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You are here: BAILII >> Databases >> United Kingdom Journals >> Equal Helpings: <I>Ratcliffe and others </I>v<I> North Yorkshire County Council</I> URL: http://www.bailii.org/uk/other/journals/WebJCLI/1995/issue4/morris4.html Cite as: Equal Helpings: <I>Ratcliffe and others </I>v<I> North Yorkshire County Council</I> |
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Copyright © 1995 Anne Morris.
First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.
Women workers, particularly part-timers, have seen significant successes in their pursuit of sex equality, and there are signs that the English courts are matching - even outdoing - the European Court in matters connected with employment rights and wages (see R v Secretary of State for Employment ex parte EOC ([1994] 1 All ER 910 HL, and R v Secretary of State ex parte Seymour-Smith CA (unreported). The Ratcliffe decision in the House of Lords ([1995] IRLR 439) has ramifications not only for equal pay generally but also for the policy of compulsory competitive tendering.
Web JCLI | [1995] 4 Web JCLI | Download this file.
- The Facts
- Legal Issues
- Claiming under the Equal Pay Act 1970
- The Judgment
- Analysis
- The Labour Market Context
- The Limitations of the Legislation
- The Costs of CCT
- Conclusion
The Local Government Act 1988 introduced compulsory competitive tendering (CCT), and the Council set up a direct service organisation (DSO) in order to tender for the provision of school meals. The 1988 Act requires DSOs to be competitive but the Council discovered that it could not compete with outside firms whose tenders were based on lower labour costs. Having lost one tender, the Council decided it must cut its own costs and the catering assistants were dismissed, then re-employed at £3 and £3.20 an hour. Complaints were brought under the Equal Pay Act 1970, claiming equal pay with those with whom they had been graded equally. An Industrial Tribunal found in favour of the employees, but the Court of Appeal subsequently allowed an appeal on the basis that the employer had a defence under section 1(3) of the 1970 Act. The employees appealed to the House of Lords.
On the face of it, the material factor defence is itself defensible since it seems logical that more highly qualified, skilled or experienced workers may be said to deserve higher pay. Unfortunately, the Equal Pay Act is directed to the results rather than the underlying causes of discrimination, and is not easily used to address issues which lie behind the structuring of the labour market. It is pertinent to enquire why men outnumber women in the ranks of the more qualified, experienced and better paid, (or conversely why there are so many women amongst the low paid) and this in turn raises the question of indirect discrimination, based on the idea that apparently gender-neutral practices may operate to disadvantage one sex disproportionately (adverse impact). Although not described as such, indirect discrimination is defined in the Sex Discrimination Act 1975, s1(1)(b), but it is not expressly mentioned in the Equal Pay Act. It is clear, however, that indirect discrimination is part of the jurisprudence on equal pay and in appropriate cases may be used to found a claim for equal pay. In the Danfoss case (C-109/88 [1989] ECR 3199) the European Court of Justice considered whether pay scales which systematically discriminated against female workers were contrary to Article 119 of the Treaty of Rome. The same basic pay was paid to workers on the same grade, but extra pay was payable for 'employee flexibility' which included reference to quality of work and ability to adapt to varying schedules and sites. The ECJ was of the opinion that, apart from the fact that a pay scale based on merit which consistently failed to reward women must be flawed, there was also the possibility of indirect discrimination since women would, generally, find it more difficult to organise their competing domestic duties to allow flexibility at work.
A vital distinction between direct and indirect discrimination is that the employer is allowed to justify the latter by showing that it is based on a real and objectively identifiable business need (Bilka-Kaufhaus GmbH v Weber von Hartz 170/84 [1987] ICR 110). That cannot, clearly, involve the sex of the workers. In terms of the 'material factor' defence, the recognition that indirect discrimination may be present within pay structures means that an employer must be prepared to show not only that there was no direct discrimination (as for example in Pickstone v Freemans plc [1988] ICR 697), but also that a distinction drawn between different groups of workers is not indirectly tainted by sex. In Nimz v Freie und Hanestadt Hamburg [1991] IRLR 222, for example, the ECJ held that rewarding seniority may amount to indirect discrimination because women tend to have different work patterns from men. Such variations must be objectively justified. Direct discrimination on the other hand, may not be justified.
Awareness of these realities was markedly lacking in the judgment of the Court of Appeal. It considered that it was required, following the ECJ's decision in the indirect discrimination case of Enderby (C-127/92 [1993] IRLR 591), to adopt a two-stage approach:
"... does the applicant show that a group which is predominantly female is treated less favourably than a group doing like or work of equal value, the majority of whom are men? If so, the burden then shifts to the employer to show that the difference is 'objectively justified' on a non-discriminatory basis, ie that it is 'genuinely due to a factor other than the difference of sex'...."
The employer cannot do so by adopting a criterion which is tainted by gender and "if 'market forces' are relied upon, he must show that these are gender-neutral...."
It had been urged upon the Court of Appeal that the rates were directly discriminatory because they were set by reference to the sex of the workers (economic and social factors being such that women were prepared to accept less) but the Court of Appeal did not accept this. Having noted that the rates offered (theoretically) to female and male catering assistants were the same - both by the Council and by the private sector competition - the Court of Appeal held that the Council was not discriminating between men and women. Moreover, the need to compete was unconnected with the difference of sex and the lower rates of pay were genuinely due to market forces which were not themselves based on sex discrimination (even if the private sector competitor itself was discriminating).
The House of Lords, while taking a fact-based approach, nevertheless identified the fallacy of this argument. The most salient fact was that the women in Ratcliffe had been graded as equivalent to their male comparators within the 1970 Act, s1(2)(b). In the view of Lord Slynn, that entitled them to equal pay subject to the defence in s1(3). There was no need, indeed, it is not permissible, to import into the 1970 Act the specific components of the distinction drawn in the Sex Discrimination Act between direct and indirect discrimination. All the Tribunal had to decide was whether the employer could show that the difference was due to a material factor other than sex. It was impossible to say that they were not entitled to find on the evidence that it was due to sex. Wages had been reduced in order to enable the Council to compete. Their principal competitor employed only women and, according to the Tribunal, "because of that, employed them on less favourable terms than the Council did previously". Whether or not the private sector enterprise discriminated against women, was not really the question. The fundamental issue was whether the DSO was paying women less than men for work rated as equivalent. The reason for paying less was because they had to compete, but the fact remained that they were paying less and the Tribunal was entitled to find that this was due to sex.
It is often asserted that the majority of those who work part-time do so voluntarily, that is that they do not want full-time work. Figures published in July 1995 (Employment Gazette 1995b) purport to show that 80 per cent of women in part-time work did not want full-time jobs. Only 11 per cent had taken part-time work because they could not find anything else. This begs the question, however, of why women do not want full-time work. If it is because they do not have child or other care facilities available to them, or because the wages paid even to full-timers are such that cuts in benefits mean that they would be worse off, it may be queried as to how free their choice really is.
Women who cannot work full-time have been forced to take such part-time work as has been available and employers have been able to depress wage rates knowing there will always be those willing to accept the terms offered. The 1994 New Earnings Survey showed that in respect of average hourly earnings, women workers generally received only 79.5 pence for each pound earned by men, and the situation is even worse for part-timers, whose rates do not even reach those of full-time women workers (Equal Opportunities Review, 1994). The persistence of unequal pay for women raises concerns about the nature of women's work and the value that is put upon it.
The way in which the labour market is segregated makes it clear that there is still 'women's work' and 'men's work.' In manual occupations men tend significantly to outnumber women particularly in skilled trades. Women, however, predominate in the service sector, and this is reflected in the high proportion of women workers in the public sector. This is especially important in the present context where CCT has led to redundancies or to worsening terms of employment (EOC, 1995). The Equal Opportunities Commission has found that CCT has led to job losses and the reduction of working hours and that these effects have been felt disproportionately by women (EOC, 1995). Women's employment during the first round of CCT (which included catering) fell by 22 per cent as opposed to 12 per cent for men. Hours were reduced by 16 per cent in school catering, meaning lower take home pay. (Compare the predominantly male occupation of refuse collectors, who have seen increased pay and no change in hours). Reducing hours affects more than just a pay packet, since lower wages may take earnings below the current National Insurance Lower Earnings Limit (£57 a week in 1994-5) and thus remove workers from the contributory state benefits system. In April 1993, over 2 million women were earning below the lower earnings limit and were therefore ineligible for benefits such as statutory sick pay and unemployment benefit (Employment Gazette 1994) . The advent of CCT has worsened the position for women, with some employers deliberately seeking to avoid the costs of national insurance (EOC, 1995).
In terms of the value placed on the work which is done predominantly by women, it is significant that fifty eight occupations in the United Kingdom pay below the Council of Europe's decency threshold (£221.50 per week, or an hourly rate of over £5), and 41 of those are carried out by women (New Review, 1995c). The decency threshold is defined as 68 per cent of all full-timers' mean earnings (thus including the lower earnings of women). Of the ten worst paid jobs in Britain, nine are predominantly female, including caterers and catering assistants (New Review 1995c), whose average gross weekly pay is £158.30, an hourly rate of £4.02 (New Earnings Survey 1994a). Part- time rates are lower at only £3.86 an hour (New Earnings Survey 1994b).
How great a step forward for part-timers is this decision? These women had been graded as equivalent to workers whose pay was now higher than theirs: they were now being paid below the rate for the job, (compare Rainey v Greater Glasgow Health Board [1987] ICR 129). The encouraging aspect of the House of Lords decision is that it recognises that the decrease in pay was due to discrimination inherent in the labour market. The fact that the lower rate of pay applied to both men and women is irrelevant in the situation where rates are set at a particular level because of the under-valuing of work that is done predominantly by women. The presence of one or two men working alongside women does not alter that fact (Pickstone v Freemans plc [1988] ICR 697).
On the other hand, Lord Slynn chose to address the case on the basis of its particular facts which were, as it happens, quite straightforward. There had been a job evaluation and the results of that were not contested. Avoiding the complications into which the Court of Appeal had wandered their Lordships held, simply, that on the basis that there was work rated as equivalent the Industrial Tribunal had been entitled to find that the material factor (need to compete) was tainted by sex. But what if there had not been a job evaluation? That would leave two grounds for an equal pay claim: like work and work of equal value. The former would not have been possible here since the men and women were paid equally for the same job. Moreover, like work claims are hampered by job segregation. Over half of women work only with other women. Equal value claims are notoriously complex, lengthy and uncertain. It is always possible that within a particular employment, a woman may not be able to find an appropriate comparator, particularly where the majority of workers are female.
What then does the decision have to offer other women? First, it is implicit in the opinion of the House of Lords that the particular difficulties faced by working women may force them to take certain kinds of work and their lack of bargaining power allows for lower pay. Lord Slynn states ([1995] IRLR 439, at 442 and 443) that:
"[t]he women could not have found other suitable work and were obliged to take the wages offered if they were to continue with this work....Though conscious of the difficult problem facing the employers in seeking to compete with a rival tenderer, I am satisfied that to reduce the women's wages below that of their male comparators was the very kind of discrimination in relation to pay which the Act sought to remove."
The judges have thus authoritatively recognised that women's working lives differ from those of their male colleagues in that women must still balance the competing demands of home and work. This is also reflected in the decision in Seymour-Smith which suggests that not only do women work fewer hours, they also work for shorter periods with any one employer.
Second, the decision clarifies the relationship between the Sex Discrimination Act and the Equal Pay Act. Whilst the concept of indirect discrimination is relevant to equal pay claims, it is to be on the basis of the ECJ's approach in Enderby, rather than importing the particular requirements of the Sex Discrimination Act, s1(1)(b).
Third, while not ruling out market forces as a potentially gender-neutral ground for paying differential rates, this decision recognises the social purpose of the equal pay legislation as being of no less significance than the market. The Court of Appeal commented that it was 'striking that the appellants should seek to establish their rights to equal pay even though, if they should succeed in doing so, they would find themselves redundant and unemployed' ([1994] IRLR 342 at p. 363). Such a comment speaks volumes about the problems to be faced in achieving equal pay. It is not only women who are forced to accept deteriorating terms of employment but it is 'striking' that women are particularly vulnerable because of the need to find work that which fits in with their other responsibilities.
Ratcliffe may be a mixed blessing for public sector workers but it does create more difficulties for the government's policy of CCT, already under fire from the Transfer of Undertaking Regulations 1981 and the Acquired Rights Directive 77/87 (McMullen 1994). Those who fear the undermining of an efficient market by 'social' policies should, however, note the findings of the Equal Opportunities Commission (EOC 1995). It would seem that contracting out has not, in any event, been the economic success its proponents would have wished for. The introduction of CCT created a saving of £124 million in the areas of building cleaning, school catering, refuse collection and leisure management. On the other hand, the resulting job losses and worsening of pay led to a net cost of £126 million.
The policies adopted by Councils keen to reduce costs (e.g. paying school caterers and cleaners only during term-time) have exacerbated the position in which the lowest paid found themselves following abolition of the Wages Councils (Trade Union Reform and Employment Rights Act 1993, s 35). At the time abolition was announced Wages Councils set minimum rates of pay for nearly two and a half million workers of whom nearly two million were women. It was predicted that already low rates of pay were likely to fall even further and this seems to have happened although the figures are disputed (Cox 1995). Moreover, not only have wage rates fallen but, contrary to what was claimed to be the advantage of abolition, the number of jobs available has not risen (Cox 1995).
Employment Gazette 1994, Vol 102, No 3, p 75
Employment Gazette 1995a, Vol 103, No 7, p2 50.
Employment Gazette 1995b Vol 103, No 7, LFS 38
Equal Opportunities Commission (1995), The Gender Impact of CCT in Local Government, research by Escott, K and Whitfield, D, Centre for Public Services.
Equal Opportunities Review (1994), No 58, p 33
Cox, G, (1995) 'Wages Council Abolition: The Official Statistics, Low Pay Network
McMullen, J, (1994) 'Contracting Out and Market Testing - the Uncertainty Ends?' 23 Industrial law Journal 230
New Earnings Survey (1994a) Part A Table 9.7, Department of Employment, HMSO.
New Earnings Survey (1994b) Part F Table 178.4
New Review of the Low Pay Unit (1994a), No. 29, News Brief, p 4
New Review of the Low Pay Unit (1994b), No. 27, 'Public service, private hardship', p 7
New Review of the Low Pay Unit (1995), No. 33, p 19
