Montgomery v Lowfield Distribution Ltd [1996] UKEAT 932_95_1405

EAT
Montgomery v Lowfield Distribution Ltd
[1996] UKEAT 932_95_1405 · 1996-05-14
MR JUSTICE MUMMERY (PRESIDENT): This is an appeal from the unanimous decision of the Industrial Tribunal held at Bristol on 27 June 1995. For the reasons explained in the Extended Reasons sent to the parties on 24 July 1995, the Tribunal dismissed a claim by Mrs Montgomery against her employers, Lowfield Distribution Limited, under the Equal Pay Act 1970 , the Sex Discrimination Act 1975 and Article 119 of the Treaty of Rome .Mrs Montgomery served a Notice of Appeal on 31 August 1995. Miss Beverley Lang argued Miss Montgomery's appeal. Mr West argued the case for Lowfield Distribution Limited.The claim was made on 27 September 1994 when Mrs Montgomery presented her Originating Application to the Industrial Tribunal, assisted by the Avon & Bristol Community Law Centre. She claimed that she had started to work for Lowfield as a full-time worker, 40 hours per week. In May 1993 she changed to being a part-time worker at 24 hours per week. As a full-time employee she was entitled, under her contract, as agreed by Lowfield with the union, GMB, to certain payments for Bank Holidays. It is unnecessary to examine the full details. If she worked for a Bank Holiday, she would be entitled to a day off in lieu and double time for the time worked on that day, or, if she did not take that day in lieu, triple time. If the Bank Holiday was on a rostered day off she would be entitled to a day off in lieu and double time for the day worked immediately before the Bank Holiday, or triple time if she did not take a day off in lieu.That may be described as the Bank Holiday pay formula. It was available, and still remains available, to full-time employees of Lowfield. Mrs Montgomery's complaint was that, after she had become part-time, the Bank Holiday pay formula did not apply to her. As a part-time employee she had fixed days off each week, Mondays and Fridays. She complained that there were some men at the same depot as her who worked full-time on four nights a week with a fixed night off. Their fixed time off each week covered a Monday, but they still had the benefit of the Bank Holiday pay formula. She had lost on changing from a full-time employee to a part-time one, a number of Bank Holidays totalling nine since 23 May 1993.In those circumstances she made a claim, under the legislation mentioned, that she should be entitled to the same terms and conditions for Bank Holiday payments and benefits as full-time workers. She contended that the exclusion of part-time workers from Bank Holiday payments and benefits was indirectly discriminatory and unlawful, whether because of part-time status, or because part-time workers had fixed days off.Lowfield's response to the complaint was short, to the point, but not especially revealing. They rejected the contention. They agreed that she had worked as a full-time worker from July 1990 until she changed to a part-time post in May 1993. Their defence was stated in these terms:
"The terms and conditions of the men referred to by the Applicant are based on different criteria, and are not related to whether the employees are part-time or full-time. Therefore the Respondents contend that the Applicant's conditions are the correct ones for her position."
That defence required amplification. By the time the case came on for a full hearing in the Industrial Tribunal on 27 June 1995, there had been clarification in correspondence, in an agreed statement of certain facts and in the production of some documents.The Tribunal correctly identified the issue between the parties. It described the nature of the business operated by Lowfield. It was a distribution centre for supermarkets at Portbury, Nr Bristol. They described Mrs Montgomery's employment as a full-time warehouse clerk on shift work and her change to a part-time position with fixed hours. They set out details of the working arrangements at Lowfield. They said:"Full-time warehouse workers and perpetual inventory (PI) clerks attached to the warehouse are paid under an agreement with the GMB Union (`the Union') on beneficial terms related to Bank Holiday pay. Part-time workers since recruited are paid on a different basis and do not enjoy those particular beneficial terms."...It was conceded that the case under the Sex Discrimination Act 1975 could not be pursued, because Mrs Montgomery's claim was in relation to pay. It had to be brought under the Equal Pay Act 1970 . Lowfield did not admit indirect discrimination or inequality, but argued that, in any event, they were entitled to the defence under Section 1(3) of the Equal Pay Act 1970 , in that the variation between the contracts of the full-time and part-time employees was genuinely due to a material factor which is not the difference of sex. Section 1(3) provides:
"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..."
As for Article 119, the Tribunal said (paragraph 7 of the decision) referring to the European Court of

Justice case in Bilka-Kaufhaus GmbH :

"... we should consider whether the difference in the contractual terms could be objectively justified and that it may be so if the difference arises from a real need on the part of the respondent, is appropriate with a view to achieving the respondent's objective and is necessary to that end."
On this appeal it is agreed that the Equal Pay Act 1970 is not in conflict with Article 119. It is not necessary to consider the two separately. It is agreed that the Tribunal correctly stated that the burden of proof was on Lowfield to establish the material factor defence. The essence of the argument presented by the Appellant is that the Tribunal did not correctly apply the statutory provisions and the tests laid down in Bilka-Kaufhaus GmbH to the facts. The point of law arising on Mrs Montgomery's appeal is neatly summarised in the Notice of Appeal:
"3. ... Whether the variation in the contractual terms between full time and part time employees, which provided for additional pay for full time workers at Bank Holidays, could properly be held to be due to a material factor other than sex, within the meaning of section 1(3) of the Equal Pay Act 1970."
To see if that point is made good, it is necessary to examine in more detail findings of fact made by the Tribunal in paragraph 5. Lowfield's business as a distribution centre for supermarkets made unusual requirements on employees. It required 24 hour working, seven days a week, but with a variable workload. This required a flexibility in hours and shifts. That was recognised by the union GMB, when the distribution depot was set up in 1989. The contracts of full-time workers, including Mrs Montgomery's original contract, contained the words "work patterns to suit this demand are required and may include variable attendance hours".On this aspect of the case we have been referred to the contract for full-time work under which Mrs Montgomery served from 1990-1993. She signed the contract accepting the terms of employment on 12 July 1990. Her job title is stated to be Warehouse Clerk. The hours of work stipulated were:
"The basic weekly hours of work are 40 hours. The Distribution Centre operates seven days per week and demand is variable on a daily basis. Work patterns to suit this demand are required and may include variable attendance hours.

Actual times of working are notified by your Supervisor/Manager."

Those terms reflect the agreement in February 1989 between Lowfield and the GMB union. That set out certain principles which included, under the heading of "Flexibility of Labour,":
"4.1 It is agreed that in the interests of efficiency employees will undertake (and be trained for) any duties within the Distribution Centre, provided they are suitably qualified and considered by management to be capable of satisfactorily fulfilling these tasks. Employees may be required to work on any day of the week and in any part of the Centre on any operation without accruing any additional premiums outside of the normal agreed pay and conditions schedule."
References are made to shift rotas, inclusive of public holidays.At the time when Mrs Montgomery was first employed in 1990, Lowfield only employed full-time employees in the warehouse. No consideration had been given to contractual pay arrangements for part-time working. The arrangements for Bank Holiday payments were made, but never reduced to writing, save in a minute of a meeting of 27 February 1991. The agreement was described as the next contracted day or NCD arrangement. It was a complex agreement. The effect was stated in these terms:
"(d) ... if a shift produced a rest day on a Bank Holiday, the normal entitlement to double time and a day off in lieu was nonetheless applied to another working day, either side of the Bank Holiday depending on the relevant shift rota. Triple time was allowed for the relevant day if no day was taken off in lieu."
That formula has been in operation ever since for full-time workers. In 1992 part-time workers were engaged to meet heavy demands in heavy periods. The difference between part-time workers and full-time workers was that part-time workers had fixed hours and did not work variable shifts. In accordance with normal pay arrangements, if their fixed hours included work on a Bank Holiday, they received additional payment. But the NCD arrangement was never applied to part-time workers. Mrs Montgomery changed from being a full-time worker to a part-time worker in May 1993. The relevant part of the offer which she accepted on 17 May 1993, said:
"With effect from Sunday 23rd May 1993 you will take up the new hours of attendance which are: Sunday Tuesday Wednesday Thursday 6.00 p.m. to 10.00 p.m. and Saturday 6.00 a.m. to 2.00 p.m. [she did not work on that arrangement on Mondays or Fridays]
This change forms a variation to your Contract of Employment with all other conditions remaining as per your original contract, a copy of which you already have."The Tribunal described the clarification of the NCD practice and the later history arising from the appointment of a new Personnel Manager. He could not find anything in writing relating to the practice and was therefore compelled to make enquiries with the union branch secretary about the arrangements.The critical fact in this case is that there was a difference in the contractual terms for full-time workers and part-time workers. Full-time workers were required to work on rotating shifts in the manner described. Part-time workers had worked specific hours on specific days. Another fact that assumed importance in the Tribunal and on this appeal is that some of the shifts of full-time workers (D, E, F and G) did not for a number of years in fact rotate. Their rest days differed, but appear in each case to have included Mondays. The NCD arrangements applied to them throughout the period when their shifts were not rotating. It was not until April 1995, after Mrs Montgomery had started her proceedings in the Industrial Tribunal, that D, E, F and G shifts had, like the remaining shifts, been varied.Mrs Montgomery first raised with her manager, in Christmas 1993, the question of her entitlement to days in lieu. It was explained to her that there was no entitlement, unless the Bank Holiday was actually worked. The NCD arrangement did not apply to her because she was a part-time worker. She accepted that position at that time, but later questioned it in these proceedings.Other important findings of fact related to the male and female composition of the workforce. (Paragraph 6.) The Tribunal said:"6. ... In the warehouse itself there are 178 full-time male employees and one full-time female employee and 13 female and two male part-time employees."...Lowfield accepted that it was inherently more likely that part-time workers would be female than male and that there are substantially more part-time female workers than male. The Tribunal accepted the comparisons put to them by Miss Underhill, who appeared for Mrs Montgomery at the Tribunal, that the contractual terms of part-time employees (and hence mainly of women), were less favourable than those of full-time employees who were predominantly men, and that an equality clause should be deemed to be included in the contracts of the part-time employees, unless the material factor defence under Section 1(3) of the 1970 Act could be properly invoked. That was the issue for the Tribunal. Was Section 1(3) applicable to this case?The Tribunal answered as follows:"10. We have found strength in the arguments on both sides and have given anxious consideration to our decision. We have concluded on the balance of probabilities that the respondent has established its "material factor" defence under Section 1(3). We accepted that the introduction of the NCD arrangement, when the seven day a week operation was set up, corresponded to a real need on the company's part to satisfy, recruit and retain a flexible full-time workforce. We have noted the entire agreement of the Union at that time. The problem of inequality of opportunity to obtain the advantages of Bank Holiday working having been identified by the Union the NCD was an appropriate means to deal with the problem and was necessary. The applicant and other part-time workers, when introduced, were contractually bound to limited and specific hours set out, in the case of the applicant, in the letter of 14 May 1993. In her full-time contract her actual times of working were to be "notified by the Manager". When part-time, this was changed to specific hours which the parties intended to have effect despite the reference to `other conditions remaining the same' and which the company could not, in our view, vary without agreement. The same reasons which made it appropriate to apply the NCD arrangement for full-time workers made it inappropriate and unnecessary to apply that arrangement to part-time workers with which, again, the Union concurred until, apparently, just before the hearing.11. We are accordingly satisfied that the variation, in the form of the NCD arrangement, between the applicant's contract and a comparable full-time man's contract is genuinely due to a material factor which is not the difference of sex such that no equality clause should be deemed to be included in the applicant's contract and her application must fail."The essence of the matter was this: over the period of which Mrs Montgomery complains that there was a breach of the Equal Pay Act , there were three groups of workers in Lowfield's warehouse. There were full-time workers. They were predominantly, if not exclusively, male. They were working on the terms set out in the contracts for full-time employees. They involved rotating shifts over seven days a week, 24 hours a day. They were operated to meet the requirements of Lowfield for a flexible workforce. There was a second group of full-time employees who, on the findings of the Tribunal, had exactly the same contracts as the first group, but were not working on rotating shifts. In practice, they were working specific days and hours. Both groups of full-time employees were beneficiaries of the NCD arrangement for Bank Holiday pay. The third group of workers, who were predominantly women, were part-time workers, working not shifts but specific hours on specific days. They were not the beneficiaries of the NCD arrangement. In those circumstances it is not surprising that Mrs Montgomery complained that there was not equal pay for equal work as between her, as a part-time worker, and one of the male workforce who were not in practice working the rotating shifts.The question was correctly identified in the Tribunal as this: was this variation between the man's contract and the woman's contract genuinely due to a material factor which is not the difference of sex? The part-time women were not getting the same pay perk as the men. That would be contrary to the Equal Pay Act unless Section 1(3) applied. The Tribunal decided it did. The contracts were different. There are not in fact three groups of workers in the warehouse relevant for this purpose. There are two. There are the full-time workers (predominantly men), who all work under the same contracts which provide for the rotating shifts and there are the part-time workers who, unlike the full-time workers, have a contractual obligation only to work specific hours on specific days. The Tribunal found that that was enough to satisfy Section 1(3). They relied on the history of the NCD arrangements and why it was appropriate and necessary to have those.In a case like this, where the circumstances changed after the arrangement about the NCD formula, it was important for Lowfield to take account of the changes in the workforce. When they started there were only full-time workers. It appears that they needed this special lure to attract people to work on these exacting terms. There were no part-time workers until 1992. By the time that Mrs Montgomery became a part-time worker, there were full-time workers who were not in practice working to the original contracts.It is important, if employers seek to rely on Section 1(3), not to invoke what Mr Willis called "a decayed justification". It may be a good justification at the inception of the arrangement, but it may cease to be a good justification through a change of circumstances. We do not cast any doubt on the importance of taking changed circumstances into account when reliance is placed on a justification that pre-dates the changes.On the appeal Mr West for Lowfield said there was nothing legally wrong with this decision. It was not open to us to interfere with the decision because we might have come to a different decision, or because the Tribunal might have come to a different decision if there had been different evidence and perhaps different arguments. The position was that, unless it was shown that there was an error of law in the way that the Tribunal interpreted and applied Section 1(3) and Article 119, or unless it was shown that there was perversity in the sense that the Tribunal's decision was not supported by any evidence, there is nothing we could do to interfere with it. He said that what Mrs Montgomery wanted was a re-run of the original case and to submit other evidence and perhaps other arguments, in the hope that a different Tribunal would come to a different decision. That is not a basis on which we could properly allow an appeal.In the rest of his arguments Mr West referred the reasoning of the Tribunal which he supported. The essence of his argument, accepted by the Tribunal, was this: that the material factor in question was one of obligation. The full-time workers' obligation was to work when required, whereas Mrs Montgomery's obligation was to work specific hours on specific days. The Tribunal were entitled to regard that as justifying a variation, genuinely due to a material factor that was not a difference of sex.Miss Lang presented all the arguments that could reasonably be advanced against this decision. The burden of proof was on Lowfield to show that the variation was genuinely due to a significant and relevant difference objectively justified and unrelated to any discrimination on grounds of sex. She referred us to three cases: first, National Vulcan Insurance Engineering Group Ltd v Wade [1978] ICR 800 at page 810 A, to the judgment of

Lord Justice Geoffrey Lane, whereafter citing Section 1(3) he said:

"Note the wording. The word used is "case." It is not "contract," it is not "skill," it is not "employment," it is "case."
That, she correctly submitted, meant that, in deciding whether this defence has been established, it is necessary for the Tribunal to look at all the circumstances of the case, not just at the contracts of the woman and the man, but at what was actually going on in practice. Secondly, she referred to Enderby v Frenchay Health Authority [1994] ICR 112 , to the passages at page 129 to 132, which sets out the relevant part of the judgment of Lord Justice Neill in the Court of Appeal, dealing with the defence of justification under Section 1(3) and to the question of market forces as a material factor. She referred to passages in the judgment of the European Court itself at paragraphs 13, 14, 19, and 24 to 29. Thirdly, reference was made to the very recent decision of the House of Lords in North Yorkshire County Council v Ratcliffe [1995] ICR 833 , in particular to the speech of Lord Slynn at various points, culminating in the passage on pages 840 H to 841 C.The essence of Miss Lang's submission was that the Tribunal mis-applied the law by identifying a factor which she submitted was neither significant nor relevant at the appropriate time, i.e. from 1992 onwards when part-time workers were first employed. Although full-time workers were all on flexible shifts when the NCD arrangement was introduced in 1989, by 1992 when part-time workers were first employed, a number of full-time workers were in practice on fixed shifts. It followed that the distinction between fixed and flexible shifts could not rationally be held to be the significant and relevant difference which justified the distinction between full-time and part-time workers on the NCD arrangement. Mrs Montgomery did not dispute that the contractual term reserving power to management to rotate shifts and rest days was significant and relevant to the 1989 discussions between the union and Lowfield. That led to the adoption of favourable pay arrangements for full-time workers all of whom worked rotating shifts at that time.Although that was a justification in 1989, the reasons relied upon by the Tribunal for the NCD arrangement continuing to apply were no longer valid. Miss Lang submits that:
"4.13 The difference between full time workers on flexible shifts and part time workers on fixed shifts was not, on their [the Tribunal] own findings of fact, a valid distinction between 1992 and 1995, since some full time workers were on fixed shifts but still had the benefit of the NCD arrangement."
In relying upon the contractual position of full-time workers as a justification, the Tribunal had therefore not taken full account of their own findings of fact and they had not taken proper account of the law, because it was established in cases such as Benveniste v University of Southampton [1989] ICR 617 that the significance of a justification may disappear with changed circumstances. That is what has happened in this case. A factor which had been of significance in the pay setting negotiations in 1989 had lost its significance and relevance by the time that Mrs Montgomery became a part-time worker.That is the critical point in Miss Lang's argument. She put the same point in several other ways. The Tribunal had misunderstood the requirement that the variation in pay had to be genuinely due to the factor identified by the Tribunal. On the Tribunal's own finding the contractual term had no impact in practice on a subset of full-time employees who received the benefit of the NCD arrangement without being required to work the rotating shifts. The error of the Tribunal was to focus on the contractual language. Instead, they should have assessed the impact of that contractual language in practice. The variation in pay between the part-time and all the full-time workers could not, in these circumstances, be said to be genuinely due to a contractual term which was not in practice enforced in respect of all the full-time employees.The Tribunal should have examined the practical significance of any employment term alleged to constitute justification. She referred to the National Vulcan Insurance Engineering case for the proposition that you should look to see what has happened in practice in order decide whether employers had really established that the variation is genuinely due to a material difference. The Tribunal had not looked in practice at what had happened to the group of full-time employees. They had only looked at the contract of a full-time employee. As for the EEC approach of objective justification under Article 119, Miss Lang did not suggest that this approach would yield a different answer. But it was another way of testing the correctness of the decision. The Tribunal had mis-applied the relevant principles. Instead of balancing one pay practice against another in order to see whether there was objective justification, the Tribunal had considered the two pay schemes separately. They had identified the reasons behind the decision in 1989 and then applied them to the part-time contract. That was not a proper exercise in determining whether there was objective justification. If the Tribunal had applied the right test, Lowfield's decision to pay less to part-time workers could not be said to be proportional to the objective at the time when the pay practice operated to reward in addition full-time staff, whom the Tribunal found faced no chance allocation in relation to shifts.The emphasis of Miss Lang's argument then moved to the evidence. She disavowed an intention to submit that the decision was perverse. She could not say that. It was impossible to say that this decision was reached on no evidence. There was, however insufficient evidence from Lowfield to allow for the assessment of objectivity of the justification asserted. The Tribunal had accepted a mere assertion from Lowfield that there were potential recruitment problems for their distribution centre. They had not made any assessment of the sort necessary to determine whether Lowfield had to compete with other rotating shift employers offering the same with better terms.Finally, by reference to the Ratcliffe case (supra), Miss Lang submitted that the Tribunal erred both under Section 1(3) or Article 119 of the EEC Treaty, because they did not adequately consider whether the factors and justifications advanced by Lowfield ultimately depended on a difference in sex. As the House of Lords held in Ratcliffe , unequal treatment must be justified on grounds other than a difference in sex. It is not enough to refer to outside forces as the cause, if those outside forces themselves cannot be shown to be untainted by considerations of sex. The Tribunal has to rule out expressly any gender based bias that may exist in such forces. The Tribunal had not expressly considered this aspect. That was an error in their approach to this problem. The matter had not been dealt with in the depth required for Lowfield to discharge the burden of proof on them.We are grateful for these excellent submissions in paragraphs 10 and 11 of the Industrial Tribunal's decision, on Section 1(3) and Article 119 and on the evidence.At the end of the day, however, the question is a short one. What is the error of law in this decision? We are unable to find one. The Tribunal gave correct directions to themselves on the burden of proof, on the terms of Section 1(3) and on Article 119 of the Treaty. It is impossible to say that they have misinterpreted them. We also have to consider whether they mis-applied the law to the facts. In our view, they did not. There was material on which they could find that the requirements of Section 1(3) and Article 119 were satisfied. It was open to them to find that the contractual difference was one which would amount to a justification of the variation between the man's contract and the woman's contract and which was germanely down to a material factor which is not the difference of sex.It cannot be said that the Tribunal ignored circumstances which they should have taken into account, in particular the fact of full-time workers not in practice working in accordance with the full-time contract. That was taken into account. They would have mis-directed themselves if they had looked only at the contractual situation, but they did not do that. They looked at all the circumstances and found that the contractual difference was the factor that did make the difference for the purpose of Section 1(3). The arguments about insufficiency of evidence amount, in our view, to no more than this: that if the matter had been gone into in more detail, the Tribunal might have reached a different result. That is not an error of law. It is the Tribunal's duty to do the best it can on the material before it. Parties cannot on an appeal to this Tribunal successfully obtain a "second go" because that might produce a better decision or a different decision. The Tribunal heard evidence. They had documents before it. They gave themselves a correct direction about the law and were entitled to reach the decision which they did on the material. For all those reasons we dismiss this appeal.