedings only by way of alternative submission. They principally invoke Directive 77/187, as implemented in English law by the 1981 Regulations."

22. Most recently this issue was dealt with by the EAT in Department for Environment Food and Rural Affairs v G Robertson and others [2004] ICR 1289. Burton J, President, giving the Decision of the Court set out the main issue which was whether a civil servant in one department could compare himself or herself with a civil servant in another department for the purposes of the Equal Pay Act 1970. At paragraphs 6 and 7 Burton J dealt with the interrelationship between Article 141 and the EPA as follows:

"6 The EPA is the way in which the Government complies with its obligations under the Treaty of Rome, under what was Article 119 and is now Article 141, which at subparagraph 1 simply reads:

"Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied."

7 It was established by the case of Defrenne v Sabena [1976] ICR 547 that this Article has direct effect. It can thus be relied upon in addition to the provisions of EPA, and so as to supplement or fill any lacuna in it. Indeed it has, as Mummery P described it in Scullard v Knowles [1996] ICR 399 at 405 "paramount effect". It is in very short and general terms, and it has been necessary for it to be authoritatively interpreted by a number of decisions in the European Court, to which we have been referred. They include, apart from Defrenne itself, McCarthys v Smith [1980] ICR 672, Enderby v Frenchay Health Authority [1994] ICR 112 and, most relevantly to our considerations, Lawrence v Regent Office Care [2003] ICR 1092, to which we shall refer specifically below."

Later he set out this Court's conclusions as follows:

"18 We are satisfied that the statements of the European Court and of the Advocate General above referred to are not intended to be prescribing, or making fresh statements about, the position where there is common employment, but are addressing, in both those cases, situations in which there is not common employment, and providing for that situation. In our judgment, the Tribunal was right and the submissions of Mr Underhill QC are right that the simple fact of common employment is not sufficient for Article 141, any more than it is sufficient for the purpose of EPA, although of course the test for the latter is derived from the statute itself, whereas the former is governed by the European Court's jurisprudence. It is clear to us that what the European Court is setting out is a justification, a principled basis upon which responsibility for difference and discrimination can be pinned. This basis is that the:

"differences identified in the pay conditions of workers performing equal work or work of equal value [can] be attributed to a single source", that "there is [a] body which is responsible for the inequality and which could restore equal treatment."

This is almost invariably the case where there is a common employer: the best example of such a single source of such a body is a common employer. But the justification can be found not in the common employment but in the single source, and if there is not such single source, no such body, then common employment is not sufficient, as the Tribunal found. This can be supported from a close consideration of Lawrence. The headnote in the ICR at 1092 reads as follows:

"School catering and cleaning staff employed by a local authority were, after a process of compulsory competitive tendering, transferred to the employment of the respondent companies, who paid them less than their previous wages. The applicants, female staff so transferred and other employees of the respondents, brought proceedings seeking equality of pay with male comparators still employed by the local authority whose work had been rated of equal value in a job evaluation study. An industrial tribunal held that the applicants could not rely on article 119 of the EC Treaty (subsequently article 141 EC) as giving them the right to bring claims comparing themselves with staff currently employed by a different employer, and the applicants' appeal was dismissed by the Employment Appeal Tribunal. On further appeal by the applicants, the Court of Appeal referred to the Court of Justice the question, inter alia, whether the applicants could rely on article 141(I) EC in the circumstances."

19 The Advocate General's opinion must then be considered:

"36. … The United Kingdom Government and [the respondent] also do not exclude a comparison with employees working for other employers as such, but take the view that there must be a common source from which the terms of conditions of employment at issue in the specific case can be derived, such as is the position where different employers are required to apply the same collective bargaining agreement in the case of a group of undertakings or authorities under common control, or where those terms and conditions have been laid down by statute or regulation. In such cases "cross-comparisons", in which employees of more than one establishment or undertaking may be involved, are indeed possible".

20 …

21 Of course it is, as is normal, the much more streamlined judgment of the European Court which binds us. But it appears to us that the European Court is in fact following and adopting the reasoning of the Advocate General, and applying it in more concise terms to the particular problem before it, making it entirely plain that the first matter which distinguished the present case from others was that (paragraph 15)

"the persons whose pay is being compared work for different employers".

We conclude that Lawrence is not authority for the proposition that common applicability of Article 141 is that which is ordinarily exemplified by common employment, namely the existence of a common source, the existence of a central responsibility for terms and conditions. If that is absent, then comparability is not available.

22 …It is obvious that there will be an evidential burden on an employer to displace the ordinary conclusion that the existence of common employment would fulfil the "single source" test. But we entirely agree with the conclusion of the Employment Tribunal that common employment of itself is not sufficient, and we dismiss the cross-appeal."

23. It seems to us, and it was not seriously disputed by either Counsel, that the case law that we have cited establishes that in order for Article 141 to apply either the alleged discrimination had to arise directly from a collective labour agreement or that the non-RVI Applicants had to by employed in the same establishment or service as their comparators and that there was a single body which was responsible for the inequality and which could restore equal treatment. The Tribunal rejected the suggestion that the inequality arose directly from the Whitley Council Guidance in view of the large number of local negotiations and the Appellants do not challenge that finding. Equally they accept the Tribunal's finding that the word "service" cannot mean an entire industry because Article 141 was not intended to equalize pay across whole industries. There was an argument before us as to whether the word "service" could extend the scope of Section 1 (6) of the EPA. In Lawrence the Advocate-General's opinion used the word "establishment or undertaking" but it seems to us that however wide "service" may be, it is governed by the requirement that there has to be a single body responsible for the inequality and which could restore equal treatment. Miss Tether argues that the Tribunal were wrong in failing to conclude that in the pre-1991 period all the relevant hospitals were maintained by the NHA, who were clearly a common source for their terms and conditions of employment and a body capable of rectifying any discriminatory differences in pay. However since the Tribunal had already referred to the local systems of collective negotiation and bonus payments, it seems to us that it was open on the facts for the Tribunal to conclude that any inequality could not be attributed to and corrected by the NHA in the period prior to 1991. Miss Tether argues that the Tribunal ignored such evidence as the Applicants' contract of employment with the NHA which provided that the contract was "subject to the terms and conditions of service of the General Whitley Council". However that was a factor that the Tribunal specifically mentioned in paragraph 8 (d) and yet at 8 (k) noted that the schemes were negotiated on a "site" and "departmental basis" and were not consistently adopted. It seems to us that overall their conclusions under Article 141 cannot be faulted.

Ground 3 & 4: Kells and TUPE

24. Assuming that we are wrong in relation to either the Section 1 (6) or Article 141 issues, can the non-RVI Applicants, whose employment commenced prior to 1991, point to RVI comparators who were employed at the same time in order to show that the Equality Clause modified their contracts of employment before the establishment of the separate Trusts in 1991? The Applicants contend that the Equality Clause came into effect in 1988 in the light of the Tribunal's findings that from 1988 onwards the bonus arrangements had a disparately adverse effect on women which could not be justified. The Applicants accept that because of the six year limitation period any award made to non-RVI Applicants who were employed prior to 1991 must be limited to the six years prior to the date on which the Originating Application was presented. However this issue concerns the period of events in respect of which a comparison can be made. The linked issue is, assuming the Equality Clause has operated to modify the Applicants contract of employment before 1991, what are the effects on this clause of the two TUPE transfers, firstly into the separate Trusts in 1991 and secondly into the Respondent Trust in 1998? These issues were dealt with by the Tribunal in paragraphs 17, 18 and 19 as follows:

"17 …The applicants rely on Kells v Pilkington [2002] IRLR 693 in arguing that a equality clause modified their contracts of employment and that this would have continued to have effect following establishment at the Freeman and NCH Trusts in 1991 and 1992.

18 For the respondent it was put, and we accept, that in Kells the EAT held there was no rule of law which limited an applicant to choosing a comparator who had been employed by the respondent within the period of six years before the presentation of the IT1. This, therefore, does not allow an applicant to select a comparator from her previous employment who is no longer employed by that employer.

19 In any event it was further argued and we accept that the transfer of employment to the Freeman or NCH Trusts was a significant alteration in terms and conditions and any modification of the contract of the employment based upon an equality clause would not survive the transfer and loss of any on-going male comparator."

25. In Kells v Pilkington [2002] IRLR 693 Mrs Kells had brought a claim for equal pay and sex discrimination. The equal pay claim was struck out by the Employment Tribunal on the grounds that the claim had no prospect of success, because her chosen comparators had not been employed on equal work to that done by her within a period of six years prior to the date of her application and therefore no award based on a comparison with those comparators could be made in her favour. The EAT reversed this Decision holding that there was no rule of law restricting the period of events in respect of which an equal pay comparison could be made to six years before the date of the application. Section 2 (5) of the Equal Pay Act 1970 was concerned with the period of default which could be compensated for rather than the period during which comparison was acceptable. Although a reliance on a comparison at distant times was likely to put considerable difficulties in the Applicant's way, the EAT held that these were difficulties of fact and not law and need therefore to be resolved on the evidence. Miss Tether argued that the Tribunal misdirected itself as to the law in holding that an applicant could not rely on a comparator from her previous employment if the comparator had ceased to be employed by the previous employer at the time when the applicant's claim was presented. She relied on Kells itself and the fact that the comparators on which the Applicant relied in that case were former employees who had ceased to be employed by the Respondent at the time when the Applicant had submitted her Originating Application. Mr Supperstone argues that when choosing a comparator there still had to be a link between the applicant, the comparator and the employer who was the respondent to the claim, thus in Kells the Applicant had brought a claim for equal pay against her employer from whom she had just resigned but her chosen comparator had been previously employed by that same employer. He also relied on the Decision in Lawrence where the Applicant could only choose a comparator in circumstances where there was a single body which was responsible for the inequality, ie because it had employed both the Applicant and the comparator, and which could restore equal treatment because it still employed the Applicant and usually also the comparator. The difficulty, however, with the Trust's position, which suggested that if the Applicants want to rely on the Equal Pay Act 1970 when employed they should have brought a claim against the NHA at that time, is said by Miss Tether to ignore the effect of the two TUPE Transfers into the separate Trusts and thereafter into the Respondent Trust.
26. She contended that by virtue of Regulation 5 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 and Section 6 of the National Health Service and Community Care Act 1990, the effect was to transfer the Applicants' contracts of employment from the NHA to individual Trusts without altering their terms and conditions, and thereafter there was a further transfer into the Trust. Regulation 5 provides that:

"5 Effect of relevant transfer on contracts of employment, etc

(1) [Except where objection is made under paragraph (4A) below,] a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee.

(2) Without prejudice to paragraph (1) above, [but subject to paragraph (4A) below,] on the completion of a relevant transfer—

(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this Regulation to the transferee; and

(b) anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee.

(3) Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, a person so employed immediately before any of those transactions.

(4) Paragraph (2) above shall not transfer or otherwise affect the liability of any person to be prosecuted for, convicted of and sentenced for any offence.

[(4A) Paragraphs (1) and (2) above shall not operate to transfer his contract of employment and the rights, powers, duties and liabilities under or in connection with it if the employee informs the transferor or the transferee that he objects to becoming employed by the transferee.

(4B) Where an employee so objects the transfer of the undertaking or part in which he is employed shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor.]

(5) [Paragraphs (1) and (4A) above are] without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice if a substantial change is made in his working conditions to his detriment; but no such right shall arise by reason only that, under that paragraph, the identity of his employer changes unless the employee shows that, in all the circumstances, the change is a significant change and is to his detriment."

And Section 6 of the National Health Service and Community Care Act 1990 provides that:

"6 Transfer of staff to NHS trusts

(1) Subject to subsection (5) below, this section applies to any person who, immediately before an NHS trust's operational date—

(a) is employed by a health authority to work solely at, or for the purposes of, a hospital or other establishment or facility which is to become the responsibility of the trust; or

(b) is employed by a health authority to work at, or for the purposes of, such a hospital, establishment or facility and is designated for the purposes of this section by a scheme made by the health authority specified as mentioned in paragraph 3(1)(f) of Schedule 2 to this Act.

(2) A scheme under this section shall not have effect unless approved by the Secretary of State.

(3) Subject to section 7 below, the contract of employment between a person to whom this section applies and the health authority by whom he is employed shall have effect from the operational date as if originally made between him and the NHS trust.

(4) Without prejudice to subsection (3) above—

(a) all the health authority's rights, powers, duties and liabilities under or in connection with a contract to which that subsection applies shall by virtue of this section be transferred to the NHS trust on its operational date; and

(b) anything done before that date by or in relation to the health authority in respect of that contract or the employee shall be deemed from that date to have been done by or in relation to the NHS trust.

(5) In any case where—

(a) an order under section 5(1) above provides for the establishment of an NHS trust with effect from a date earlier than the operational date of the trust, and

(b) on or after that earlier date but before its operational date the NHS trust makes an offer of employment by the trust to a person who at that time is employed by a health authority to work (whether solely or otherwise) at, or for the purposes of, the hospital or other establishment or facility which is to become the responsibility of the trust, and

(c) as a result of the acceptance of the offer, the person to whom it was made becomes an employee of the NHS trust,

subsections (3) and (4) above shall have effect in relation to that person's contract of employment as if he were a person to whom this section applies and any reference in those subsections to the operational date of the trust were a reference to the date on which he takes up employment with the trust.

(6) Subsections (3) and (4) above are without prejudice to any right of an employee to terminate his contract of employment if a substantial change is made to his detriment in his working conditions; but no such right shall arise by reason only of the change in employer effected by this section.

(7) A scheme under this section may designate a person either individually or as a member of a class or description of employees."

27. In Sorbie and others v Trust House Forte Hotels Ltd [1977] ICR 55, Phillips J, giving the Decision of the EAT dealt with the effect of an equality clause in this way:

"In other words, once the section is applied and the contract is modified, there is then a contract providing remuneration at that rate. It seems to us that the true way of looking at it is that that contract remains so modified until something else happens, such as a further agreement between the parties, a further collective agreement, or a further statutory modification by reason of a further operation of the equality clause."

28. In Preston and others v Wolverhampton Healthcare NHS Trust and others (No 3) [2004] ICR 993 seven test cases, brought under modifications to the Equal Pay Act 1970 which dealt with equality of access to occupational pension schemes, were brought by Applicants who were part-time female workers excluded from their employer's occupational pension scheme because membership was dependent on the employee working a minimum number of hours per week. They had successfully complained that such exclusion discriminated indirectly against women in the matter of pay since the majority of part-time workers were women and was contrary to Article 141. One of the issues in the case arose out of a relevant transfer of an undertaking for the purposes of the TUPE Regulations and the effect of Regulation 7, which excludes occupational pension schemes from the effect of Regulation 5 of the TUPE Regulations and thus whether the time for commencing proceedings in respect of an equal pay claim ran from the date of a transfer or from the cessation of employment with the transferee. Judge McMullen QC, giving the Judgment of the EAT, had allowed appeals by the Applicant holding that the words "employment" in Section 2 (4) of the Equal Pay Act 1970 meant no more than the contract of employment, and the contract by virtue of Regulation 5 of the TUPE Regulations was deemed not to have terminated by reason of the transfer so that the Applicant was still in the employment in the course of which he suffered the breach of the Equality Clause, even though under Regulation 7 the clause providing equality of access to the pension scheme did itself not transfer and that accordingly a claim against the transeferor could be maintained for as long as the Applicant remained in the transferee's employment plus six months.
29. A similar conclusion on the effect of Regulation 5 was reached by the Court of Appeal in Powerhouse Retail Ltd and others v Burroughs and others [2004] EWCA Civ 1281 which heard the appeal from Judge McMullen's Decision. Pill LJ, giving the Judgment of the Court, at paragraph 24 said this:

"24. I accept the appellants' submissions as summarised in paragraph 18 of this judgment as the correct analysis. Regulation 5 does not deem the contract of employment with the transferor never to have happened; it deems that what happened was between the employee and transferee. By virtue of Regulation 7, the pension terms fall out of the contract of employment with the transferee and no further pension rights can be acquired against the transferor though, at the time of transfer, there is a cause of action against the transferor with respect to pension rights.

25. The continuing contract of employment is deemed always to have been with the transferee but it must be acknowledged that the pension rights have been removed from it and it cannot be treated as if they have not. It cannot be regarded as the specific contract of employment, giving rise to the claim for pension rights, which existed between the transferor and the employee before the transfer took place. The employment under a contract of employment about which complaint is made is the contract between transferor and employee, with its equality clause providing pension rights, and the post- transfer contract of employment, shorn as it is by statute of existing pension rights, is not the specific contract of employment for the purposes of Section 2(4). The claim is based on the previous contract and, in so far as its terms have not been transferred, it terminated upon the transfer and time began to run. The existence, in each of the contracts, of an equality clause does not mean that they can be treated as the same contract."

30. Mr Supperstone submitted that the Preston case supports his contention that the claim for inequality had to be made against the employer who was responsible for the alleged unequal treatment and that the comparators had to have been employed by that employer. However we are satisfied that that was because of the exclusion in Regulation 7 relating to occupational pension schemes and that the effect of the Preston case confirms that all other clauses would be deemed always to have been with the transferee. See also Martin v Lancashire County Council [2001] ICR 197 in which it was held that liability in tort transfers to the transferee.
31. Mr Supperstone then submitted that the Tribunal were correct to find that the transfer of employment to the Freeman or NCH Trusts was a significant alteration in terms and conditions and any modification of the contract of employment based upon an equality clause would not survive the transfer and loss of any ongoing male comparator. He submitted that such a change of employment would fall within the category of "something else happens" as envisaged in the Sorbie case. He also relied on the facts of Lawrence where the Applicants, when they became employed by Regent Office Care lost the right to compare themselves with their former colleagues at the Council.
32. Miss Tether argued that the language of Section 1 (2) of the Equal Pay Act 1970 made it clear beyond doubt that the Equality Clause operates to modify individual terms of the contract of employment; it did not simply float over the contract until a claim was made. She relied on the words "that term of the woman's contract should be treated as so modified". As regards the Lawrence Decision she contended that in that case the Applicants were making a purely contemporary claim and they could not have done otherwise because the rates of pay which they were challenging were reduced after the service in which they worked had been outsourced to a private sector contractor, ie at a time when they had ceased to be employed by the Council which employed their comparators. It is also of note in Lawrence that in paragraph 16 of the Court's Decision they refer specifically to the fact that the Court of Appeal had not referred to them any question "relating to the safeguarding of employees' rights in the event of transfers of undertakings".
33. Our conclusion on this issue is that by virtue of the TUPE Regulations the Applicants continuing contract of employment was deemed always to have been with the Respondent Trust and that applying Kells v Pilkington the Applicant could have selected a comparator from her pre-1991 period of employment and that from 1988 or from any later date when her contract commenced the Equality Clause operated to vary her contract of employment and that contract, as varied, remained in force, even if the Applicant ceased to be able to rely on her comparator.

Grounds 5 & 6 – Common Terms and Conditions - Same Service Since 1 April 1998

34. We have already referred to the Tribunal's conclusions in relation to the post-1998 period set out in paragraphs 11-14 of their Decision. Although the Tribunal in their earlier fact finding in paragraph 8 had not set out in any great detail contractual arrangements post-1998, both parties' final submissions before the Tribunal made reference to whether or not there were substantially comparable terms and conditions across the separate Trusts' hospitals after April 1998 – see paragraph 42 of the Appellants' closing submissions and paragraph 47 of the Respondents' closing submissions. The Tribunal in particular in their conclusion had identified that staff at the different hospitals had retained different protection provisions. Miss Tether submitted that this was a minor disparity and that no reasonable Tribunal should have found that this prevented terms and conditions being considered substantially comparable on a broad basis. Again, however, we are satisfied that the Tribunal had the correct test in mind and were entitled on the facts before them to come to the conclusion that there were essentially different employment regimes, and we see no reason to interfere with their conclusion. Similar conclusions apply in relation to the Article 141 issue. Again the Tribunal, in our view, focussed on the key issue which related to the single source and came to the conclusion that post-1998, since there was continuing collective negotiation on a departmental basis, those differences could not be attributed to the Respondent as a single source.

Material Factor Defence

35. The tribunal's conclusions on this issue were set out in paragraphs 28-32 of their Decision as follows:

"28 Miss Tether also drew reliance in supporting the principle that the employer needs to justify a difference in pay which has a disparately adverse effect on women by the following authorities: Enderby v Frenchay Health Authority [1994] ICR 112; Jamstall Hetsombudsmanne v Orebro Landsting [2000] IRLR 421 ; Brunnhofer v Bank der Osterriechischen Postparkasse [2001] IRLR 572.

29 Miss Tether relied upon the facts of the present case as being in important respect similar to those which form the backdrop to North Yorkshire County Council v Radclilffe and others [1995] ICR 833. The domestics of the RVI were exclusively, or almost exclusively, female and the labour market for domestics in the north east was almost exclusively female. The porters were male. It was considered that one of the reasons why portering was not put out to tender was that as it was not compulsory to do so a more robust industrial reaction might be experienced. We do see the decision not to put out the predominantly male area to tendering as being tainted by sex.

30 The respondent relies upon the following explanation for difference in treatment, namely:

(i) the porters were not put out to tender because it was not compulsory to do so and the NHA was philosophically opposed to the idea;

(ii) major savings would not be made in this area because the budget for portering was less than in other groups;

(iii) the NHA management was not aware of local companies who might have been interested in tendering in this area;

(iv) opposition to a proposal to put out to tendering an area which are not compulsory was expected to be more voluble.

31 In considering the above reasons given or the tests set out in Glasgow City Council case we can accept the first two of the above reasons might have been genuine at the time. We are concerned about the second two as there appears to have been little or no effort to explore the market and the male porters were in employment traditionally more heavily unionised and voluble because we know from our own experience of the local market more males tend to be full time than females and to be unionised. These two alleged justifications amount to significant and relevant factors tainted by sex and strike at the basis of the justification claimed.

32 However, even if the explanation had been genuine at the time the respondent then relies upon the historical basis for the introduction of bonus schemes and the reducing disparity but on our findings of fact there has been a smaller proportion of women entitled to receive a bonus at all material times since 1988 than the proportion of men. We accept the contention made for the applicants that no witnesses have been called properly to explain why the bonus schemes were being maintained in existence at the time when the applicants' claims were submitted. We accept that the historical factors are therefore not sufficient to justify the maintenance of differentials which have had a disparate impact on women for a period of nearly fifteen years."

In its amended Notice of Appeal the Trust raises four grounds of appeal, in summary these are:

(1) The Tribunal failed to consider the Trust's defence that the procedures and rules governing the implementation of bonus schemes across the whole of the NHA were a genuine and material factor which explained the pattern of bonus payments.

(2) The Tribunal erred in concluding that the decision not to put portering services out to tender was tainted by sex discrimination and, in any event, failed to give reasons in support of this conclusion.

(3) The Tribunal erred in concluding that the material factors relied upon by the Trust no longer justified any disparate impact and in any event failed to give reasons in support of this conclusion.

(4) The Tribunal's Decision on the Trust's material factor defence was tainted by the delay between the end of the hearing and the promulgation of the Decision.

Ground 1 – Failure to Consider the Trust's Pleaded Case – the Material Factor Defence.

36. Mr Supperstone submitted that the Tribunal failed to consider properly or at all whether:

(1) the procedures and rules governing the implementation of bonus schemes were a genuine material factor which explained the pattern of bonus payments;

(2) the pattern was directly or indirectly discriminatory;

(3) if the pattern of bonus payments was discriminatory, whether any discrimination could be objectively justified by the Trust.

In relation to the first issue he contended that although the Tribunal set out a number of relevant facts in paragraph 8, by the time that the Tribunal reached its conclusions this issue appears to have been overlooked and in particular that there was a significant dispute whether the statistics revealed indirect discrimination and also whether any discrimination could be objectively justified. In response Miss Tether submitted that the material factor defence, as set out in paragraph 8 of the Notice of Appearance, was that the pattern of the payment and non-payment of bonuses to ancillary staff was explained historically by four factors namely:

(i) Results of the work-study evaluations carried out in the late 1970s and early 1980s

(ii) The fact that some departments could fund a bonus scheme through productivity improvements where others could not.

(iii) Commercial imperatives imposed on certain departments, such as the domestic staff at RVI by the introduction of compulsory competitive tendering.

(iv) The distribution and management of the various hospitals after the introduction of NHS Trusts in the 1990s.

She contended that the Tribunal did indeed consider the Trust's historical explanation, for example at paragraph 8 (b) of the Extended Reasons the Tribunal said this:

"The inequality alleged is the payment of bonuses to some, but not all ancillary workers. The factual background to the claim is largely not in dispute but is complex and reflects changes in National Health Service ("NHS") policy over a 30 year period. Given the period of time, there are inevitably some gaps in the "paper trail" but it is not necessary for the purposes of this preliminary hearing to detail the negotiation of each individual bonus scheme or its precise details. Rather it is necessary to look at the history of the Trust and the reasons for the payment of bonuses to some ancillary workers and not to others."

37. At paragraph 8 (u) of their findings the Tribunal had said that:

"…an analysis of the effective bonus arrangements appended to the applicants' closing submissions nevertheless shows that from 1988 onwards they have had a disparately adverse effect on women as shown by Ms Swanson's evidence contained in her second supplemental statement."

Further, in their conclusions in paragraph 32 they make reference to the Respondent, "relies upon the historical basis for the introduction of bonus schemes and the reducing disparity…". It seems to us therefore that it is wholly unrealistic to suggest that the relevant reasons were not considered by the Tribunal.

38. Equally we can find no merit in the Trust's contention that the Tribunal failed to consider whether the pattern of bonus payments was directly or indirectly discriminatory. As we have stated, paragraph 8 (u) of its Decision found that the analysis of the bonus arrangements appended to the Applicants' closing submissions, some of which we have referred to above, showed that from 1988 onwards there was a continuing disparate adverse effect upon women. Mr Supperstone has attempted to submit that the phrase "disparately adverse impact" does not have the same meaning as indirectly discriminatory. It is clear, however, from having regard to recent authorities, such as R v Secretary of State for Employment, ex parte Seymour-Smith (No 2) [2000] ICR 244, Barry v Midland Bank plc [1999] ICR 859, and Secretary of State for Trade and Industry v Rutherford and others [2003] IRLR 859, that these two expressions are often used interchangeably. For example in paragraph 4 of Lord Mummery' Judgment in Rutherford he said this:

"It explicitly sets out to examine all the relevant statutory material and all the case law, domestic and EC, as well as the very full arguments addressed by two leading practitioners in this field on the evidence and the law relating to the two basic issues on the law of indirect discrimination, disparate adverse impact and objective justification."

39. Mr Supperstone also argued that the Tribunal ignored the cogent arguments that the admitted disparate impact did not amount to indirect discrimination, and in particular he referred to the statistical evidence that was placed before the Tribunal. Miss Tether argued that the Tribunal clearly accepted the statistical analysis appended to the Applicants' submissions showing the disparity in respect of male and female ancillary staff employed at the RVI who were and were not in the bonus scheme, ranging between 66.3 in April 1988, down to 24.3 in February 2002. In the Seymour-Smith case the ECJ concluded that a lesser disparity would suffice in respect of a persistent and relatively constant disparity over a long period. On reference back to the House of Lords, who allowed the appeal, they held that the evidence adduced as to the proportion of men and women able to satisfy the qualifying period showed a persistent and constant disparity over a long period so as to amount to indirect discrimination contrary to Article 119. The table included in the speech of Lord Nicholls showed a disparity ranging from 8.5 in 1985 to 4.3 in 1993. He continued at page 258 in this way:

"These figures are in borderline country. The question under consideration is one of degree. When the borderline is defined by reference to a criterion as imprecise as "considerably smaller" it is inevitable that in some cases different minds may reach different conclusions. The decisions of the two courts below illustrate this. My own impression differs from a minority of your Lordships. I find myself driven to the conclusion that a persistent and constant disparity of the order just mentioned in respect of the entire male and female labour forces of the country over a period of seven years cannot be brushed aside and dismissed as insignificant or inconsiderable. I agree with the Court of Appeal that, given the context of equality of pay or treatment, the latitude afforded by the word "considerably" should not be exaggerated. I think these figures are adequate to demonstrate that the extension of the qualifying period had a considerably greater adverse impact on women than men."

We are satisfied that the Tribunal was entitled to come to conclusions that it did based on the Applicants' statistical evidence, showing greater and more persistent disparity than in the Seymour-Smith case.

40. Lastly on ground 1, Mr Supperstone argued that the Tribunal did not consider the Trust's submissions as to whether the overall pattern of bonus payments could be objectively justified. In particular there were arguments in their closing submissions that even if objective justification were required, it could be found as to the inception of bonus schemes and the requirement that they be self-funding and as to their limited continuing operation in the wish to harmonize terms and conditions whilst addressing the significant financial deficits on the creation of the Respondent Trust. Thus it was argued that the pattern of bonus payments was objectively justified on the grounds that it corresponded to a real business need or objective and was necessary to achieve that objective and was proportionate to the achievement of that objective.
41. Miss Tether responded by first of all pointing out that the Tribunal correctly directed themselves, at paragraphs 27 and 28, that where there was any evidence of sex discrimination a "purely historic explanation of the pay difference between the sexes is insufficient" - see Glasgow City Council v Marshall [2000] ICR 196 particularly at pp 202F-203E, and that it was for the employer to show the pay difference was objectively justified, both historically and up to the present time. Whilst the Notice of Appearance had provided a historic explanation of the differentials in payment of bonus, but had not pleaded any objective justification, the Tribunal did consider that issue at paragraphs 29-32 and finally in paragraph 32 accepted the contention from the Applicants that no witnesses had been called to properly explain why the bonus schemes were currently being maintained in existence. Again we can find no error in the manner in which the Tribunal dealt with this issue, either on a historical basis or indeed by referring to the current factors.

Ground 2 – Process of Tendering Tainted by Sex Discrimination

42. In its second ground of appeal the Trust submitted that the Tribunal erred in its conclusion that the decision not to tender portering services was tainted by sex discrimination. It was always undisputed that the domestics at the RVI were a female dominated service and were subject to CCT and the porters were a male dominated service and were not subject to CCT. Mr Supperstone submitted that the facts did not by themselves reveal sex discrimination. Although the Tribunal were correct to analyse the reasons for this difference, he submitted that in conducting this analysis the Tribunal erred in a number of respects, in particular:

(1) They failed to refer to a fifth reason that he had put forward, namely the evidence on behalf of the Trust that it was more difficult to prepare a tender specification for portering services than for domestic services.

(2) He criticized the Tribunal's finding that there had been little or no effort made by NHA management to explore the local market for companies who might have been interested in tendering in that area. He submitted that this finding was not open to the Tribunal on the evidence before it since the Trust had given evidence that there was not really a significant private presence in portering, transport, supplies and stores in the Newcastle region.

(3) He criticized the Tribunal's findings resulting from "our own experience of the local market that more males tend to be full-time than females and to be unionised." He submitted that in reaching this conclusion the Tribunal erred in five respects;

(a) There was no evidence that status as full-time or part-time employees had any impact on the decision whether or not to put a service out to tender.

(b) The Tribunal had wrongly relied on its own stereotypical notion of unionization.

(c) There was consistent opposition to CCT, regardless of the gender of the staff involved.

(d) There was no evidence that the level of opposition to putting the portering out to tender would be affected by the level of unionization in the portering services.

(e) The Tribunal's conclusion that there would be more voluble opposition to any decision to put portering services out to tender because it was a unionized male service was not supported by the evidence.

43. In response Miss Tether pointed out, in relation to this ground of appeal, that the primary basis of the Tribunal's finding that the process of competitive tendering was tainted by sex discrimination was the finding that domestics at the RVI, who had lost their incentive bonuses as a result of competitive tendering, were exclusively or almost exclusively female and were part of a labour market which was also almost exclusively female – see paragraph 29. In that paragraph the Tribunal had referred to North Yorkshire County Council v Ratcliffe and others [1995] ICR 833. In that case, in order to secure CCT contracts in certain areas and maintain the viability of the direct service organization, the Council declared catering assistants in those areas redundant, dismissed them, and re-employed them through the direct service organization at rates of pay that, in the majority of cases, were below joint council rates. The Applicants who were employed in those areas sought equality of pay under Section 1 of the Equal Pay Act 1970 with their male comparators at similar grades who were all still employed on broadly the same terms and conditions as under the National Joint Council Agreement. The Industrial Tribunal had found that the Applicants were in the same employment as their male comparators and that as the Council had failed to show under Section 1 (3) of the 1970 Act the variation between the Applicants' contracts and those of their male comparators was due to a material factor that was not the difference of sex. The EAT reversed this Decision on the basis that the Tribunal had misdirected themselves on both issues and it ordered a fresh hearing. The Court of Appeal dismissed the appeal, but the House of Lords, in allowing the appeal, held that the distinction between direct and indirect discrimination and the Sex Discrimination Act 1975 was not to be imported into Section 1 of the Equal Pay Act 1970 under which the question was whether equal treatment was accorded to men and women employed on like work or work rated as equivalent, and therefore although the Council's reason for paying women less than men for work rated as equivalent was to enable it to compete with a commercial company, the Industrial Tribunal had been entitled to conclude under Section 1 (3) of the Act of 1970 that the Council had not shown that the variation was genuinely due to a material factor other than the difference of sex and the Applicants had been entitled to have their contracts modified accordingly. Lord Slynn, giving the leading speech of the House of Lords, said at paragraph 840C:

"In my opinion it is impossible to say that they were not entitled on the evidence to come to that conclusion. It is obvious that the council reduced the applicants' wages in order to obtain the area contracts and that to obtain the area contracts it had to compete with C.C.G. who, the tribunal found, employed only women and "because of that, employed them on less favourable terms than the council did previously under the N.J.C. agreement" (majority conclusion, paragraph 2). The fact, if it be a fact, that C.C.G. discriminated against women in respect of pay and that the D.S.O. had to pay no more than C.C.G. in order to be competitive does not however conclude the issue. The basic question is whether the D.S.O. paid women less than men for work rated as equivalent. The reason they did so is certainly that they had to compete with C.C.G. The fact, however, is that they did pay women less than men engaged on work rated as equivalent. The industrial tribunal found and was entitled to find that the council had not shown that this was genuinely due to a material factor other than the difference of sex."

And later at 841B:

"Unlike the Employment Appeal Tribunal I do not find it necessary to remit this case for further findings; nor do I consider that the industrial tribunal so misdirected itself that its findings cannot stand. The fact is that the council re-engaged the women at rates of pay less than those received by their male comparators and no material difference other than the difference of sex has been found to exist between the case of the women and their male comparators. It is accordingly not necessary to review the many cases decided under these two Acts, nor is it necessary to consider article 119 of the E.E.C. Treaty (Cmnd. 5179-II) and the decisions of the European Court of Justice on that article, it not being suggested that the Act of 1970 is in this respect in conflict with article 119.

Though conscious of the difficult problem facing the council in seeking to compete with a rival tenderer, I am satisfied that to reduce the women's wages below that of their male comparators was the very kind of discrimination in relation to pay which the Act sought to remove. I would accordingly allow the appeal and restore the decision of the majority members of the industrial tribunal."

Miss Tether then submitted that although, in the light of Ratcliffe it was not really necessary for the Tribunal to make any further findings in relation to sex discrimination, the Tribunal in this case also found that the decision not to put the predominantly male portering services out to tender was similarly tainted by sex discrimination. She submitted that this was a finding of fact that the Tribunal were entitled to make on the evidence. She conceded that the Tribunal failed to refer to the fifth reason in relation to the difficulties concerning a tender specification but she submits that this omission is of little or no weight in the overall context of the case and we agree with that submission. As regards the alleged failure on the part of the NHA to explore the local market, she argued that the Trust had not advanced any evidence to show that they had made any efforts to find out whether local companies might be interested in tendering for portering. The issue had in fact been taken up by Miss Tether in cross-examination of two of the Trust's witnesses but neither of those witnesses had in fact given any evidence that specific enquiries had been made as to whether local companies might be interested in tendering for portering. She also submitted that it was not an error in law for the Tribunal to take into account their own local knowledge of the local labour market in reaching the conclusions that they did and refers to the Tribunal in Ratcliffe who also relied on their knowledge of the local labour market in a similar way. We can see no harm in the Tribunal as the industrial jury using their considerable industrial and employment experience in this way. As regards the Tribunal's findings in relation to the local market, Miss Tether submitted that in light of the Ratcliffe Decision the findings on this issue were clearly not crucial to their conclusion and any errors which they made in their findings relating to portering staff were not of critical importance and did not vitiate their Decision – see Phipps v Bradford Hospitals NHS Trust EAT/531/02. Again we agree with those conclusions. As we have previously stated the issue of portering services was secondary to the Tribunal's main finding in relation to the process of competitive tendering being tainted with sex discrimination arising out of the domestics being part of a labour market which was almost exclusively female.

Ground 3 – Material Factors No Longer Justified in Disparate Impact

44. Mr Supperstone argued that the Tribunal appeared to have failed to take into account, in reaching its conclusions in paragraph 32, a number of reasons put forward by the Trust to explain the continuing pattern of bonus payments, including:

(1) The fact that the pattern of bonus payments was steadily decreasing and that the current pattern was a proportionate response to the obstacles which the Trust faced in harmonizing bonus payments. In particular the Tribunal ought to have taken into account the declining number of employees receiving bonuses, both male and female, the declining value of bonuses in comparison to the cost of paying bonuses to all ancillary staff, and the threats of legal or industrial action if the Trust removed bonuses from those currently receiving them.

(2) The Tribunal ought to have concluded that the Trust's efforts to harmonize bonus payments across all ancillary staff were reasonable and proportionate and therefore amounted to a continuing objective justification.

(3) The Tribunal failed to explain why it rejected the Trust's explanation of why that harmonization process was ongoing.

In addition he submitted that continuing financial constraints could justify an inequality in pay – see for example Benveniste v University of Southampton [1989] IRLR 122. In response Miss Tether firstly submits that two criticisms by the Trust in the grounds of appeal, namely that the Tribunal failed to refer to evidence that the Trust could not afford to pay bonuses to all ancillary staff and that it could not remove bonuses from those that received them because of the risk of legal and industrial action, were not factors mentioned in the Trust's Notice of Appearance as providing justification for the difference in the pattern of bonus payments. In any event she submitted that the problems which an employer may experience in equalizing pay for the future are not, as a matter of law, capable of providing justification for pay differentials which were discriminatory in the present and had been in the past. She referred us to Smith and others v Avdel Systems Ltd [1995]ICR 596 where the European Court of Justice made it clear that, in relation to the past, a breach of the equal pay principle can only be remedied by granting persons in a disadvantaged class the same advantages as those enjoyed by persons in the favourite class. The Court pointed out that in relation to the future an employer is free to equalize upwards or downwards. She submitted that the Tribunal did make reference in paragraphs 8 (s) and 8 (t) to the new policies adopted by the Trust after 1998 and also the decreasing number of staff receiving bonuses. However they also acknowledged that no witnesses had been called to properly explain why the bonus schemes are being maintained in existence at the time when the claims were submitted and in our view the Tribunal were therefore entitled to come to the conclusion that there were no sufficiently cogent current reasons as to why the pattern of differentials had not been eradicated.

Ground 4 - Delay

45. At the beginning of this Decision we set out that the evidence was concluded on 22 May, the Tribunal deliberated on 23 May and 10 November 2003 and the Decision was promulgated on 22 December 2003. In Kwamin v Abbey National plc [2004] ICR 841 Burton J set out guidance on when delay in promulgating a decision will undermine that decision:

(1) The appellate court will examine a delayed judgment for any sign of error due to faulty recollection.

(2) The appellant would need to show a material error or omission. If only one then it would need to be more significant or a series of material errors or omissions. Material in this context means that the errors taken separately or together show a real risk that there has been a failure of recollection so as to establish that the decision is unsafe by virtue of the delay. Therefore, the error or errors must be due to the delay and cast doubt upon the decision or one part of the decision ie causation is essential.

(3) The deference which the EAT gives to decisions of Employment Tribunals must inevitably be less when it is suggested that there have been errors by the Tribunal by virtue of the delay or that conclusions of the Tribunal are not or may not be based upon any abiding recollection of the evidence.

Mr Supperstone submitted in the current case the Tribunal made a number of legal errors in reaching its Decision on the material factor defence (although somewhat surprisingly makes no criticism of the manner in which it dealt with the wrong comparator issue). He contends that these errors illustrate that the Tribunal:

(1) failed to consider certain arguments raised by the Trust;

(2) failed to give adequate reasons for its conclusions;

(3) failed to have regard to certain aspects of the evidence given at the hearing;

(4) reached conclusions which do not appear to be based upon the evidence given at the hearing.

He submitted that these errors reflect the fact that the Tribunal, when reaching its conclusions, failed to recollect the detail of the arguments before it because there was a delay of seven months between the last date of the hearing and the date on which the Decision was promulgated. He argued that there was a real risk that there has been a failure of recollection "so as to establish that the Decision is unsafe by virtue of the delay" – see the Decision of the EAT in Kwamin. We cannot agree that errors have been made for the reasons that we have indicated and although the Decision was not lengthy in its conclusions we are quite satisfied that the Tribunal made correct findings of fact, most of which were, in any event, not substantially in dispute, and also came to correct conclusions based on the law. The Tribunal were in the fortunate position, as we have been, to receive written submissions of the highest quality from both Counsel and we are mindful of the fact that the Tribunal held its deliberation on 23 May, the day immediately following the hearing. We have, in fact, only been able to identify one very minor error on the part of the Tribunal in dealing with the material factor defence and we are not satisfied that that minor error was, in any event, due to delay.

46. Accordingly for the reasons we have outlined both the appeal and cross-appeal will be dismissed.