APPEARANCES
| For the Appellant |
MR M FORD
(of Counsel)
Instructed by:
Messrs Thompsons
Solicitors
Congress House
Great Russell Street
London WC1B 3LW |
| For the Respondent |
MR A LYNCH QC
and
MR D STILITZ
(of Counsel)
Instructed by:
(i) The Solicitor to the London Borough of Islington
(ii) Messrs Gregsons
Solicitors
St Christopher's House
Tabor Grove
Wimbledon
London SW19 4EX |
THE HONOURABLE MR JUSTICE RIMER:
Introduction
- Before us are an appeal and cross-appeal against the decision of an employment tribunal sitting at London Central between 13 and 23 January 2003 and chaired by Mr B.C. Buckley. The tribunal's decision and extended reasons were promulgated on 10 March 2003. The decision was on applications by three applicants in the nature of test cases under the Equal Pay Act 1970 ("the EqPA"). The applicants were Mrs Ann Douglas, a municipal cleaner, Mrs Edith Irons, a school cleaner and Mrs Amanda Hume, a kitchen assistant. Each was formerly employed by the first respondent, the London Borough of Islington ("Islington"), and claimed that she was employed on work "rated as equivalent" within the meaning of section 1(2)(b) of the EqPA with that of a named comparator and that she was therefore entitled to equally favourable terms of employment. The comparator was Mr Tony Lee, an assistant caretaker also employed by Islington. During his employment, Mr Lee had benefited from an incentive scheme originally introduced in 1968 which provided for a bonus payment of 1/3 for "standard performance". The applicants were not paid like bonus payments and so received lower pay, a grievance which led to their applications to the tribunal. The tribunal upheld their claims that their work was rated as equivalent with Mr Lee's, but also upheld the respondents' defence under section 1(3) of the EqPA that the admitted difference in Mr Lee's rate of pay was genuinely due to a "material factor" which was not a difference of sex. The result was that the applicants' claims failed. They have appealed against the decision on the section 1(3) point, and the respondents have cross-appealed against that on the section 1(2)(b) point.
- In October 2000, following the commencement of the proceedings, there was a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") of municipal and school cleaners from Islington to the second respondent, Caxton Islington Limited. In October 2001, there was a like transfer of kitchen assistants to the third respondent, Castle Independent Limited. The claims before the tribunal were, however, only in respect of the period up to the respective transfers although, as Islington's employment liabilities would have transferred to Caxton and Castle under regulation 5 of TUPE, those companies were also joined as respondents. Islington, however, accepted that any award the tribunal might make should be made against it. All three respondents were represented, both before the tribunal and us, by the same counsel, Mr Adrian Lynch QC and Mr Daniel Stilitz. The applicants were represented both before the tribunal and us by Mr Michael Ford. We express our gratitude to counsel for their excellent arguments.
The governing provisions
- Article 141 (formerly 119) of the EC Treaty provides:
"1. 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.
2. For the purpose of this Article, 'pay' means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind, which the worker receives directly or indirectly, in respect of his employment, from his employer.
Equal pay without discrimination based on sex means –
(a) that pay for the same work at piece rates shall be calculated on the basis of the same unit of measurement;
(b) that pay for work at time rates shall be the same for the same job.
3. The Council, acting in accordance with the procedure referred to in Article 251, and after consulting the Economic and Social Committee, shall adopt measures to ensure the application of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation, including the principle of equal pay for equal work or work of equal value.
4. With a view to ensuring full equality in practice between men and women in working life, the principle of equal treatment shall not prevent any Member State from maintaining or adopting measures providing for specific advantages in order to make it easier for the under-represented sex to pursue a vocational activity or to prevent or compensate for disadvantages in professional careers."
- The EqPA provides, so far as material:
"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 –
…
(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-
…
(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; …
(5) A woman is to be regarded as employed on work rated as equivalent with that of any men if, but only if, her job and their job have been given an equal value, in terms of the demand made on a worker under various headings (for instance effort, skill, decision), on a study undertaken with a view to evaluating in those terms the jobs to be done by all or any of the employees in an undertaking or group of undertakings, or would have been given an equal value but for the evaluation being made on a system setting different values for men and women on the same demand under any heading."
(a) Was the tribunal correct to hold that the applicants' work was "rated as equivalent with that" of Mr Lee?
- This is the issue raised by the cross-appeal, but logically it falls for determination before the issue raised by the appeal and so we will deal with it first.
General background
- The issue for the tribunal was whether the applicants' jobs were "rated as equivalent with" the comparator's job for the purposes of section 1(2)(b) of the EqPA. If it was, then (subject to Islington's "genuine material factor" defence afforded by section 1(3)) the applicants would be entitled to the benefit of an equality clause in their employment contracts resulting in their employment terms being no less favourable than the comparator's. A woman's work will only be regarded as "rated as equivalent" for the purposes of section 1(2)(b) if it has been so rated "on a study" of the nature described in section 1(5). The particular issue was whether the applicants' jobs had been so rated under the same "study" as that under which the comparator post had been evaluated. The applicants' case was that the jobs had all been evaluated under the same study, namely Islington's adoption of the national level scheme known as the National Joint Council for Local Authorities Scheme – Manual Workers (August 1987) ("the Scheme"). The tribunal found that the applicants' jobs had been evaluated under that Scheme, and there is no challenge to that. The critical question was whether the comparator job, that of assistant caretaker, had also been evaluated under it. The applicants claimed it had, whereas Islington claimed it had not.
- Paragraph 1 of the Introduction to the Scheme reads:
"1. Evaluation of jobs covering some 90% of the manual worker labour force has been undertaken at national level so what remains to be done locally is first, to ensure that the local job content accords broadly with the national position, and second to bring the remaining 10% onto the structure. This document therefore provides the materials to allow this to be done, sets out the approach to the task, describes how the national structure was evolved and what criteria should be brought in at the local level in the assimilation process."
- The Scheme contained model job evaluations for 37 common local authority jobs. It provided two procedures for the evaluation of manual jobs at the local level. The first was the "assimilation" of the local jobs to the 37 national jobs in cases where the local jobs were close enough to the national jobs to be brought on to the national structure. This required an examination of the local job by reference to its job content so as to determine whether it could be assimilated to one of the national jobs. Consideration would have to be given to whether anything of substance was carried out in the local job which meant that it should be graded higher or lower than what was, on the face of it, a comparable nationally evaluated job. The second procedure – relevant to this case - applied where the local job did not correspond sufficiently to the national jobs to be so "assimilated", in which case a more detailed exercise by way of an "assessment" of it had to be carried out, the Scheme providing that a "factor comparison" should be used for the assessment. Factor comparison was described as follows in section 2 of the Scheme:
"(ii) Assessment of Local Jobs
9. The task of the assessment of local jobs which have not been examined nationally will be a major consideration at Provincial Council level and within each authority. In many instances these occupations will have a job content and mix of skills and responsibilities not dissimilar from national jobs, but it is recognised that, with the range of services local authorities provide, there are jobs with only a few people in them which are very different from the mainstream. For these occupations, a more detailed exercise will have to be carried out. It is essential that there is agreement between both sides locally on the approach to be adopted in this part of the exercise. The NJC decided that factor analysis should be used where appropriate to assess these local jobs.
There should be no need to carry out a full job evaluation exercise as done nationally.
Factor Comparison
10. Factor comparison is normally defined as the definition and assessment of jobs in terms of a few common factors. For this exercise it entails looking at the content of a local job, e.g. public lighting attendant, and comparing it with what are considered to be the closest national jobs using (i) the individual factor scores for these comparator jobs, (ii) the national job outlines and commentary (see section 3), (iii) the job evaluation scheme and notes of guidance. The national jobs are therefore the key or benchmark jobs against which all others have to be placed in the structure.
11. The national jobs have been analysed and evaluated in full against the factors and a separate score on each factor has been produced. For the remaining jobs, i.e. the local jobs, what has to be done is to produce a factor by factor score for each using the material outlined in Paragraph 10. For example taking again the public lighting attendant, there is a range of jobs against which this can be compared. In the first instance it is likely that that the attendant has driving duties, so the driving jobs would feature in the comparison. Further there are skills utilized which may be comparable with some of the roadworker jobs, and there may be responsibility for significant tools and equipment which might bring in other jobs such as gardener. By comparing the local job with the full range of the factor scores of the appropriate national jobs, the factor by factor score of the local jobs will be built up. The resulting factor levels will be used to produce an overall score, which will then allow the job to be placed on the structure.
12. The national jobs, 37 in all, cover a very wide range of manual worker occupations so finding a reasonable set of comparators for local jobs should not prove difficult."
- The Scheme provided that the carrying out of the assimilation and assessment exercises at local level "must be undertaken jointly, and there must be the fullest involvement of both unions and management." Those involved in the exercises had to receive appropriate training. The Scheme summarised itself as follows:
"Summary
18. Bringing jobs onto the new structure is a two stage process. In the first for national jobs there should be a check to ensure that the job being done in the authority fits broadly with the national outline for the job. If it does then there is no problem. If it does not, then the part of the process that applies to local jobs – job comparison – should similarly be undertaken.
19. For local jobs factor comparison with appropriate national jobs should be used. This involves building up a score for the job in each factor using the scores of comparable national jobs, thereby enabling the job to be placed in the structure.
20. The joint process of bringing jobs onto the structure will depend essentially on the judgement and goodwill of the parties and must be completed speedily. It is only where there are clear and major differences between the national outline and the job being carried out in the local authority that there may be any need to undertake a closer examination of such jobs by applying the process of factor comparison which we recommend for local jobs."
- Islington adopted the Scheme, it organised training and it established job evaluation panels comprising both sides of industry. Evidence about this was given by Karen Birsinger, a trained job evaluator on the union side. She was one of the four-member management/union panel which evaluated the job of assistant caretaker by carrying out a factor comparison, the result being shown by the panel's analysis sheet of 22 June 1988. The assessment was required because no position equivalent to that of assistant caretaker was evaluated nationally in the Scheme.
- The respondents' case before the tribunal was that the Scheme required the assessment of the assistant caretaker post to be carried out by way of a factor comparison with the closest of the 37 national jobs, and that only those jobs could be used as comparators. The evidence showed that, in evaluating the job of assistant caretaker, the panel had compared it with four jobs, of which three were within the group of 37: housing caretaker, assistant school caretaker and road sweeper. But the panel also compared it with a fourth job, which was not one of the 37. The fourth job was a jobbing assistant post which had previously been assessed and evaluated under the Scheme by a joint panel. The respondents' case was that this involved a departure from the Scheme which was sufficiently material so to vitiate the evaluation of the assistant caretaker post that it could not be said that it had been evaluated under the same single job evaluation "study" as had the applicants' jobs. Their jobs and that of the assistant caretaker had, in effect, been evaluated by reference to two studies.
The tribunal's decision
- The tribunal rejected that submission. They noted that the scores of the jobbing assistant post were broadly in line with the other three comparator posts. They said that the joint panel had "thought it right to use a post which itself had been evaluated by reference to national model jobs and brought on to the local structure. They were not using a post which had not itself been evaluated. There was no suggestion in the evidence before us that the Jobbing Assistant post had been incorrectly scored or graded when it was evaluated,…". The tribunal said in paragraph 2 of its reasons that:
"(o) We do not accept, in these circumstances, that we should assume that the evaluating of the Jobbing Assistant was in error, given the period of time which has elapsed since it was done and there being no evidence of any complaint. We also find that the NJC Scheme, adopted as a Local Agreement, is intended to be a living structure to which jobs are added at local level from time to time by the process of assessment. Consequently, we find that it is not unnatural for such jobs to be considered in the process of assessment by factor comparison.
(p) We do not accept the Respondents' argument, therefore, that there was intolerable scope for error in the assessment process for the Assistant Caretaker post, such that the evaluation was fatally flawed.
(r) We do not find that it can be successfully argued in relation to the Jobbing Assistant post that, by its inclusion in the factor comparison, the post of Assistant Caretaker was not evaluated under the NJC Scheme."
The cross-appeal against that decision
- Mr Lynch, for the respondents, submitted that in coming to this conclusion the tribunal fell into error. He said there are strict requirements for what will constitute a "study" for the purposes of section 1(5). Proof that a woman's job has been rated as equivalent to a man's under such a study will (subject to any section 1(3) defence) entitle her to win her equal pay claim, so that the consequences of a valid evaluation being in place are potentially far-reaching. Because of this, he said that the requirements for a relevant "study" are rigorous. He referred to Eaton Ltd. v. Nuttall [1977] ICR 272, a decision of this appeal tribunal. In his judgment, Phillips J said at 277:
"It seems to us that subsection (5) can only apply to what may be called a valid evaluation study. By that, we mean a study satisfying the test of being thorough in analysis and capable of impartial application. It should be possible by applying the study to arrive at a position of a particular employee at a particular point in a particular salary grade without taking other matters into account except those unconnected with the nature of the work. It will be in order to take into account such matters as merit or seniority, etc., but any matters concerning the work (e.g. responsibility) one would expect to find taken care of in the evaluation study. One which does not satisfy that test, and requires the management to make a subjective judgment concerning the nature of the work before the employee can be fitted into the appropriate place in the appropriate salary grade, would seem to us not to be a valid study for the purpose of subsection (5)."
- Mr Lynch also referred to Bromley and Others v. H & J Quick Ltd [1988] ICR 623 as Court of Appeal authority that an "analytical" approach must be shown to have been taken in relation to all jobs covered by the study. Dillon LJ said, at 633:
"What section 1(5) does require is, however, a study undertaken with a view to evaluating jobs in terms of the demand made on a worker under various headings, for instance effort, skill and decision. To apply that to section 2A(2)(a) it is necessary, in my judgment, that both the work of the woman who has made the application to the industrial tribunal and the work of the man who is her chosen comparator should have been valued in such terms of demand made on the worker under various headings. Mr Lester submitted that the method used on undertaking a study within section 1(5) must necessarily be analytical, a word he used in the sense of describing the process of dividing a physical or abstract whole into its constituent parts to determine their relationship or value. Sir Ralph Kilner Brown criticised the use of the word analytical as a gloss on the section. In my judgment, the word is not a gloss, but indicates conveniently the general nature of what is required by the section, viz. that the jobs of each worker covered by the study must have been valued in terms of the demand made on the worker under various headings."
- Mr Lynch moved to the further submission that section 1(5) shows that the applicant's and the comparator's job must have been evaluated under the same study, the relevant words being "her job and their job have been given an equal value, … on a study …". He said that approach makes substantive and practical sense. If different evaluative approaches are applied to the rating of the applicant's and comparator's jobs, a rating of their jobs at the same grade cannot be said to have been carried out under the same job evaluation study. Such a study, Mr Lynch said, will have a number of features. It will identify the headings under which jobs are to be assessed (for example, skill, effort, complexity) and will identify the system under which marks are to be awarded to those factors. It may involve a particular system of "weighting", giving different values to the various factors that the jobs exhibit, and will involve a definition of the span of grades.
- Turning to the Scheme, Mr Lynch submitted that three fundamental principles can be derived from it. First, paragraphs 10 to 12 (earlier quoted) show that the process of assessment by way of factor comparison requires a mandatory comparison with the closest national jobs, i.e. one or more of the 37 nationally evaluated jobs. He referred to the six uses of the word national in those paragraphs, and to the mandatory terms of the last sentence of paragraph 10. Secondly, the Scheme required local job evaluations to be carried out by a panel including both management and union representatives. Thirdly, those involved in the process had to be trained.
- Mr Lynch said the tribunal's findings showed that the panel evaluating the assistant caretaker post did not make a factor by factor analysis with the nationally evaluated jobs, because it used the jobbing assistant post in the analysis, one which had not been evaluated nationally but only locally. He submitted that the inclusion of this post for comparative purposes involved a material departure from the requirements of paragraphs 10 to 12, under which only the nationally evaluated jobs provided a reliable source of expert data for the purposes of the local assessment. He said it followed that the job of assistant caretaker was not evaluated in accordance with the Scheme.
- This meant, Mr Lynch said, that it also followed that the applicants' posts and that of assistant caretaker were not evaluated under, pursuant to or in accordance with the same "study". He submitted that, having found the primary facts they did, the tribunal had no choice but so to conclude. Instead, the tribunal addressed themselves to the consideration of whether the admitted departure from the Scheme involved such a deviation from it as to taint the whole process of the evaluation and, having done so, found that it had not. Mr Lynch submitted that this was to pose the wrong question, the right one being whether the relevant evaluations had been carried out under the same study. He criticised the tribunal's observations in paragraph 2(o) of their reasons (earlier quoted) to the effect that the Scheme was a living instrument. He said that if by this the tribunal meant that the assessment of jobs at local level under the Scheme could be carried out in part by reference to jobs other than the 37 nationally evaluated job, that was inconsistent with the requirements of the Scheme and was wrong.
- In support of the tribunal's decision, Mr Ford accepted that the question for the tribunal was whether the applicants' posts and that of assistant caretaker had been evaluated "on a study" within section 1(5), meaning the same study. But he submitted that the question so raised for the tribunal was the paradigm of a question of fact. He said that the tribunal had found that all the jobs had been so evaluated, a finding which he said cannot be questioned before us. He accepted that the assistant caretaker post had been evaluated by comparison with a job - that of jobbing assistant - which was not one of the 37 national jobs, and recognised that this involved a departure from the Scheme. But he said that it is not the case that every departure, however minor, from the terms of the Scheme in the evaluation of a particular job means that the job has not been evaluated under or in accordance with the Scheme. Whether the particular departure has or has not produced this result is a question of fact and degree in each case, and Mr Ford submitted that the tribunal was entitled to conclude, as it did, that Islington's evaluation of the assistant caretaker post was carried out under the same "study" as that of the applicants' posts. The evidence from Mrs Birsinger was that the evaluating panel used the jobbing assistant post because it was very similar to the assistant caretaker post, and there was no dispute within the panel about the method adopted, nor was there any suggestion that the jobbing assistant post had itself been incorrectly evaluated. Mr Ford said that any breach of the Scheme in relation to the evaluation of the assistant caretaker post was minimal and of no practical importance.
- Mr Ford also submitted that the Scheme anyway did not impose mandatory requirements for the assessment of jobs which could not be "assimilated" to national jobs. He relied upon the penultimate sentence of paragraph 9 of the Scheme (earlier quoted) as supporting the proposition that it was open to Islington to decide upon its own local procedures for job assessments. He also relied upon the second sentence of paragraph 20 (also quoted), which he said showed that the process of factor comparison by reference to national jobs was merely something that was recommended, not a process which was set in stone.
- Coming now to our conclusions, we regard it as clear that, for the purposes of section 1(5), the evaluation of the applicants' jobs and that of assistant caretaker had to be carried out under a particular "study," and that must mean the same study. Were it otherwise, different jobs would or might be evaluated by reference to different criteria, with the result that a comparison between the results would not be one of like with like. There is no doubt that in this case the "study" adopted by Islington was the Scheme. There is also no doubt how the Scheme was required to be operated at local level. In particular, as regards the "assessment" of local jobs which could not be "assimilated" to any of the 37 model national jobs, a factor comparison was required with the closest national jobs (paragraph 10 of the Scheme). We do not accept Mr Ford's submission that this (and other requirements) of the Scheme were merely recommendations from which local departure was permissible in the assessment of jobs. If that were so, the Scheme would be of little worth. We accept that the Scheme was not mandatory in the sense that either Islington or any other local authority was bound to adopt it. But, if it was adopted, it had to be applied uniformly, and according to its terms, since otherwise the job evaluations carried out under it could not be said to be carried out under it as a single "study".
- In the present case, there is no doubt that Islington did adopt the Scheme and purported to evaluate the relevant jobs under it. The evaluation of the assistant caretaker post was, however, assessed it by reference to three national model jobs and also to a fourth non-national model job. In the last respect, the assessment involved a clear departure from the Scheme. We are disposed to agree with Mr Ford that, in principle, not every such departure will necessarily compel a conclusion that the relevant evaluation was not carried out under the "study" represented by the Scheme. We agree this will usually raise a question of fact as to the materiality of the departure.
- We have found ourselves divided as to the materiality of the departure in this case. Mr Jacques, who is in the minority, favours the view that the use of the jobbing assistant post as a comparator did not involve a material departure. It was only one of four comparisons used in the exercise, and was itself a job which had earlier been locally evaluated under the Scheme. He would uphold the tribunal's decision.
- The majority prefers the view that for the panel to evaluate the assistant caretaker post by reference to four comparator posts, of which one was not a national model post, did involve a material departure from the requirements of paragraph 10 of the Scheme. The majority does not regard it as a departure that can be dismissed as minimal or trivial. It involved the deliberate inclusion of an impermissible comparator post for the purpose of assessing the assistant caretaker post, and that comparator post can only have been so included on the basis that it was regarded as material for the purposes of the assessment. In the majority's view, therefore, it cannot be said that the evaluation of the assistant caretaker post was carried out under the Scheme, or therefore under the same "study" as that under which the evaluation of the applicants' posts was carried out.
- The majority is disposed to agree with Mr Ford that the relevant question for the tribunal – that is, same study or not - was in principle one of fact, but does not agree that it follows that this appeal tribunal has no jurisdiction to review the conclusion to which the tribunal came. The question was not one of primary fact, involving a finding based on the evidence adduced before the tribunal. The task for the tribunal was rather in the nature of one requiring it to make the primary findings as to the method by which the assistant caretaker post
was assessed, and then to make a secondary finding as to whether that method was or was not carried out under the same "study" as that under which the applicants' jobs had been evaluated. It appears to the majority, however, that the tribunal did not in fact embark on the latter part of that exercise at all. They interpret its conclusion to have been based on the reasoning that it was reasonable for the evaluating panel to make a comparison with the jobbing assistant post, since (a) no complaint had been made of the evaluation of this post, and (b) the Scheme was a "living instrument" which permitted factor comparisons to be made with jobs which had been so evaluated locally.
- In the view of the majority, the tribunal was in error in so approaching the issue. They consider that it was an error to regard the Scheme as the type of living instrument the tribunal identified, and disagree that it was permissible under the Scheme to assess local jobs by a factor comparison with any jobs other than the 37 national jobs. That approach is out of line which paragraph 10 of the Scheme. In their view, the correct question for the tribunal was: "Did the method the panel adopted for the evaluation of the assistant caretaker post involve a material departure from the Scheme such that it could not be said that the evaluation was carried out under that Scheme?" The majority are of the view that that question admits only of the answer yes. They therefore allow the cross-appeal.
- We turn to the appeal, to which most of the argument before us was devoted. Having regard to our above conclusion, it follows, however, that the tribunal's decision must be affirmed, whatever our decision on the appeal.
(b) Was the tribunal in error in holding that the Respondents had established the "genuine material factor" defence under section 1(3) of the EqPA?
The background facts
- The tribunal found that, as at 20 July 2000, 67.7% of municipal cleaners and 67.7% of school cleaners were women; and that as at 1 April 2001, 94% of kitchen assistants were women. They found that about 87% of assistant caretakers were male. The applicants were representatives from each of the first three groups, being groups which consisted predominantly of part-time workers, who tended to be women. The job of assistant caretaker, the comparator post, tended to be viewed as suited to men although in about 1995 Islington made unsuccessful efforts to encourage more women into the caretaking service. The tribunal specifically found that Islington had taken all reasonable steps to promote equal opportunities in the workplace and to outlaw discrimination.
- It was common ground that the applicants are paid at hourly rates significantly above average market rates for comparative work in the public and private sector. It was also common ground that their hourly rates were below those enjoyed by assistant caretakers. This was because the latter enjoy an incentive bonus scheme which the applicants do not. This scheme dates from the 1960s. Following the merger of the two former Metropolitan Boroughs of Finsbury and Islington into the single London Borough of Islington, Islington commissioned a survey that revealed a disparity between the performance levels of the caretaking staff at Finsbury and Islington. As a result, Islington decided to introduce an incentive bonus scheme directed at raising both performance and standards from the existing low levels being delivered by many caretakers in the former Metropolitan Borough of Islington. Approval of the scheme had to be, and was, obtained from the Central Government Pay and Productivity Board. Employers who wished to pay their employees more wages had to produce a bonus scheme linked to increased productivity.
- The scheme was set out in a so-called "Buff Book", and was agreed with the trade unions, as were various changes made to it in the 1970s and 1980s. Its effect was to provide for incentive payments to caretaking staff provided that they performed a specific set of tasks at defined frequencies as set out in Part II of the Buff Book. The evidence before the tribunal was that the establishment, for the first time, of a specific list of tasks was central to the scheme introduced by the Buff Book, and the tribunal described the specification as "intended to have the effect of raising the performance of many of the Caretaking Staff from levels as low as 60% of what should have been delivered to a level of 133%, in order to achieve the bonus." The tribunal found, in paragraph 5 of its reasons, that:
"(vii) The aims of the scheme … was [sic] the introduction of management control whereby performance standards could be supervised and significantly raised, whilst at the same time enabling the Caretaking Staff to receive increased earnings. These aims were agreed by both management and the trade unions.
(viii) A sanction of not paying the full or any bonus was provided by the scheme, which stated that bonus was payable for 'standard performance'. It was a task-type scheme linked to the performance of specific duties at stated frequencies. It was to be evidenced by weekly job sheets (tick sheets) to be completed by the Caretaking Staff (both Assistant and Resident Caretakers) and supervised by means, inter alia, of management quality control sheets identifying any concerns. …".
- The material provisions of the scheme were as follows. Section 2 set out certain General Conditions:
"Basis of Scheme
2.2. The scheme is straight proportional and based on the principle of an average person having the opportunity to earn bonus of 33 1/3% at the appropriate bonus rate (including service supplement and plus rates for skill and responsibility) as bonus for 'standard performance'.
Type of Scheme
2.3. The scheme is a 'task type'. The basic principle as outlined in paragraph 2.2 has been applied when calculating Caretaker and Assistant Caretaker workloads.
Maximum Bonus
2.4. In order to safeguard health, equipment and quality of work the maximum bonus rate for Caretakers and Assistant Caretakers will normally be set at 33 1/3 on cleaning duties.
Payment of Bonus
2.5. Bonus will be paid weekly in arrears of wages, to allow necessary time for calculation.
Range of Work
2.6. The incentive scheme covers the work of cleaning and management duties involved for all estates and other nominated residential buildings. A detailed list of all duties to be undertaken is given in Appendix 'A'.
Method Changes
2.7. When methods, equipment etc., are altered, Management Services will restudy the work as necessary to determine the effect on the allowed times. Before any study work or changes take place the normal consultative procedures will be carried out."
- Section 3 dealt with the method of working, and section 4 set out the "Operating Instructions" and provided in part:
"Range of Tasks and Frequencies
4.1. The range of tasks and frequencies are shown on the revised weekly estate work sheet.
Details of Scheme
4.2. The average weekly bonus for Caretakers & Assistant Caretakers equates to approximately 33 1/3% and will be paid in proportion to the hours worked …
Quality of Work
4.5. All work that is completed must be certified by the Superintendent and must be of acceptable quality. The Superintendent Caretaker will make examinations in depth at regular intervals and forward their report to Management. Work found to be of unacceptable quality must be rectified otherwise time may be deducted from the total bonus of the individual concerned. …
Weekly Job Sheets
4.8. Weekly job sheets will be completed by each Caretaker, and Assistant Caretaker and will be used for management control data.
Clockhours
4.9. A weekly record of attendance hours worked by all staff will be maintained in the Housing Department for bonus calculation and Management Control purposes.
Bonus Sheet
4.10. A weekly bonus summary sheet (with a copy for office file) will be produced weekly by the Housing Department and forwarded to the Director of Finance (Wages Section). …".
- Section 5, headed "Management Control Information", provided in part:
"'Call Out' Hours
5.3. The number of 'call out' hours should be noted and trends explained as this is an additional cost to the level of service.
5.4. The number of bonus hours deducted and number of substantiated complaints received from tenants for poor quality of work will give a further indication of the level of service achieved."
- Appendix A listed some 28 duties required to be performed by caretakers and identified the frequency of their required performance.
- The tribunal heard evidence from Mr Riley, a former Principal Management Services Officer with Islington, who was closely concerned with the operation of the incentive bonus scheme from about 1968 to 1988. His evidence was, and the tribunal found, that during this period the scheme was well supervised by a team of superintendent caretakers, who operated it through a system of tick sheets and management quality control sheets. The tribunal found that significant improvements in productivity from the caretaking staff were achieved, which was to the general benefit of the tenants on the housing estates where they worked.
- The tribunal found that in the late 1980s, following the Riley era, the practice of caretaking staff completing weekly tick sheets as evidence of performance fell into disuse. The tribunal also found, however, that supervision of the caretakers by superintendent caretakers continued until a reorganisation which took place in 1995. What then happened was that, as the tribunal found, in paragraph 5:
"(x)… the supervision of Caretaking Staff was added to the responsibility of the Estate Managers in the Housing Department, in connection with a compulsory competitive tendering exercise in which the [Islington] staff were awarded the estates cleaning contract for a five-year period. The post of Superintendent Caretaker was rendered redundant in the reorganised structure for the cleaning contract, under which the Housing Estate Managers were able to devote only approximately 10% of their time to the supervision of the Caretaking Staff. The bulk of their time was devoted to their other responsibilities in the Housing Department.
(xi) The effect of this reduced level of supervision was that, during the period up to October 1999, the performance levels and standards of cleaning by the Caretaking Staff on the housing estates declined. The Tribunal heard evidence about two individual Caretakers (Mr P. Owen and Mr G. Doolan), both of whom were trade union representatives, in whose case there was ample evidence of poor levels of performance and standards. In neither case did this result in reduction of bonus payments. These continued to be paid despite obvious failures to respond to management concerns expressed in quality control sheets, letters from Estate Managers and, in the case of Mr Owen, oral interviews.
(xii) In the period before the estates cleaning contract was awarded, the Superintendent Caretakers would from time to time exercise the sanction of suspending and/or stopping altogether hours from Caretakers' pay, including bonus, pending enquiries into poor performance. After the 1995 reorganisation, the Estates Managers did not do this. A presumption apparently developed among some of the Caretaking Staff whereby the bonus payment came to be regarded as inviolable and a payment as of right."
- These findings might suggest that, following the 1995 reorganisation, the Buff Book became something of a dead letter. The tribunal's findings make it clear that there was a decline in standards and performance by the caretaking staff, but the tribunal also found that the Buff Book still continued to provide the relevant performance yardstick. Their further findings about the post-1995 period were that:
"(xiii) However, the Buff Book, continued to be the yardstick against which the performance levels of the Caretaking Staff were judged by management. Its terms were incorporated as the specification required under the estates cleaning contract, and it was referred to on occasions by Estates Managers in their supervisory dealings with Caretaking Staff.
(xiv) Thus, for example, in July 1997 Mr P. Owen was informed by Estates Manager, Ms Linda Potter, that 'you have not been carrying out your duties this week …. as detailed in the buff book'; and Mr Doolan was written to by Estates Manager, Ms Coghiel, in August 1995 requiring him to carry out tasks 'as laid down in the caretaking quality manual'.
(xv) The Tribunal heard of numerous examples relating to the work performance of Mr Owen throughout the 1990s whereby there were concerns raised by management as to the quality of his work and attempts made to raise his performance levels to those required by the Buff Book. These examples were evidenced by documents such as management quality control check sheets and internal memoranda and included notes of disciplinary interviews held on occasions.
(xvi) The fall in the performance levels of the Caretaking Staff and the rise in levels of complaints from tenants resulted in a decision taken by [Islington] in October 1999 to end the estates cleaning contract prematurely. An immediate consequence was to restore a team of Caretaker Managers who were given an exclusively supervisory role, similar to the former Superintendents, to uphold the performance levels and standards set in the Buff Book.
(xvii) Between 1999 and 2001, [Islington] undertook a review of the Caretaking Services, which led to a restructuring in about September 2001. The Assistant (now classified as Non-Residential) Caretakers by agreement with management and the trade unions now carry out duties under a new job description rather than by reference to the duties specified in the Buff Book. As regards the remuneration of Non-Residential Caretakers, the incentive bonus scheme no longer applies and the former bonus payments have been consolidated into normal earnings.
(xviii) The Resident Caretakers have been unwilling to accept the new arrangement which deletes the incentive bonus scheme. The scheme still remains as part of the Resident Caretakers' remuneration package, based on the Buff Book duties."
- Having found that the applicants' work was rated as equivalent with that of an assistant caretaker, the tribunal held that it followed that in principle an equality clause was to be implied into the applicants' contracts entitling them to terms no less beneficial as regards pay as were enjoyed by the comparator. However, whether it should be implied was still subject to the respondents' "genuine material factor" defence under section 1(3) of the EqPA, namely that the variation as between the applicants' contracts and the comparator's contract was "genuinely due to a material factor which is not a difference of sex", being a factor that was a material difference between the applicants' case and the comparator's.
- In approaching this question, certain basic principles about section 1(3) are common ground. It must be interpreted in accordance with Article 141, and the onus is on the employer to establish the defence. The burden so imposed was summarised as follows by Lord Nicholls of Birkenhead in the leading speech he delivered in Glasgow City Council and Others v. Marshall and Others [2000] ICR 196, at 202:
"The scheme of the [EqPA] is that a rebuttable presumption of sex discrimination arises once the gender-based comparison shows that a woman, doing like work or work rated as equivalent or work of equal value to that of a man, is being paid or treated less favourably than the man. The variation between her contract and the man's contract is presumed to be due to the difference of sex. The burden passes to the employer to show that the explanation for the variation is not tainted with sex. In order to discharge this burden the employer must satisfy the tribunal on several matters. First, that the proffered explanation, or reason, is genuine, and not a sham or pretence. Second, that the less favourable treatment is due to this reason. The factor relied upon must be the cause of the disparity. In this regard, and in this sense, the factor must be a 'material' factor, that is, a significant and relevant factor. Third, that the reason is not 'the difference of sex.' This phrase is apt to embrace any form of sex discrimination, whether direct or indirect. Fourth, that the factor relied upon is, or in a case within section 1(2)(c), may be a 'material' difference, that is, a significant and relevant difference, between the woman's case and the man's case.
When section 1 is thus analysed, it is apparent that an employer who satisfies the third of these requirements is under no obligation to prove a 'good' reason for the pay disparity. In order to fulfil the third requirement he must prove the absence of sex discrimination, direct or indirect. If there is any evidence of sex discrimination, such as evidence that the difference in pay has a disparately adverse impact on women, the employer will be called upon to satisfy the tribunal that the difference in pay is objectively justifiable. But if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity."
- Lord Nicholls's observations as to the circumstances in which the employer will need to provide objective justification of the pay disparity echo the words of Lord Browne-Wilkinson in the earlier decision of Strathclyde Regional Council and Others v. Wallace and Others [1998] ICR 205, at 212H, namely that:
"… even where the variation is genuinely due to a factor which involves a difference of sex, the employer can still establish a valid defence under subsection (3) if he can justify such differentiation on the grounds of sex, whether the differentiation is direct or indirect."
The arguments before and conclusion of the employment tribunal
- Mr Ford conceded before the tribunal that the respondents had established that a genuine cause for the original difference in pay lay in the need in the 1960s to increase the standards and performance of the caretaking staff. Paragraph 7(e) of the tribunal's reasons also records that it was no part of the applicants' case that they had at any time been the victims of any form of sex discrimination by Islington, whether direct discrimination or indirect discrimination within the meaning of section 1(2)(b) of the Sex Discrimination Act 1975 ("the SDA"). It was, however, part of their case that they had been the victims of discrimination for the purposes of Article 141.
- The applicants' case was that although the introduction of the bonus scheme for caretakers in the 1960s was genuinely linked to increased productivity and standards, that no longer applied after 1995. Their case was that after then bonus scheme was no longer linked to performance since the evidence showed that poor performance did not lead to any reduction in bonus. Thus, by 1995, it could no longer be said that the difference in the pay rates enjoyed by the caretakers as compared with those enjoyed by the applicants was genuinely due to a material factor not being a difference of sex.
- The tribunal accepted that a lapse in standards and performance was suffered during what they called "the unsuccessful reorganisation of the supervision under the estate cleaning contract." They found that the decision to dispense with close supervision by superintendents during this period proved to be a mistake, one which Islington recognised in October 1999 and reversed. However, the tribunal also found that the variation in pay enjoyed by the caretakers was not only originally (and genuinely) due to a material factor unrelated to any sex difference, but that it had at all times remained so due. The finding was that the relevant factor was "the objective of securing and maintaining high levels of performance and standards in the cleaning work of Assistant Caretakers." The tribunal's further finding was that the lapse in supervision during the post-1995 period did not cause this objective to cease. The tribunal's findings in paragraph 7 on these matters were as follows:
"(g) With regard to these two Caretakers, as against the obvious evidence of poor workmanship, we note however the considerable evidence contained in bundles C and E of attempts by management at various times to ensure compliance with the duties in the Buff Book, upon which the incentive bonus scheme was based.
(h) We are satisfied that a lapse in performance levels and standards was permitted during the unsuccessful reorganisation of supervision under the estate cleaning contract. We are satisfied that the decision to dispense with close supervision by Superintendents and to add their role to the numerous responsibilities of Estate Managers in the Housing Department proved to be a mistake. This mistake was eventually recognised in October 1999 and, in effect, was reversed.
(i) We are satisfied that this lapse in good management and supervision of the Caretaking Staff did not cause the objective of high levels of productivity and standards to cease being the reason for the difference in pay between the comparator and the Applicant groups. There is ample evidence of the fact that, despite the shortcomings of the supervision system during the period of the estate cleaning contract, both management and trade unions recognised that the satisfactory performance by the Caretakers was always to be measured by the yardstick of the Buff Book.
(j) We take into account the evidence of the Caretaker Manager, Mr Evans, who was formerly a Caretaker himself before becoming a Superintendent Caretaker. In his latter role he preferred to discuss concerns with his supervisees and talk problems through, rather than react by immediately cutting bonus payments. On occasions he did suspend and sometimes cut hours altogether when appropriate, which would have the knock-on effect of reducing bonus. He believed that other supervisors acted in a similar way, although he believed Estate Managers, when they were entrusted with supervision, may have been unaware of their power to deduct bonus because of their lack of training in the role which they took over from the Superintendents.
(k) From the early 1990s poor performance has not consistently been visited with deduction of bonus. We accept on the other hand the evidence of Mr Evans of his practice of suspending and deducting hours on occasions for poor performance. We note in this regard that the provisions of the Buff Book state that: '… time may be deducted from the total bonus.
(l) The reason for the introduction of the incentive bonus scheme was, therefore, in order to bring about and maintain improved levels of performance and standards in the cleaning duties of Caretaking Staff whereby, as a consequence, Caretakers could be awarded increased earnings at a time when they had to be linked to increases in productivity. …
(p) Accordingly, we are satisfied that the Respondents have established that the variation in pay was, and has remained, genuinely due to a material factor which is not related to the gender of the Applicants or the comparator, namely the objective of securing and maintaining high levels of performance and standards in the cleaning work of Assistant Caretakers."
- The tribunal's finding was, therefore, that the pay variation between the applicants' and the comparator's contracts was both originally and at all times since (including during the post-1995 period) genuinely due to a material factor which was not a difference in sex. On the face of it, that meant that the respondents succeeded in their defence under section 1(3).
- The applicants, however, also advanced the further argument that on the particular facts of the case the respondents needed to show an objective justification for the material factor relied upon, whereas it was said that they could not do so. We have referred to the guidance given by Lord Nicholls in Glasgow, to the effect that the employers will be put to the task of objective justification of the differentiating factor in cases in which "there is any evidence of sex discrimination, such as evidence that the difference in pay has a disparately adverse impact on women, …". We have explained that the applicants disclaimed any suggestion that they were the victims of any relevant direct or indirect sex discrimination within the meaning of the SDA. Their case was, however, that the statistics we gave earlier showed that the worker groups to which the applicants belonged were predominantly female (67.7% of municipal cleaners and 67.7% of school cleaners were women, and 94% of kitchen assistants were women) as compared with the worker group to which the comparator belonged, which was predominantly male (87% were men). These facts were sufficient, Mr Ford submitted, to require an objective justification by the respondents of the pay difference, because they showed that a predominantly male worker group enjoyed a pay advantage over predominantly female worker groups.
- This argument took the tribunal into the territory of the decision of the European Court of Justice in Enderby v. Frenchay Health Authority and Another [1994] ICR 112. Mr Lynch conceded before the tribunal that that decision showed that, in circumstances in which the disadvantaged group is made up "almost exclusively by women", objective justification of the differentiating factor will be required. He further conceded that the kitchen assistants were "almost exclusively" women, so that objective justification needed to be shown as regards them. He disputed, however, that either the municipal or school cleaners could be regarded as made up "almost exclusively" of women, and submitted that in their case no objective justification was required: all that the Islington needed to prove was that the cause of the pay difference was genuinely due to a "material factor." The tribunal accepted this submission and rejected Mr Ford's submission that the decision in British Road Services Ltd v. Loughran and others [1997] IRLR 92 required them to interpret Enderby as imposing on Islington the burden of proving objective justification also as regards the groups of municipal and school cleaners.
- The tribunal held, therefore that the respondents needed to show objective justification for the pay difference as regards the kitchen assistants, but not as regards the municipal or school cleaners. They found that the respondents had discharged the burden of showing such justification. Their conclusions in paragraph 7 were as follows:
"(x) We find that the Respondents have established objective justification in that the material factor of seeking to bring about and maintain high levels of productivity and standards of work by means of an incentive bonus scheme, on the facts of this case was both a necessary and appropriate step for [Islington] to take in order to achieve their objective of providing an efficient Caretaking Service for the tenants on their housing estates. On the evidence put before us we find that the payments made to the Applicant groups are consistent with the public duty of [Islington] not to permit contractual terms of payment which are 'irrationally generous or unreasonably in excess of a fair or market rate', a principle laid down in Eastbourne BC v. Foster [2001] LGR 529.
(y) The Buff Book Scheme has been shown to be an appropriate method by which [Islington's] management have been able to raise levels of performance and standards of cleaning work by Assistant and Resident Caretakers. The possible sanction of withdrawal of bonus has always remained an aspect of the scheme, albeit rarely used.
(z) In holding that the Respondents have therefore shown objective justification of the material factor that we have found caused the variations in pay between all Applicant groups and the comparator, we have borne in mind that the respective pay arrangements have been negotiated throughout a period in excess of 30 years by collective bargaining process between management and the trade unions acting for the respective groups."
The appeal against that decision
- Mr Ford submitted that the tribunal erred: (1) in holding that it was necessary for the respondents to prove objective justification for the pay differential only in relation to the kitchen assistants, and not in relation to the two groups of cleaners; (2) in their application of the objective justification test; and (3) in holding that the bonus scheme continued to be the cause of the pay difference after 1995. We will deal with each submission in turn.
(a) When must objective justification be shown?
- Given Mr Lynch's concession in relation to the kitchen assistants, this question only arises as regards the municipal and school cleaners. Mr Ford said that objective justification of the pay differential will be required in any case in which there is evidence of direct or indirect sex discrimination in relation to the difference in pay. This will arise, for example, if the pay differential has a disparately adverse effect on women because it affects a considerably or substantially higher proportion of women than men, or a far greater number of women than men. He referred us to authorities said to support that, and also advanced a submission based on the Burden of Proof Directive (Council Directive 97/80/EC).
- Article 2 of the Directive provides:
"Definitions
1. For the purposes of this Directive, the principle of equal treatment shall mean that there shall be no discrimination whatsoever based on sex, either directly or indirectly.
2. For purposes of the principle of equal treatment referred to in paragraph 1, indirect discrimination shall exist where an apparently neutral provision, criterion or practice disadvantages a substantially higher proportion of the members of one sex unless that provision, criterion or practice is appropriate and necessary and can be justified by objective factors unrelated to sex."
Article 3 of the Directive shows that it applies (inter alia) to situations covered by Article 141 of the EC Treaty.
- Mr Ford submitted that the present case was one of indirect discrimination within the meaning of Article 2.2 of the Directive because he said that Islington's practice of paying bonuses to assistant caretakers and not to the predominantly female cleaners was an "apparently neutral … practice" which disadvantaged a substantially higher proportion of women than men.
- We do not accept that submission. The language of Article 2.2 is relevantly akin to that in the definition of indirect discrimination in section 1(2)(b) of the SDA, namely the case in which an apparently neutral "provision, criterion or practice" detrimentally, and unjustifiably, disadvantages "a considerably larger proportion of women than of men …". We have already noted that the tribunal recorded that the applicants did not argue that Islington had been guilty of any indirect discrimination against them by the application of any "provision, criterion or practice which has a disproportionate impact upon women, which was to the detriment of the Applicants." Despite this, the applicants now seek to make such a point on this appeal by reference to the Directive. We have some doubts as to whether it is open to them to do that (although Mr Lynch did not in fact so argue), but we anyway agree with Mr Lynch that the facts do not support the submission. Islington imposed no "provision, criterion or practice" which militated against women becoming assistant caretakers and so enjoying the bonus. The job was as open to them as to men, and we consider that it is nothing to the point that only a relatively small proportion of women as compared with men chose to take it up. It follows that we disagree with Mr Ford's submission that the relevant discriminatory "practice" was that of paying bonuses to caretakers. Mere difference in the pay levels of a caretaker's job cannot be a relevant "practice" for the purposes of section 1(2)(b) of the SDA or Article 2.2 of the Directive. Any "practice" disadvantaging women has to be one in the way of getting the job in the first place.
- The rival positions between the parties on the remainder of this part of Mr Ford's submission can therefore be summarised as follows. Mr Ford's submission is that, in order to impose a burden of proof of objective justification on the employer, it is enough if the pay differential affects a considerably or substantially higher proportion of women than men, or a far greater number of women than men, and that there is no need for the complainant to show first that the pay difference is referable to some narrowly categorised form of indirect sex discrimination on the part of the employer. Mr Lynch's position is that the employer is only required to provide objective justification for the pay difference (a) where there is a prima facie case of indirect discrimination within the meaning of article 2.2 of the Directive or section 1(2)(b) of the SDA, and (b) in the unique type of case which arose in Enderby, to which decision we shall come.
- Mr Ford referred us to various authorities in support of his proposition. He relied upon the judgment of the European Court of Justice in the equal pay case of Bilka-Kaufhaus GmbH v. Weber Von Hartz [1987] ICR 110. The court there held that:
"31. … article 119 [now 141] of the EEC Treaty is infringed by a department store company which excludes part-time employees from its occupational pension scheme, where that exclusion affects a far greater number of women than men, unless the undertaking shows that the exclusion is based on objectively justified factors unrelated to any discrimination on grounds of sex."
- That passage must, however, be read in the context of the facts. Bilka was a case in which a qualification for membership of the employer's pension scheme required a minimum period of full-time employment, which Mrs Weber von Hartz claimed was unfairly discriminatory since women were more likely than men to take part-time work with the company. The company's response to her claim was that there were objectively justifiable economic grounds for the exclusion of part-time employees from the pension scheme. It appears to us that the case was therefore one in which the employer's pension qualification provisions were indirectly discriminatory against women. We consider that is how Lord Browne-Wilkinson regarded it in Strathclyde (see [1998] ICR 205, at 212). At pages 212/213, Lord Browne-Wilkinson also said that the EqPA has to be construed so as to work harmoniously with the SDA and article 141. We add that we interpret what he there said as being to the effect that it is not just in a case of indirect discrimination that it will be open to, and necessary for, the employer to provide objective justification, but also in a case of direct discrimination. He said, at page 212:
"The law on article [141], whilst recognising that in many cases there is a de facto distinction between direct and indirect discrimination, does not draw the same firm legal demarcation between the two as does the Sex Discrimination Act 1975 which permits justification of indirect discrimination but not of direct discrimination. The correct position under section 1(3) of the Equal Pay Act 1970 is that, even where the variation is genuinely due to a factor which involves the difference of sex, the employer can still establish a valid defence under subsection (3) if he can justify such differentiation on the grounds of sex, whether the differentiation is direct or indirect. I am not aware as yet of any case in which the European Court of Justice has held that a directly discriminatory practice can be justified in the Bilka sense. However, such a position cannot be ruled out since, in the United States, experience has shown that the hard and fast demarcation between direct and indirect discrimination is difficult to maintain.
From what I have said, it is apparent that, in considering section 1(3) of the Equal Pay Act 1970, the only circumstances in which questions of 'justification' can arise are those in which the employer is relying on a factor which is sexually discriminatory. There is no question of the employer having to 'justify' (in the Bilka sense) all disparities of pay. Provided that there is no element of sexual discrimination, the employer establishes a subsection (3) defence by identifying the factors which he alleges have caused the disparity, proving that those factors are genuine and proving further that they were causally relevant to the disparity of pay complained of."
- We regard Lord Nicholls's speech in the Glasgow case (a relevant part of which we quoted earlier) as being to the same effect. Applying the approach he there explained, it may be that the facts that (a) 87% of assistant caretakers were men, (b) 67.7% of cleaners were women, (c) that both caretakers and cleaners did work rated as equivalent, and (d) that the caretakers were paid more than the cleaners collectively raise a presumption of sex discrimination against the female element of the groups of cleaners. But Lord Nicholls explains that it is open to the employer to rebut any such presumption by showing that the reason for the pay difference is not the difference of sex, i.e. that it is not referable to any form of sex discrimination, whether direct or indirect. It is only if the employer is unable to rebut it that he is called upon, if he can, to provide objective justification of the pay difference. Lord Nicholls was therefore making clear that it will in principle be open to the employer to rebut the presumption by proving why the pay differential exists. At this point in the employer's case there is no obligation on him also to provide objective justification of the difference. The need for that only arises when and if he fails to show that the reason for the pay difference was "the difference of sex." Mr Ford's submission appears to us to involve the proposition that it is implicit in Lord Nicholls's speech that proof, for example, of the four facts we have just listed gives rise to an irrebuttable presumption of sex discrimination which required the employer to proceed direct to the proof, if he can, of its objective justification. It is not clear to us that it is so implicit. However, as we shall explain, we do not find it entirely easy to reconcile Lord Nicholls's explanation of the law with the approach of the European Court of Justice in Enderby.
- Mr Ford also relied on Harvest Town Circle Ltd v. Rutherford [2002] ICR 123. We do not regard that as supporting his submission either. The issue raised by the case was whether certain provisions of the Employment Rights Act 1996 were incompatible with Article 141 on the basis that they were indirectly discriminatory as between men and women. In giving the judgment of this appeal tribunal, Lindsay J recognised, at page 126, that:
"… such a national measure is to be regarded as indirectly discriminatory to the particular extent if it imposes a requirement which a considerably smaller percentage of women than men, or men than women, is able to fulfil and where the discriminatory measure is not justified by objective factors unrelated to any discrimination on the grounds of sex."
- That appears to be a conventional summary of what is embraced in the concept of indirect discrimination, and the judgment was thereafter devoted to a consideration of Article 2.2 of the Directive, in particular to the meaning of "a substantially higher proportion of the members of one sex …". After reviewing the authorities, Lindsay J listed seven principles he derived from them of which the last was:
"(vii) The employment tribunal, in such less obvious cases, after looking in detail at such figures as should have been laid before it, must then stand back, as it were, and, assimilating all the figures, is then to judge whether the apparently neutral provision, criterion or practice in issue has a disparate impact, being on men or women, that could be fairly be described as considerable or substantial."
- In our view, therefore, Rutherford does not support Mr Ford's proposition that a mere consideration of the statistics was enough to require Islington, in making good its section 1(3) defence, to provide objective justification of the pay difference.
- The Enderby decision is, however, one from which Mr Ford is able to derive support. The complainant was a woman speech therapist doing job A. She was employed in a profession in which the staff employed by the employer, X, were 98% female. The comparator was a male pharmacist who did job B. The majority of the X's employees performing job B were men. Jobs A and B were assumed for the proceedings to be of equal value in terms of the demands on the job holder. There was a finding by the industrial tribunal that there had been no direct or indirect sex discrimination in the collective bargaining processes which led to the respective terms of employment. However, the system of bargaining had had an adverse impact on the women since they were paid less than the male comparator. The questions the Court of Appeal posed for the European Court of Justice included (1) whether the principle of equal pay in article 141 required the employer to justify objectively the difference in pay between jobs A and B; and (2) if yes, could the employer rely as sufficient justification for the pay difference upon the fact that the pay for jobs A and B had been determined by different collective bargaining processes which did not discriminate on grounds of sex and did not operate so as to disadvantage women because of their sex.
- The Court of Justice ([1994] ICR 112, at 159) recorded that the industrial tribunal had concluded that the collective bargaining arrangements had not been discriminatory and that the resultant pay differences were not attributable to discrimination. At 160, it further explained the first question posed as being:
"… whether the principle of equal pay for men and women requires the employer to prove, by providing objective justification, that a difference in pay between two jobs assumed to be of equal value, of which one is carried out almost exclusively by women and the other predominantly by men, does not constitute sex discrimination."
- At 161, the Court of Justice explained that normally it is for the complainant to prove any discrimination he alleges, but that in certain cases of alleged indirect discrimination the onus may shift to the employer and require him to show that the matter complained of is based on objectively justified factors unrelated to discrimination on the grounds of sex. The Court of Justice referred by way of one example to Bilka, and as another to the type of case in which the pay system is so lacking in transparency that it is for the employer to prove that the lower pay received by women workers is not discriminatory. The Court of Justice went on to dispose of the first question as follows:
"15. In this case, as both the health authority and the United Kingdom observe, the circumstances are not exactly the same as in the cases just mentioned. First, it is not a question of de facto discrimination arising from a particular sort of arrangement such as may apply, for example, in the case of part-time workers. Secondly, there can be no complaint that the employer has applied a system of pay wholly lacking in transparency since the rates of pay of National Health Service speech therapists and pharmacists are decided by regular collective bargaining processes in which there is no evidence of discrimination as regards either of those two professions.
16. However, if the pay of speech therapists is significantly lower than that of pharmacists and if the former are almost exclusively women while the latter are predominantly men, there is a prima facie case of sex discrimination, at least where the two jobs in question are of equal value and the statistics describing that situation are valid.
17. It is for the national court to assess whether it may take into account those statistics, that is to say, whether they cover enough individuals, whether they illustrate purely fortuitous or short term phenomena, and whether, in general, they appear to be significant.
18. Where there is a prima facie case of discrimination, it is for the employer to show that there are objective reasons for the difference in pay. Workers would be unable to enforce the principle of equal pay before national courts if evidence of a prima facie case of discrimination did not shift to the employer the onus of showing that the pay differential is not in fact discriminatory: see, by analogy, Handels-og Kontorfunktionaerernes Forbund i Danmark v. Dansk Arbejdsgiverforening (Case 109/88) [1991] ICR 74,79, para. 13.
19. In these circumstances, the answer to the first question is that, where significant statistics disclose an appreciable difference in pay between two jobs of equal value, one of which is carried out almost exclusively by women and the other predominantly by men, article 119 [now 141] of the Treaty requires the employer to show that that difference is based on objectively justified factors unrelated to any discrimination on grounds of sex."
- The Court of Justice then turned to the second question and answered it as follows:
"23. Accordingly, the answer to the second question is that the fact that the respective rates of pay of two jobs of equal value, one carried out almost exclusively by women and the other predominantly by men, were arrived at by collective bargaining processes which, although carried out by the same parties, are distinct, and taken separately, have in themselves no discriminatory effect, is not sufficient justification for the difference in pay between those two jobs."
- We do not find Enderby an easy case. The Court of Justice was considering a set of facts in respect of which there had been a finding of no direct or indirect discrimination in the collective bargaining processes, yet it held that the relevant statistics raised a prima facie case of what we understand to be direct sex discrimination such as to require the employer to provide objective justification of the pay disparity and show that it was unrelated to any discrimination on grounds of sex. We cannot easily reconcile that approach with that explained by Lord Nicholls in Glasgow, in which Enderby was not referred to. It seems to us that, on Lord Nicholls's approach, and given the finding by the industrial tribunal in Enderby of no discrimination against the women, the point would simply not be reached at which the employer would have to provide objective justification for the pay difference. In particular, we do not find it easy to identify the difference between the Court of Justice's reference in paragraph 18 to a "prima facie case of discrimination" and Lord Nicholls's reference to a "rebuttable presumption of sex discrimination." The view of the Court of Justice is that the demonstration of the former imposes on the employer the burden of proving objective justification. The view of Lord Nicholls is that the employer will only be subject to such a burden if he fails to rebut the presumption.
- Mr Lynch's submission was that Enderby is authority for nothing more than the proposition that where the complainant group is "almost exclusively" composed of women and the comparator group is predominantly male then a presumption of sex discrimination arises such as to require the employer to show objective justification for the difference in pay. It was on that basis that he conceded that objective justification needed to be proved by Islington in response to the claim on behalf of the kitchen assistants, a concession involving his acceptance that the fact that 94% of kitchen assistants are women means that such assistants are "almost exclusively" comprised of women. He disputes that the same can be said of the municipal and school cleaners (of whom only 67.7% are women) and in respect of whom no sex discrimination has been established. In the case of those groups of workers, Mr Lynch submitted that, in making good its section 1(3) defence, Islington had to do no more than prove that the material factor relied upon was the genuine cause of the difference in pay (see again Lord Nicholls's speech in Glasgow).
- Mr Ford submitted that Mr Lynch's interpretation of Enderby is too narrow. He recognises that Article 141, the EqPA and the SDA must be interpreted as a code, but said that it is Article 141 that is of paramount importance. He said that the focus of Article 141 is on achieving the result of equal of pay between the sexes, and that, contrary to Mr Lynch's primary submission, Enderby shows that the need for objective justification of pay differentials cannot be confined to cases which can be shown to have been the result of particular types of indirect discrimination. If it were so confined, it would not cover cases of direct discrimination, and nor would it capture another situation in which the Court of Justice recognised in Enderby that objective justification may be required, namely that in which a pay system lacking in transparency results in lower average pay for women than men. As for the actual decision in Enderby, he said the Court of Justice cannot be interpreted as confining the principle of the case to one in which the disadvantaged group is "almost exclusively" comprised of women. The reason why that formula was used by the Court in its judgment is because on the particular facts before it the disadvantaged group was so comprised. But the principle upon which the case was decided cannot sensibly be narrowly confined to one in which the disadvantaged group was made up "almost exclusively" of women rather than men. It will apply in any case in which the statistics justify a finding that the pay difference has a disparately adverse effect on women, by affecting a considerably or substantially higher proportion of women than men, or a far greater number of women than men.
- We agree with Mr Ford that Enderby cannot be understood as a case whose principle only applies in circumstances in which the disadvantaged group is made up "almost exclusively" of women. First, if that is the test, what does "almost" mean? Enderby shows that it means 98%, and Mr Lynch has conceded that it also means 94%. But would it cover 90%? Or 85%? What is the cut-off point, and what is the explanation for it? If it is, say, 85%, what is the magic of the difference between 84% and 86%? If Mr Lynch is correct in his submission as to the extent of the principle established by Enderby, then we consider that the principle would be too uncertain to be capable of practical application, if indeed it could be regarded as being a principle at all. We cannot accept that the Court of Justice was deciding the case on the narrow and unreasoned basis that Mr Lynch suggests. Secondly, and flowing from this, we consider that the broader underlying principle of Enderby must be, and is, that there will be cases in which, having regard to the relative sizes of the proportions of women in the disadvantaged group and men in the advantaged group, a prima facie case of direct sex discrimination in relation to pay will be regarded as arising that is sufficient to cast on to the employer the burden of proving that the pay difference is objectively justifiable. We consider that is the only rational basis upon which the decision can have been founded. That approach finds support in the careful analysis of the decision of the majority of the Court of Appeal in Northern Ireland in British Road Services Ltd v. Loughran and others [1997] IRLR 92, which Mr Ford deployed in support of his argument, and which Mr Lynch invited us not to follow.
- We have explained that the employment tribunal accepted Mr Lynch's submission that the Enderby principle applied only to cases in which the disadvantaged group was "almost exclusively" comprised of women. It followed that the tribunal held that it did not apply to the disadvantaged groups represented by the municipal and school cleaners, of which groups only 67.7% were women. For the reasons given, we consider that the tribunal was in error in its summary rejection of the applicants' submission with regard to these two groups, namely that a consideration of the statistics relating to (i) the proportion of women who were municipal and school cleaners and (ii) the proportion of men who were assistant undertakers raised a prima facie case of discrimination as regards pay between the three groups sufficient to require Islington to provide objective justification of the pay difference. That does not, however, mean that we are ourselves either in a position, or are prepared, to substitute a finding that there was a prima facie case of sex discrimination in these cases. That further step would involve a fact finding exercise which it is not our function to perform. If the outcome of the applications of Mrs Douglas and Mrs Irons ultimately depended on this issue, we would remit the applications to the employment tribunal with directions for a re-hearing on it. As, however, (because of our decision on the cross-appeal and our further decisions on the appeal) they do not, we do not so remit the applications.
(b) Did the tribunal err in its application of the objective justification test?
- We move on to Mr Ford's second submission, namely that the tribunal erred in its application of the objective justification test. The tribunal of course found that, in relation to the kitchen assistants, Islington did establish objective justification of the pay differential. As they also pointed out, Islington's case on justification was the same in relation to the municipal and school cleaners, and would also have succeeded in relation to them as well had it been necessary for Islington to advance it.
- Mr Ford submitted that this part of the respondents' case required careful scrutiny by the tribunal. They had to consider whether the end sought to be achieved by the introduction of the bonus scheme could have been achieved by other means, whether Islington's aims were unrelated to discrimination based on sex, and whether the chosen method was capable of achieving the desired aim. He referred to Kutz-Bauer v. Freie und Hansestadt Hamburg [2003] IRLR 368, in which the Court of Justice said, in paragraph 51:
"It is for the national court, which alone has jurisdiction to assess the facts and to interpret the national legislation, to determine whether that is so. It is necessary in that regard to ascertain, in the light of all the relevant factors and taking into account the possibility of achieving by other means the aims pursued by the provision in question, whether such aims appear to be unrelated to any discrimination based on sex and whether those provisions, as a means to the achievement of certain aims, are capable of advancing those aims (see, in that regard, case C-167/97 Seymour-Smith and Perez [1999] IRLR 253, paragraph 72)."
- Mr Ford conceded before the tribunal that Islington had established objective justification for the bonus scheme at the time it first introduced it. But, as is common ground, it also had to establish objective justification as at all subsequent relevant times. As to that, Mr Ford also conceded that Islington established such justification down to 1995.
- That, however, was the point at which his concessions ended; and Mr Ford submitted that the tribunal erred in holding that Islington had also established it during the subsequent period. During the argument, he also made clear that the applicants' claims were confined to a period commencing on an uncertain date in 1995, and it was of course in 1995 that the supervision of the caretaking services underwent the changes which the tribunal described and to which we have referred. Mr Ford pointed out that a means originally suitable for a particular end may turn out not to be so, and may cease to be appropriate. If the original reason for the difference in pay ceases to apply, it can no longer provide a justification for the difference. He said that the requirements of "objective" justification meant that Islington had to show that the explanations for the pay difference in fact explained the difference. The applicants' point before the tribunal was that, although the difference in pay was originally justified by the need to improve the caretakers' performance and standards, by 1995 the bonus scheme ceased to be linked to that objective or, therefore, to be justified by it.
- The tribunal held, however, in paragraphs 7(x) to (z) (earlier quoted) that the respondents had established objective justification for the incentive bonus scheme at all material times. They had earlier made a like finding at paragraph 7(p) (also quoted), having earlier explained their reasons for that conclusion in paragraphs 7(g) to (l) (also quoted).
- Mr Ford advanced a detailed criticism of the tribunal's findings and conclusions and submitted that, in their journey towards their conclusion, the tribunal either misdirected themselves or provided insufficient reasons. We see no basis for the suggestion that the tribunal misdirected themselves with regard to this aspect of the case and cannot accept that their reasons were insufficient. This part of the applicants' appeal is one by which they simply seek to challenge the tribunal's clear findings of fact, being findings adverse to their case. We have no jurisdiction to question or re-open their findings of fact, or allow an appeal based on a challenge to them, unless only it can be shown that inherent in the making of the relevant findings was an error of law. There would be such an error if, for example, there was no evidence justifying the findings, or if they were perverse. The demonstration of the latter is one of the more difficult tasks faced by appellants before this appeal tribunal, and we see no basis for a suggestion that the findings were perverse. Nor, in our view, can it be said that there was no evidence on which to make them.
- In considering this aspect of the appeal, it is important to appreciate that the incentive bonus scheme was not simply a scheme under which the caretakers were to be paid more for doing the same job as they had been doing before. The paying of the bonus was merely one aspect of a productivity deal which substantially rewrote the duties of the caretaking staff. The new deal imposed on caretakers the burden of lists of specific tasks which they had to perform at given frequencies and by which they were judged by weekly and monthly quality control checks. As a quid pro quo, their pay was increased by the bonus. In substance, the new scheme involved the negotiation of a new job for a new rate of pay, with a power (but not a duty) for Islington to reduce the pay if the job was not done according to the new specifications. The essence of the new scheme was encapsulated in the tribunal's findings in paragraph 5(vii) (earlier quoted). Mr Riley's written evidence to the tribunal was that:
"… the introduction of this monitored and rigorous incentive bonus scheme did result in very significant improvement in the overall Caretaking service. While the incentive bonus scheme included provision for the withholding of bonus where the agreed standards were not being met I am aware that Caretaking Superintendents found this extremely difficult to implement. The situation arose because in many instances the full Caretaker/Porter complement of hours was not available. However this situation in no way undermines the fact that the bonus incentive system introduced a rigorous scheme of management control and the threat of financial penalties proved very effective."
And in his oral evidence in chief he said that:
"In practice, quality control checks were undertaken by superintendents. We were not in the area of reducing bonus. We wanted to ensure work was being done, not reduce bonus. The essence was to put the work back to the standard required. The role of superintendent was to do their various checks. I also carried out checks."
- The further evidence before the tribunal was that quality control checks continued to be carried out throughout the post-1995 period, the objective being to monitor and control the performance of the caretaking duties in line with the Buff Book requirements. The evidence was, therefore, that at all times the Buff Book remained the standard by reference to which the performance of the caretaking staff was measured.
- Against this background, the rival arguments before the tribunal were, in short: (i) by the applicants, that the consideration for the payment of the bonus was an increase in standards, and that as standards fell from after 1995, there was no longer any justification for the bonus, which nevertheless continued to be paid; and (ii) by the respondents, that this argument ignores the fact that the bonus arrangement was merely one part of a fundamentally new caretaking regime which was introduced in 1968, being one under which the Buff Book continued at all times thereafter, including during the post-1995 period, to provide the benchmark against which duties were to be performed and standards measured.
- The tribunal was fully aware of the point made by the applicants, and referred to it expressly in paragraph 7(f) of its reasons. However, it rejected the argument and made the findings in paragraphs 7(i) and (p) which we have quoted. In summary, it found that the lapses after 1995 did not cause the objective of high levels of productivity and standards to cease to be the reason for the difference in pay, saying in paragraph 7(i) that there was "ample evidence of the fact that, despite the shortcomings of the supervision system during the period of the estate cleaning contract, both management and trade unions recognised that the satisfactory performance by the Caretakers was always to be measured by the yardstick of the Buff Book." The essence of this finding was that the cause of the differential in pay at all times was Islington's continued commitment to the Buff Book scheme and its lengthy list of tasks and frequencies, a cause which the tribunal found never changed. Islington had different means of attaining that objective, including a cutting of pay, and its success at achieving the Buff Book objective varied over the years. But the Buff Book always remained the standard, and the terms of the caretakers' level of pay was merely one aspect of the new regime introduced by the Buff Book. It was their quid pro quo for the increased commitments imposed on them by the Buff Book, being commitments which never changed.
- In our judgment, it is clear from the tribunal's full and careful reasons that they were well aware of both sides of the objective justification argument. Their findings, however, were that Islington had discharged the burden of providing objective justification. We consider that the findings were ones which the tribunal were entitled to make and we reject the applicants' submissions that they were either perverse, insufficiently reasoned or were the fruit of a misdirection. We do not, therefore, accept Mr Ford's submission on this aspect of the applicants' appeal.
(c) Did the tribunal err in holding that the bonus scheme continued to be the cause of the difference in pay after 1995?
- Lord Nicholls's speech in Glasgow ([2000] ICR 196, at 202H and 203D) shows that the material factor relied upon by the employer for the pay difference must have been the cause of the pay disparity. The cause for the variation in pay must continue throughout the relevant period. The tribunal's finding on this was in paragraph 7(p), but Mr Ford criticised the conclusion on the basis that the tribunal failed to ask themselves why the bonus continued to be paid during the post-1995 period. We will deal with this shortly, because in our view the issue is essentially covered by the points discussed in relation to the submission we have just dealt with. The reason it was paid is was because it was part of the consideration due to the caretakers under the new regime introduced by the Buff Book. That regime continued to operate throughout the post-1995 period, the caretaking staff were still expected to perform their duties under it and the finding of the tribunal was that satisfactory performance by the caretakers continued to be measured by the yardstick of the Buff Book. Again, we do not accept that the tribunal's finding on this aspect of the issues before them was not one which it was properly entitled to make.
- The result is that we dismiss the appeal.
Overall result
- We dismiss the appeal and, by a majority, allow the cross-appeal. The consequence is that we affirm paragraphs (i) and (ii) of the Decision of the employment tribunal.
