MRS K E TAYLOR v COMMISSIONERS OF INLAND REVENUE [1999] UKEAT 498_98_2809

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [1999] UKEAT 498_98_2809Case No Appeal No. EAT/498/98Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MRS K E TAYLORAPPELLANTCOMMISSIONERS OF INLAND REVENUERESPONDENT
Before
His Honour Judge Peter Clark Mr L D Cowan Mr W MorrisDate 28 September 1999
[1]APPEARANCES For the Appellant MR M FORD (of Counsel) Messrs Russell Jones & Walker Solicitors Swinton House 324 Grays Inn Road London WC1X 8DH For the Respondents MS R DOWNING (of Counsel) Solicitors Office Inland Revenue East Wing Somerset House The Strand London WC2R 1LB JUDGE CLARK: This is an appeal by Mrs Taylor, the Applicant before the Nottingham Employment Tribunal sitting on 16 December 1997, against that Tribunal's decision by a majority (the Chairman, Mr D R Sneath dissenting) dismissing her complaint of indirect sex discrimination brought against her employer, Commissioners of Inland Revenue, the Respondents. That decision was promulgated with Extended Reasons on 30 January 1998. Background The Appellant commenced employment as a Valuation Assistant in the Valuation Office of the Inland Revenue in 1988. That is now the Valuation Office Agency. In 1992 she was promoted to Valuation Executive. On 20 June 1993 she left on maternity leave. Her child was born on 13 September 1993.[2]During September 1993 an appraisal was carried out on the Appellant and other staff. In the resulting Skills Review and Development Report she was graded Box 4 (not fitted for promotion because of lack of experience) on a descending scale of 1-5.[3]On 30 November 1993 she gained her professional qualification, membership of the RICS.[4]On 26 December 1993 her maternity leave ended. She then took a career break under the Respondent's scheme. She did not return to work until 6 May 1996.[5]The Respondent's scheme provided for a total absence of up to six years on career break. During that time all terms and conditions of employment apply to staff on career break as they do to staff in post. It also provides that staff on unpaid special leave are eligible for promotion.[6]In 1994 and 1995, following agreement between the Respondent and the Trade Unions, the Respondent instituted a re-grading scheme whereby those Valuation Executives who met three stated criteria would be automatically promoted to Senior Valuer Grade.[7]The Tribunal was concerned with the second re-grading exercise carried out in 1995. The relevant criteria applied to all 85 Valuation Executives, including the Appellant, were that on 1 October 1995 the Executive should have:(i) completed at least three years Valuation Officer Agency service,(ii) obtained corporate membership of the RICS or ISVA before 31 December 1993 and(iii) received a box 2 marking or above for promotability on their most recent Performance Skills Review and Development forms. In the Appellant's case, due to her absence from work, that was the September 1993 appraisal, giving her a box 4 marking for promotability. She fulfilled the first two criteria, but not the third. She did not receive automatic promotion. 12 of the 85 Executives were promoted on that occasion.[8]Following her return to work in May 1996 her Trade Union Branch Secretary, Ms Hardman wrote to the Respondents seeking promotion for the Appellant on the basis that she would, but for her career break, now be on a par with her contemporaries who joined in 1988, most of whom were Senior Valuers. The reply from Mr Ebdon of the Respondent dated 16 October was to the effect that when she obtained the appropriate number of promotion markings, the Appellant would be considered for promotion.[9]In January 1997, seven months after returning to work, she was graded box 1 for promotability, that is, exceptionally fitted for promotion. As a result of that marking she sought retrospective re-grading. That was rejected by Mr Watling, Director of the East Region by letter dated 17 March 1997. The Complaint[10]By an Originating Application presented to the Employment Tribunal on 16 June 1997, the Appellant complained of both direct and indirect sex discrimination. The former claim was abandoned before the Employment Tribunal, which was concerned only with the claim of indirect discrimination. It was her case that but for her career break she would have complied with the third criterion, box 2 or above promotability, and been promoted on 1 October 1995. That criterion disproportionately affected women. The claim was resisted on the basis that the criteria did not have a discriminatory effect on women but if so, the criteria were justifiable. Indirect Discrimination[11]Section 1(1)(b) of the Sex Discrimination Act 1975 provides:
"(1) A person discriminates against a woman in any circumstances relevant for the purposes of any provision of this Act if – … (a) he applies to her a requirement or condition which he applies or would apply equally to a man but – (i) which is such that the proportion of women who can comply with it is considerably smaller than the proportion of men who can comply with it, and (ii) which he cannot show to be justifiable irrespective of the sex of the person to whom it is applied, and (iii) which is to her detriment because she cannot comply with it."
[12]One approach to the statutory test for indirect discrimination is to ask the following questions posed by Mustill LJ in Jones v Chief Adjudication Officer [1990] IRLR 533, paragraph 36, where he said this:
"As I understand it, the process for establishing discrimination on this basis takes the following shape. (For ease of illustration, I will assume that the complaint stems from the failure of a woman to satisfy a relevant positive qualification for selection, and that only one such qualification is in issue.) (1) Identify the criterion for selection; (2) Identify the relevant population, comprising all those who satisfy all the other criteria for selection. (I do not know to what extent this step in the process is articulated in the cases. To my mind it is vital to the intellectual soundness of the demographic argument); (3) Divide the relevant population into groups representing those who satisfy the criterion and those who do not; (4) Predict statistically what proportion of each group should consist of women; (5) Ascertain what are the actual male/female balances in the two groups; (6) Compare the actual with the predicted balances; (7) If women are found to be under-represented in the first group and over-represented in the second, it is proved that the criterion is discriminatory."
That is not the only approach. Per Ralph Gibson LJ in University of Manchester v Jones [1993] ICR 474, 493E.[13]If the Applicant establishes prima facie indirect discrimination under section 1(1)(b)(i) and (iii) it will then be for the Respondent to justify the discriminatory condition. After some debate it is now settled that the test for justification under section 1(1)(b)(ii) is encapsulated in the words of Balcombe LJ in Hampson v Department of Education and Science [1989]ICR 179,191:
"In my judgement justifiable requires an objective balance between the discriminatory effect of the condition and the reasonable needs of the party who applies the condition."
That test was expressly approved by the House of Lords in Webb v Emo [1993] ICR 175 , 183A, per Lord Keith of Kinkel. The Tribunal Decision[14]The first question for the Tribunal was what was the requirement or condition applied to the Appellant for the purpose of section 1(1)(b)(i). Here, the Employment Tribunal parted company.[15]The lay majority accepted, on a submission made by Miss Downing on behalf of the Respondent, that the three criteria applied to the 1995 automatic promotion exercise were indivisible. As a result the relevant "pool" was all 85 Valuation Executives. Their reasoning is expressed at paragraph 16 of the reasons thus:
"We accepted that we should not look further than those 85 Valuation Executives who were considered for re-grading in October 1995, whose particulars are set out in the document R1. Miss Downing, for the Respondent, argued that the three criteria were indivisible, so that the pool was all 85. Taken together, the criteria constituted the condition or requirement which the Respondent applied equally to all the Valuation Executives regardless of sex. The majority lay-members accepted that submission because, treating each of the criteria as discrete, would lead to a number of permutations. Furthermore, focusing on the third criteria, that of the Box 2 marking, could result in unfairness to male Valuation Executives who, for example, met the first two criterion on 1 October 1995 but only had Box 3 markings and who might subsequently in 1996 have made the grade to Box 2 or better. Further, the lay members find that the conditions of the re-grading exercise taken either together or separately did not apply unfairly to women. Both sexes could comply and the majority lay members did not accept that the applicant's box 4 was made artificially low to deny her the chance of re-grading."
[16]The Chairman took a different view. He held that as a matter of ordinary language the Respondent applied three conditions or requirements to the Valuation Executives. It is the third of which the Appellant made complaint. He applied the guidance given by Evans LJ in Jones v University of Manchester . At page 501D his Lordship said:
"If follows that the statutory concept, in my judgment, is that of a "pool" or "relevant population", meaning those persons, male and female, who satisfy all the relevant criteria, apart from the requirement in question."
In that way the Chairman concluded, at paragraph 17 of the reasons, that the relevant pool was those Valuation Executives who met the first two criteria; that was 23 Executives.[17]The difference in the pool had a significant effect on the statistical exercise necessary to judge the question of disproportionate impact.[18]Taking all 85 Executives (the majority pool) 63 were men and 22 were women. 12 complied with all three criteria and were automatically promoted to Senior Valuer in 1995. Of those 12, eight were men and four women. Thus eight out of 63 men could comply with all three criteria (12.7 percent) and four out of 22 women (18.2 percent). There was no disproportionate impact on women.[19]Alternatively, the majority carried out a further exercise, set out at paragraph 18 of the reasons, based on all those who met any two out of the three criteria. Again there was no disproportionate impact on women.[20]On the other hand, if the pool is that taken by the Chairman, of the 23 Executives who met the first two criteria, 12 were men and 11 were women. Eight of those 12 men met all three conditions and were re-graded (66 percent); four out of the 11 women met all three conditions (36 percent), allowing for rounding up. In these circumstances a disproportionate impact on women is made out. Ms Downing does not challenge the figures arrived at by the Chairman by his route.[21]Turning to the question of justification, the majority found that even if disproportionate impact was made out, the Respondent had justified the application of the requirement or condition: "because the re-grading exercise was a time-limited scheme. To give effect retrospectively to it would amount to more favourable treatment of the Applicant, compared with her male colleagues who, like her, might have made the grade in either December 1995 or December 1996." (reasons, paragraph 18) Again, the Chairman disagreed, and for the reasons given at paragraph 19 would have found that the Respondent had failed to justify the requirement or condition. The Appeal[22]The question for us in this appeal is not whether the Chairman was right, but whether the majority lay members of the Tribunal were wrong in law in approaching the matter as they did. We shall deal with the case in two parts; disproportionate impact and justification. Disproportionate Impact[23]Having considered the submissions of Mr Ford and Miss Downing it is clear to us that the critical issue for us to resolve is whether the majority reached a permissible conclusion in finding that the three criteria applied by the Respondent on 1 October 1995 for automatic promotion were indivisible, thus leading to a pool of all 85 Executives, or whether the only permissible finding is that the third criterion, Box 2 or above promotability, must be separated out, so that the pool consists of those 23 Executives who complied with the first two criteria, as did the Appellant.[24]It is accepted that if the former pool is used, there is no disproportionate impact on women, applying the majority's principle finding; if the latter, disproportionate impact is made out.[25]On this issue we accept the submission of Mr Ford. It is absolutely clear from the cases, including University of Manchester v Jones and the race discrimination case of Raval v Department of Health and Social Security [1985] ICR 685, that where a number of criteria are applied the correct approach is to take as the appropriate pool all those who can comply with those criteria with which the Applicant complies. Here the first two criteria. It is the essence of a claim of indirect discrimination that the pool should consist of those who satisfy all the relevant criteria apart from the requirement in question. In this case, Box 2 promotability.[26]It follows, in our judgment that the majority erred in treating the pool as all 85 Executives. That part of the decision cannot stand.[27]Further, we accept that the effect of the Chairman's correct approach in law is that the Appellant has established disproportionate impact in relation to the 1995 promotion exercise. Justification[28]We accept that the question of justification is essentially one of fact for the Employment Tribunal, provided that no error of law in approach is made out.[29]The difficulty with the majority's approach to justification, as we think Miss Downing accepts, is that their reasoning is based on irrelevant factors, namely:(1) that the re-grading exercise was a time-limited scheme, and(2) to give effect to it retrospectively would amount to more favourable treatment of the Appellant compared with her male colleagues who might have made the grade in December 1995 and December 1996.[30]The errors into which the majority have fallen are first to judge the question of justification at a date later than 1 October 1995 (the retrospective point) and secondly to consider whether a finding of unlawful discrimination in favour of the Appellant would somehow mean that male colleagues were being treated less favourably. Either the offending condition is justifiable as at 1 October 1995 or it is not. The position of male colleagues at this stage of the enquiry is wholly immaterial.[31]Further, if it be necessary, we would also uphold Mr Ford's further submission that on the face of their reasons the majority have failed to carry out the balancing exercise identified by Balcombe LJ in Hampsom ; or if they have, they have failed to give adequate reasons for concluding that question in favour of the Respondent. Meek v City of Birmingham District Council [1987] IRLR 250 .[32]For these reasons we are satisfied that the majority finding on justification cannot stand and must be set aside. Conclusion[33]We shall allow this appeal and declare that the Appellant has established that the relevant condition or requirement, the Box 2 or above promotability criterion, applied to her on 1 October 1995, had a disproportionate impact on women and that it was to the Appellant's detriment because she could not comply with it.[34]As to the question of justification, it is common ground that we cannot deal with that matter ourselves. It must be remitted to the Employment Tribunal for reconsideration. Since the last Tribunal was divided, it makes obvious sense for this issue to be remitted to a fresh Tribunal, based on the declaration which we have made in respect of disproportionate impact, and we so direct.