Hawker Fusegear Ltd v Allen [1995] UKEAT 794_94_1412

EAT
Hawker Fusegear Ltd v Allen
[1995] UKEAT 794_94_1412 · 1995-12-14
MR JUSTICE MUMMERY (PRESIDENT) This is an appeal from the decision of the Industrial Tribunal held at Leicester on 20th October 1993 and 4th July 1994. As explained in Full Reasons notified to the parties on 8th July 1994 the Industrial Tribunal unanimously decided that(1) Mrs Allen was unfairly dismissed by her employers, Hawker Fusegear Ltd ("Fusegear"), now known as Cooper (UK) Ltd;(2) she had been victimised for bringing an equal pay claim against Fusegear; and(3) the defence of genuine material factor to the equal pay claim was not available to Fusegear;(4) Mrs Allen should be awarded compensation of £36,175.31, including £2,500 for injury to feelings.Fusegear appealed by a Notice of Appeal, since amended and re-amended, served on 10th August 1994. There is no appeal against the finding of unfair dismissal, but there is an appeal against the finding of victimisation, against the rejection of the genuine material factor defence, which Fusegear wish to re-argue at the merits hearing of the equal pay claim (on which an independent expert's report is now available), and against the award of £2,500 for injury to feelings.

The issues on this appeal are therefore -

(1) Did the Industrial Tribunal err in law in holding that, in selecting Mrs Allen for redundancy, Fusegear unlawfully victimised her for bringing an equal pay claim? This is the principal point on the appeal.(2) Did the Industrial Tribunal err in law in awarding the sum of £2,500 for injury to feelings for the victimisation claim?(3) Did the Industrial Tribunal err in law in rejecting Fusegear's "genuine material factor" defence to Mrs Allen's equal pay claim and are Fusegear entitled to raise that defence at the merits hearing of the equal pay claim, which has not yet taken place?

The Facts

The facts found by the Tribunal may be summarised as follows:-

(1) Mrs Allen was employed by Fusegear as a Purchase Ledger Supervisor.(2) On 22nd May 1991 she presented an Originating Application (No.19454/91) claiming equal pay with a male employee of Fusegear, a Mr McInnes, who had been employed since February 1990 as an Export Documentation Clerk. Mr McInnes was a replacement for a Mrs Martin (who had been paid the same wage as Mrs Allen), but he was paid more than Mrs Allen.

(3) Fusegear resisted the equal pay claim on the grounds that

(a) the work of Mrs Allen and Mr McInnes were not of equal value; and(b) the differential in pay arose by reason of genuine material factors not based on sex (S.1(3) of the Equal Pay Act 1970).(4) Fusegear faced financial problems in 1992. Some employees, including Mrs Allen, were selected for redundancy. Her employment was terminated on 30th April 1992.(5) Mrs Allen was then 58 years old. She had attended a retirement course. She would have been entitled to retire at 60, though she could not be obliged to. The head of Fusegear's Finance Department, Mr Norman, presumed that Mrs Allen would in fact retire at 60, though he did not attempt to verify that or consult her about it. Her age was the "crucial factor" in the selection decision.(6) Mrs Allen made an unfair dismissal claim in July 1992. That was given a new case number, No.63883/92. Her claim was that she had been unfairly selected for redundancy.

Decision of the Industrial Tribunal

The parts of the decision material to the issues on this appeal may be summarised as follows:-

A. Equal Pay Claim

The Tribunal rejected the genuine material factor defence for the following reasons:(1) The Tribunal were not satisfied that Mr McInnes was employed to do anything different from what Mrs Martin had been employed to do before he was engaged.(2) The Tribunal saw no job description of Mrs Martin and no job description for the job that Mr McInnes was employed to do.(3) Fusegear were impressed by Mr Martin's qualifications. He was previously employed in a bank for a number of years. Fusegear decided to take him on on the basis that someone of his calibre would be an asset to the Company. They decided that he had "the kind of special qualification they were looking for with regard to foreign currency".(4) The Tribunal's conclusion was that the handling of sales in different currencies would be a simple matter for any export clerk to deal with.(5) Fusegear had not justified the difference in pay relating to the jobs or to any special qualification which Mr McInnes brought to that job.

B. Victimisation

Although Fusegear do not appeal against the finding of unfair dismissal, the facts on that issue and the conclusion that Fusegear did not act reasonably in treating redundancy as the reason for Mrs Allen's dismissal are relevant to the issue of victimisation. The Tribunal reasoned as follows:(1) There was a redundancy situation. The Company was facing financial problems.(2) There was a proper appraisal of the various departments of the organisation. It was appropriate to make three people redundant in the Finance Department where Mrs Allen worked.(3) The age of Mrs Allen was a "very relevant factor in her selection for redundancy". In paragraph 10 of the decision the Tribunal said -"... we are satisfied that the crucial factor in the selection decision was the applicant's age".(4) There was no consultation whatever with Mrs Allen. That was a procedural defect in the selection procedure.(5) There was also a fundamental defect in the failure to conduct the selection process properly. It was presumed by Mr Norman that Mrs Allen was going to retire at 60, though she was not obliged to do so. There was no evidence that she would retire at 60. No reasonable employer would have made the presumption that Mr Norman did.In those circumstances the Tribunal came to the conclusion that there was victimisation of Mrs Allen. The reasons are stated in paragraph 14 as follows:-"The fact that the applicant was unfairly dismissed does not mean automatically that we can find in her favour on her discrimination claim. It does, however, provide a fact upon which we can draw the inference of discrimination if we think it appropriate. It seems to us that any employer knowing that an employee has made an equal pay claim would have bent over backwards to ensure that the selection for redundancy was carried out in her case with meticulous care. Clearly that has not been done and we feel able, therefore, to draw the inference that the applicant's selection for redundancy was motivated by her bringing an equal pay claim. We therefore find that the applicant has been discriminated against on the grounds of her sex by way of victimisation. This clearly is a serious matter and must be reflected by a proper award of compensation for injury to feelings. We therefore feel that an appropriate figure for compensation for her injury to feelings would be £2,500 and she is awarded this sum".

The Victimisation Appeal

The decision on victimisation is essentially a question of fact to be determined either by primary evidence or by inference from primary evidence as to the reason for the alleged act of discrimination, in this case the selection for redundancy. The material parts of S.4 of the Sex Discrimination Act 1975 provide as follows:-
"(1) A person ("the discriminator") discriminates against another person ("the person victimised") in any circumstances relevant for the purposes of any provision of this Act if he treats the person victimised less favourably than in those circumstances he treats or would treat other persons, and does so by reason that the person victimised has - (a) brought proceedings against the discriminator or any other person under this Act or the Equal Pay Act 1970, ..."

The questions for the Tribunal under S.4 were -

(1) Did Fusegear treat Mrs Allen less favourably than they treated or would treat others ie, those who have not done the relevant protected act of bringing proceedings under the Equal Pay Act?(2) If so, was the less favourable treatment "by reason that" Mrs Allen had brought proceedings against Fusegear under the Equal Pay Act 1970? This is a question of the motive which caused less favourable treatment. Both questions are questions of fact. See Aziz v. Trinity Taxis Ltd [1988] ICR 531 at 548 and 546.On the second question it must be shown that Fusegear was influenced in its less favourable treatment of Mrs Allen by the fact that she had made her equal pay claim. On this issue both counsel and the Tribunal are indebted to Miss Claire Noone, the law reporter who sat in during the argument, for drawing attention to a recent case in the Employment Appeal Tribunal reported by her, Nagarajan v. Agnew & Ors [1995] ICR 520. One of the questions in that case concerned the matter of mixed motives or influences. The following part of Mr Justice Knox's judgment at p.535G - 536A is relevant to the present appeal.
"It is clear from that decision that a reason which is an important factor in the operative decision is quite enough, to quote Sir David Cairns [ Abernethy v. Mott, Hay and Anderson [1974] ICR 323, 330]. In our judgment, where an industrial tribunal finds that there are mixed motives for the doing of an act, one or some but not all of which constitute unlawful discrimination, it is highly desirable for there to be an assessment of the importance from the causative point of view of the unlawful motive or motives. If the industrial tribunal finds that the unlawful motive or motives were of sufficient weight in the decision-making process to be treated as a cause, not the sole cause, but as a cause of the act thus motivated, there will be unlawful discrimination. An important factor in the decision is clearly well within that principle.
In this decision there is, as we have mentioned, no evaluation of the importance of the further element, as it is called, in the decision-making process. We are not persuaded that it was a triviality or something in the nature of an aside which carried no significant weight at all, if only for the reason that the industrial tribunal came to the conclusion at the end of the day that there had been an unlawful discrimination in this case and the only basis upon which that could be justified on the basis of victimisation was that this further element constituted the unlawful motivation. It is therefore in our view not possible to say that this was something that the industrial tribunal treated as "just by the by". On the other hand, we are unable to detect from the industrial tribunal's decision an evaluation of how important the further element was and that is a profoundly unsatisfactory state of affairs. When it is coupled with the point under S.4(2) or (1) of the Act of 1976 the combination seems to us amply sufficient to make it impossible for this decision to stand."That was a decision on the victimisation provisions of S.2 of the Race Relations Act 1976, but they are in substantially similar terms to the victimisation provisions of the Sex Discrimination Act 1975.

Fusegear's Submissions

On behalf of Fusegear, Miss Beale criticised the Tribunal's decision on the victimisation claim on the following grounds and submitted that the appeal should be allowed and the victimisation claim dismissed -(1) The Tribunal accepted Mr Norman's evidence that he presumed that Mrs Allen was going to retire at 60. The Tribunal found that Mrs Allen's age was " the crucial factor" in the decision to select her for redundancy. That was consistent only with the conclusion that they would have treated, in the same way, a person in her circumstances who had not brought an equal pay claim against them. There was no room for inferring that Fusegear selected Mrs Allen for another reason eg, by reason that she had brought an equal pay claim. In brief, the inference of victimisation was not consistent with or supported by the facts found on the claim for unfair dismissal.(2) Parts of the reasoning in paragraph 14 of the decision (quoted above) indicated that the Industrial Tribunal had taken a wrong approach to the whole question of victimisation. The Tribunal said that the selection for redundancy in her case was not carried out "with meticulous care." It is not, however, the legal duty of an employer to carry out a selection process with "meticulous care": the duty is to carry out the selection fairly. The Industrial Tribunal was not entitled to hold that Mrs Allen had been treated less favourably than others who had not brought an equal pay claim on the ground that she had not been treated more favourably than other such persons in the selection process. Mrs Allen was not entitled to more favourable treatment ie, the standard of meticulous care, because she had brought an equal pay claim. The Tribunal had failed properly to address the issue whether Mrs Allen was treated less favourably than a person who had not brought an equal pay claim.

Conclusion on Victimisation Appeal

In our judgment, the reasoning of the Tribunal on this claim, when read as a whole, does not disclose an error of law. The reasoning of the Tribunal is brief and we agree with Miss Beale that some comments in the decision are open to the criticism that they are not legally relevant to the issue of victimisation (eg, the "meticulous care" comment). But we are of the view that the Tribunal made findings of fact on the evidence which entitled them to come to the conclusion that there was victimisation of Mrs Allen.

In our view, the legal position is as follows:-

(1) The Industrial Tribunal found that Mrs Allen had been subjected to unfair treatment ie, selection for redundancy which was unfair both substantively and procedurally. There was less favourable treatment of her than of those who had not brought an equal pay claim.(2) The Tribunal were entitled to look to Fusegear for an explanation for that unfair treatment. In the absence of an adequate or satisfactory explanation for the treatment, the Tribunal might legitimately draw the inference that the reason for the treatment or one of the reasons for the treatment was the fact that she had brought the equal pay proceedings: King v. The Great Britain China Centre [1992] ICR 516 .(3) The explanation provided by Fusegear was, in the view of the Tribunal, unsatisfactory. It was based on an assumption (ie that she would retire at 60) which no reasonable employer would have made and which had not been verified with her or subject to any consultation.(4) In the absence of a satisfactory explanation for less favourable treatment the Tribunal were entitled to draw the inference that "the applicant's selection for redundancy was motivated by her bringing an equal pay claim."(5) Mrs Allen's age was the crucial factor in the selection process in the sense that it was her age that led Fusegear to make an unwarranted and untested assumption about the date of her retirement. That finding did not preclude the presence of the equal pay claim as an operative motive causing her selection. The fact that the assumption about her retirement was false and untested might legitimately assist the Tribunal in making the inference of victimisation on the basis that an operative motive for her selection was her proceedings under the Equal Pay Act.

Damages for Injury to Feelings

The Tribunal awarded Mrs Allen £2,500 for injury to feelings. It was argued by Miss Beale that the brief reasoning of the Tribunal was legally flawed, as they considered the "seriousness" of Fusegear's conduct rather than whether and, if so, to what extent, Mrs Allen did actually suffer injury to her feelings. The reasoning of the Tribunal indicated that they were awarding damages on a punitive, and not a compensatory, basis. This is legally erroneous, because punitive damages are not available for sex discrimination or victimisation: Deane v. London Borough of Ealing [1993] IRLR 210 at 211. The case should, therefore, be remitted to the Industrial Tribunal to hear evidence, if there was any, of the extent of Mrs Allen's injury to feelings.In our judgment, there was no error of law in the Tribunal's decision on the quantum of damages for injury to feelings. The position is that -(1) There was evidence before the Tribunal to support the finding of injury to feelings as a matter of fact. For example, there was evidence from Mrs Allen (recorded in the Chairman's Notes) that when she was told that she was selected to be made redundant she was "very shocked and felt betrayed". There was also evidence from Mr Norman that Mrs Allen was "very upset at the meeting" at which she was informed of the decision.(2) The size of the award is not so great as to be characterised as perverse. It is not substantially out of line with what is appropriate. It is not a wholly erroneous estimate.(3) The Tribunal did not make the award in order to punish Fusegear. It was made in order to compensate Mrs Allen for injury to feelings. It was legitimate for the Tribunal to comment that it was "a serious matter". That was not expression of punishment as a reason for making the award or even a criticism of the conduct of Fusegear. It was "a serious matter" from the point of view of hurt to Mrs Allen's feelings of which evidence had been given.

The Genuine Material Factor Point

The context of this point is as follows. The substantive hearing of Mrs Allen's equal pay claim has not yet taken place. The Tribunal ordered a report from an independent expert. He has now reported that the jobs of Mrs Allen and Mr McInnes are of equal value. Ahead of that report the Tribunal heard evidence and argument on the issue of the genuine material factor defence. That procedure was authorised by the 1993 Rules of Procedure, Schedule 2, Rule 9(2E) which provided that -"A Tribunal may, on the application of a party, if in the circumstances of the case, having regard to the considerations expressed in paragraph (1), it considers that it is appropriate so to proceed, hear evidence upon and permit the parties to address it upon the issue contained in subsection (3) of section 1 of the Equal Pay Act (defence of genuine material factor) before it requires an expert to prepare a report under Rule 8A. Where the tribunal so proceeds, it shall be without prejudice to the further consideration of that issue after the tribunal has received the report".That provision has been amended by the Industrial Tribunals (Constitution and Rules of Procedure)(Amendment) Regulations 1994 (S.I.1994 No.536). Those Regulations came into force on 1st April 1994 and amended Rule 9(2E) in Schedule 2 by substituting

"...determining whether to require" for "it requires"

and omitting the second sentence. Paragraph 8 of the Amendment Regulations, however, provides that Rule 9(2E) applies in its amended form in relation to all proceedings in which the Tribunal exercises its discretion under the Rule to hear evidence upon and permit the parties to address it upon the issue referred to in the Rule (defence of genuine material factor) where the first day of the hearing on which such evidence is heard or the Tribunal is so addressed falls on or after 1st April 1994. In this case the Industrial Tribunal heard evidence and submissions on the issue of genuine material factor on 20th October 1993. The Rule therefore applies in its unamended form and the Industrial Tribunal will be entitled to give further consideration to the issue of genuine material defence at the substantive hearing of the equal pay claim. On this appeal Miss Beale seeks a direction that the Industrial Tribunal were wrong in law to exclude from consideration of this defence Mr McInnes's qualifications, experience and his salary requirements. She also seeks a direction that such matters are properly to be considered at the substantive hearing of the equal pay claim together with any other matters which Fusegear may wish to adduce in support of that defence.In support of that submission Miss Beale argued as follows:(1) Fusegear sought to explain and justify the payment of a higher salary to Mr McInnes by reference to three different matters -(i) The content of the job to which they had added an "extra dimension".

(ii) Mr McInnes's extra qualifications , and

(iii) the fact that Mr McInnes wanted a salary of £9,000 .(2) The Tribunal rejected the comparison argument on the content of the job, but went on to hold that Fusegear were impressed by Mr McInnes's qualifications and"... decided to take him on, on the basis that someone of his calibre would be an asset to the Company".(3) The Tribunal wrongly failed to consider and decide whether that constituted a genuine material factor other than sex which was a material difference between Mr McInnes's case and Mrs Allen's case and whether Fusegear had proved, on the balance of probabilities, that the difference in pay was genuinely caused by that factor. The correct approach was that laid down in Macgregor v. General Municipal Boilermakers and Allied Trades Union [1987] ICR 505 at 514 D-E , where the Employment Appeal Tribunal said -It seems to us that in approaching a defence to an equal value claim under S.1(3)(b) the tribunal will have to ask itself the following questions. 1. Was there a variation between the woman's contract and the man's contract? In this case the answer must be "Yes. pay." 2. Was a material factor, other than the difference in sex, which was a material difference between the woman's case and the man's case, or other material difference? 3. Has the employer proved that it was more probable than not that the variation was genuinely due to that material factor? We should add that there may of course be more than one material factor to be considered."The Tribunal failed to consider whether all the matters relied on by Fusegear were material factors and whether it was more probable than not that the variation in pay was genuinely due to those material factors.(4) The Industrial Tribunal failed to consider and decide whether Mr McInnes's qualifications, calibre and potential to be "an asset for the Company" for the future constituted a good defence under S.1(3) of the 1970 Act. Reliance was placed on Edmonds v. Computer Services [1977] IRLR 359 at paragraphs 6, 9 and 12 in support of the argument that the payment of the higher salary for the potential to exercise responsibility, in view of age and experience, might be considered to be a "material difference" between a woman's case and a man's case.(5) The Tribunal also failed to consider properly, or at all, Fusegear's argument that they needed to pay more to attract a person with the qualifications that they wanted. Reliance was placed on Rainey v. Greater Glasgow Health Board [1987] ICR 129 at 140 D-F where Lord Keith said -
"... The difference must be "material", which I would construe as meaning "significant and relevant", and it must be between "her case and his." Consideration of a person's case must necessarily involve consideration of all the circumstances of that case. These may well go beyond what is not very happily described as "personal equation" ie, the personal qualities by way of skill, experience or training which the individual brings to the job. Some circumstances may on examination prove to be not significant or relevant, but others may do so, though not relating to the personal qualities of the employee. In particular, where there is no question of intentional sex discrimination whether direct or indirect (and there is none here) a difference which is connected with economic factors affecting the efficient carrying on of the employer's business or other activity may well be relevant."
Reliance was also placed on passages at p.144A and 145 A-B which indicated that the payment of more because of the necessity to attract a particular employee could constitute a material difference between a woman's case and a man's case.(6) The Industrial Tribunal had failed to distinguish between two matters: on the one hand, the content of Mr McInnes's job and, on the other hand, the qualifications, experience and salary demands of Mr McInnes. Having failed to be satisfied that Mr McInnes's job was any different from the job done by his predecessor, the Tribunal wrongly held that that concluded the issue against Fusegear.

Conclusions on the Genuine Material Factor Defence

We have not been persuaded by Miss Beale that there is any error of law in the Tribunal's decision on this point. The legal position, in our view, is as follows:-(1) Fusegear's genuine material factor defence was set out in the second paragraph of the Notice of Appearance dated 18th July 1991.
"Alternatively, if the work is of equal value then the differential in pay arises by reason of genuine material factors which are material differences between the male's case and the applicant's and which are not based on sex. These are inter alia, the need to pay more to attract the candidate for the shipping documentation clerk's position with relevant banking experience. There were some six applicants for this position a proportion of whom were female and the salary required by all of them would have been at or around the level awarded to the successful candidate. There was no discrimination based on sex."
(2) The burden was on Fusegear to make out its case on that defence.(3) At the Industrial Tribunal Fusegear did not argue that the qualifications of Mr McInnes justified the pay differential without reference to the job he was employed to do. Fusegear's case was on the basis that the extra dimension of the job that he was employed to do justified the difference in pay. The Tribunal considered that case and decided it against Fusegear. It is not open for Fusegear to put its case on a different basis on appeal from that decision.(4) The Tribunal were legally entitled to reject the genuine material factor defence.On the findings of fact made by the Industrial Tribunal there was no genuine material factor underlying the pay differential. The Tribunal had found as a fact that Mr McInnes had not been employed to do anything different from what his female predecessor had done and she had been paid the same as Mrs Allen. Fusegear had been impressed by Mr McInnes's qualifications, but it was not established by Fusegear that those qualifications related to the job. The Tribunal did not find as a fact that the qualifications were relevant to the job he was employed to do.In our judgment, there was no error of law or perversity in the Tribunal's findings of fact or conclusions of law in relation to genuine material factor defence. We therefore decline to make the direction sought by Miss Beale. It will be for Fusegear to decide whether to seek to raise the question of genuine material factor before the Industrial Tribunal at the merits hearing of the equal pay claim, relying on the unamended Rule 9(2E) and it will be for the Industrial Tribunal to decide whether they should give further consideration to that issue.For all those reasons this appeal is dismissed on all the points which were argued.