PARLIAMENTARY COMMISSIONER FOR ADMINISTRATION AND THE HEALTH COMMISSIONER v MR J FERNANDEZ [2003] UKEAT 0137_03_0509

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2003] UKEAT 0137_03_0509Case No Appeal No. EAT/0137/03Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
PARLIAMENTARY COMMISSIONER FOR ADMINISTRATION AND THE HEALTH COMMISSIONERAPPELLANTMR J FERNANDEZRESPONDENT
Before
His Honour Judge Peter Clark Mr D Bleiman Mr A E R MannersDate 5 September 2003
[1]APPEARANCES For the Appellants MR NICHOLAS PAINES QC And MR CLIVE SHELDON (Of Counsel) Instructed by: The Treasurer Solicitor Queen Anne's Chambers 28 Broadway London SW1H 9JS For the Respondent MR ROBIN ALLEN QC And MS NICOLA BRAGARIZA (Of Counsel) Instructed by: Equal Opportunities Commission Arndale House Arndale Centre Manchester M4 3EQ HIS HONOUR JUDGE PETER CLARK This appeal raises directly for determination the question as to whether the European Court of Justice judgment in Brunnhofer v Bank Der Ostereichischen Postparkasse AG [2001] IRLR 571 alters the approach to be taken by Employment Tribunals, following the House of Lords guidance in Strathclyde Regional Council v Wallace [1998] ICR 205 and Glasgow City Council v Marshall [2000] ICR 196 , when considering an employer's genuine material factor defence raised under S1(3) of the Equal Pay Act 1970. The appeal is brought by the Parliamentary Commissioner for Administration and The Health Service Commissioners (The Ombudsman), the Respondent before an Employment Tribunal sitting at London (South) under the chairmanship of Professor R W Rideout against that Employment Tribunal's decision, promulgated with Extended Reasons (EWR) on 10 September 2002 insofar as it upheld(a) the Applicant, Mr Fernandez' complaint brought under the Eq PA and(b) his complaint of direct racial discrimination in part. We shall refer to the parties by their descriptions below. Background[2]The Applicant, a barrister, commenced employment with the Parliamentary Ombudsman as a case worker on 4 January 1999. His starting salary was £19,527 per annum. (misstated in the Employment Tribunal's reasons, paragraph 5 as £19,257 per annum). On the same date Ms Christine Moulder also started work as a case-worker with the Health Service Ombudsman, a different department within the same overall office. Before accepting that appointment Ms Moulder asked for a higher starting salary. The Respondent agreed. She commenced at £19,950 per annum (pro-rated for part-time work).[3]During her employment Ms Moulder pressed for a salary increase. That was granted. By letter dated 21 January 2000 she was informed that she was offered a Recruitment and Retention allowance, increasing her salary by £1,500 for full-time employment (pro-rated to £900 in her case).[4]The pay structure in the Department provided for salary increases to be linked to an employee's box-marking in the annual appraisal procedure. With effect from 1 August 2000 Ms Moulder received a salary increase (on a full-time basis) of £1,520. She had received a box 2 marking in the previous appraisal. The Applicant, who had received an overall box 3+ rating, was awarded an increase of £1,280 per annum.[5]By an Originating Application dated 18 July 2001 the Applicant brought an Equal Pay claim against the Respondent. On about 30 August 2001 he presented a complaint of direct race discrimination. In both claims he named Ms Moulder as a comparator.[6]The factual background to both claims involved:(1) the difference in their starting salaries,(2) the payment of the Recruitment and Retention allowance to Ms Moulder and not to the Applicant,(3) the difference in performance-related pay, following their annual appraisal box markings, with effect from 1 August 2000. The Employment Tribunal decision[7]The Equal Pay claim succeeded on all 3 grounds. It was accepted by the Respondent that the Applicant and Ms Moulder were employed on like work. The Respondent raised the genuine material factor defence under S1(3). The Employment Tribunal rejected that defence in respect of all 3 grounds of complaint.[8]As to the complaint of direct race discrimination the Employment Tribunal, by a majority, rejected that complaint in respect of the first and second grounds of complaint but unanimously upheld the third, that is in relation to the difference in performance related pay increases made to the Applicant and Ms Moulder in August 2000. Equal Pay[9]The principal issue in this appeal concerns the Employment Tribunal's self-direction as to the material factor defence under S1(3) Eq PA. It is formulated at paragraph 29 EWR thus:
"29. The Respondent accepts that the Applicant and his chosen comparator, Ms Christine Moulder, were employed on like work. The only issue in relation to the claim under the Equal Pay Act concerns the existence of a genuine material factor falling within section 1(3) of that Act. The Tribunal is asked to take note of the decisions of the House of Lords in Strathclyde Regional Council v Wallis [1998] ICR 205 ; Glasgow City Council v Marshall [2000] IRLR 272 ; and Tyldesley v TML Plastics Ltd [1996] IRLR 395 . They establish that a factor is genuine if it is relied on, is not based on sex and is not a sham, even if it subsequently appears that it is factually incorrect. It has been submitted by the Respondent that the question is whether the factor" caused a difference"
. In the view of the Tribunal, however, this does not mean that a factor which is genuine is necessarily material. It is for the Tribunal to decide whether the factor is sufficient to support the difference. In that respect the Tribunal proposes to rely on the decision in Bilka-Kaufhaus Gmb H v Laber Vaughn Hartz [1987] ICR 110 which requires objective justification in respect of materiality. In the Danfoss Case [1991] ICR 74, and in Enderby v Frenche (sic) Health Authority [1994] ICR 112 the ECJ and House of Lords respectively decided that materiality could not be deduced from a factor which lacked transparency. In other words, the factor must permit the employee to see why the difference arose. In Rayney v Greater Glasgow Health Board [1987] ICR 129 Lord Keith in the House of Lords said the factor must be "significant and relevant". In that case market forces (which, for instance, might in the present case refer to the difficulty of recruiting or retaining staff) were to be considered relevant. But the fact that a factor is relevant and potentially material does not mean that it is material unless it is actually of significance in explaining the difference. This does not mean that its consequence must unavoidably lead to a difference. It must be shown, however, that there is a real difference that is relied upon to produce the pay differential. If the evidence reveals no difference the mere belief in such a difference may be genuine but is not material."[10]It should be noted that the case of Brunnhofer , in which judgment was delivered on 26 June 2001, was reported in the August 2001 edition of the Industrial Relation Law Reports. This case was heard by the Employment Tribunal on 31 July and 1-2 August 2002. Nevertheless, the case was not cited to the Employment Tribunal by junior Counsel who appeared below and does not appear to have been considered by the Employment Tribunal.[11]It is clear to us from the Employment Tribunal's self-direction that they require the Respondent to objectively justify the variations in pay between that of the Applicant and Ms Moulder in what may be called the Bilka-Kausfhaus sense, that is to say, the grounds put forward by the employer to explain the inequality must correspond to a real need of the undertaking, be appropriate to achieving the objectives pursued and necessary to that end. See Brunnhofer , paragraph 67.[12]Mr Paines QC submits that the Employment Tribunal has misdirected itself in law in requiring the Respondent to objectively justify the differences in pay in circumstances where it was not suggested on behalf of the Applicant that the factors relied upon by the Respondent were indirectly discriminatory. He prays in aid the House of Lord's authorities of Wallace and Marshall , the latter case expressly approving the approach of Mummery P in Tyldesley v TML Plastics Ltd [1996] ICR, 356, 361-2 (EAT). See Marshall 203F. per Lord Nicholls.[13]Mr Allen QC, to the contrary, submits that the Employment Tribunal was merely applying the well-established principle, to be found consistently in ECJ jurisprudence, that Article 141 (formerly Article 119) of the Treaty of Rome requires that similar situations shall not be treated differently unless the differentiation is objectively justified. Brunnhofer applies that principle in a way particularly relevant to the issue in this case and in a way inconsistent with the reasoning in Tyldesley . We should follow the ECJ guidance.[14]We must resolve this dispute before turning to the Employment Tribunal's findings on the Respondent's material factor defence. The domestic jurisprudence[15]We are quite satisfied that the domestic authorities, particularly Wallace and Marshall , demonstrate an approach inconsistent with that taken by the Employment Tribunal in this case.[16]In Tyldesley Mummery P summarised the Industrial Tribunal's self-direction as to the S1(3) material factor defence (360 C-F). Having found that the Applicant in that case was employed on like work to that of her male comparator it held that the onus lay on the employer to prove that the variation in pay was genuinely due to a material factor which is not the difference in sex. The employer had, on the balance of probabilities, to rebut the presumption that any discrimination in the terms and conditions was due to the Applicant's sex. Having considered that 'material' means 'significant and relevant', the Industrial Tribunal found that the employer also [Mummery P italics] had to show that: "the discrimination is objectively justified, that is, the [employer] is pursuing measures that correspond to a real need and are appropriate and necessary to meeting that need [the Bilka formula for objective justification].[17]In expressing the Employment Appeal Tribunal's conclusions [361 E - 363B] Mummery P expressly disapproved the Industrial Tribunal's approach insofar as it placed an additional burden on the employer to satisfy the test of objective justification to make out the S1(3) defence. He limited the ratio of the House of Lords decision in Rainey v Greater Glasgow Health Board [1987] ICR 129 to cases of indirect discrimination, that is where the factor relied on by the employer to explain the difference in pay was one which affected a considerably higher proportion of women and was thus tainted by sex discrimination unless justified. In the absence of prima facie indirect discrimination, no requirement of objective justification arose. He referred to the earlier Employment Appeal Tribunal decision (Tuckey J presiding) in Yorkshire Blood Transfusion Service v Plaskitt [1994] ICR 74 , where the Employment Appeal Tribunal held that it was not necessary for an employer to provide objectively justified grounds for the difference in pay when seeking to establish the S1(3) defence. On appeal, the Employment Appeal Tribunal found, reversing the Industrial Tribunal decision below, that a genuine but mistaken belief on the part of the employer as to a material difference between the Applicant and her comparator was sufficient to found the defence. It follows that such a reason, based on a mistake, however genuine, could not objectively justify the variation in pay.[18]If Tyldesley correctly interprets S1(3), then in our judgment Professor Rideout's Employment Tribunal misdirected themselves in law.[19]That it does so has been confirmed by the House of Lords in Marshall, per Lord Nicholls (203F), as Mr Paines submits.[20]Mr Allen points out that in Wallace , by the time that case reached the House of Lords it had been conceded on behalf of the Applicants that the factor put forward by the Respondent was genuine and not tainted by discrimination. In these circumstances, said the House of Lords, no further burden lay on the Respondent to objectively justify the pay disparity. In the present case no such concession has been made on behalf of Mr Fernandez. In Marshall the House was not invited to depart from its reasoning in Wallace (Lord Nicholls. 204D).[21]In Marshall , Lord Nicholls set out those matters on which the employer must satisfy the tribunal in order to show that the pay variation is not tainted by sex (202G - 203A):
"First, that the proferred 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 … a "material" difference, that is, a significant and relevant difference, between the woman's case and the man's case." Later, at 203B, Lord Nicholls added:
"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."
[22]We note that Lord Nicholls' analysis cited above was recently adopted by the Court of Appeal, without demur, in Nelson v Carillion Services. 15 April 2003. [2003] EWCA Civ 544 . per Simon Brown LJ. Paragraph 9.[23]In Tyldesley Mummery P mentioned, at the end of his judgment (363C), that since that case was heard the House of Lords in North Yorkshire County Council v Ratcliffe [1995] ICR 833 (opinion of Lord Slynn, 839 E-G) had decided that the distinction between direct and indirect discrimination and the Sex Discrimination Act 1975 is not imported into S1(3) Eq PA. We have looked at Ratcliffe , although not specifically referred to it by Counsel. It does not take the matter further. We note that Lord Slynn was a party to the decision in Marshall . There is no analysis of S1(3) in that case. We accept that the material factor defence will fail if it is tainted by either direct or indirect sex discrimination.[24]Mr Allen submits that the approach of the Employment Appeal Tribunal in Tyldesley and the earlier case of Plaskitt is inconsistent with European law principles in general and Brunnhofer in particular. It is therefore to the European cases that we must now turn. The European Jurisprudence[25]Mr Allen took us to a number of ECJ decisions, in various fields of law, which applied this principle, to be found in Brunnhofer , paragraph 28, where the Court said:
"As the Court has already held in case 43/75 Defrenne II [1976] ECR 455 , paragraph 12, that principle [Article 119 (now 141)] that the same work must be remunerated in the same way, whether it is performed by a man or a woman] which is a particular expression of the general principal of equality which prohibits comparable situations from being treated differently unless the difference is objectively justified, forms part of the foundations of the Community."
It is at this point that this Tribunal finds itself divided.[26]The majority accept that general proposition, however, as the Court went on to say in Brunnhofer , paragraph 40:
"… the differences in treatment prohibited by Article 119 are exclusively those based in the difference in sex of the employees concerned."
We paraphrase that observation to mean, using the expression to be found in the domestic cases, that the variation in pay is tainted by sex.[27]This in turn begs the question, when is a pay differential tainted by sex? To answer this question we return to the basic principles of sex discrimination law. In a case of direct sex discrimination, where there is a difference of sex and less favourable treatment of the complainant compared with his or her comparator the employer is required to provide an explanation for the difference in treatment which is gender neutral. If he does so, that is the end of the claim; if he does not then, today, the provisions of S63A SDA come into play. That amendment was not in force at the time of the material events in the present case.[28]However, if the Employment Tribunal finds direct sex discrimination is made out, then such discrimination cannot be justified, in the Bilka sense or at all. Mummery LJ so observed when considering the then relatively new and different provisions of the Disability Discrimination Act 1995 in Clark v Novacold [1999] ICR 951 , 963H. For an extreme example of the principle that direct sex discrimination cannot be justified in the European jurisprudence see the ECJ judgment in Tele Denmark A/S v Handles [2001] IRLR 853 .[29]Pausing there, it seems to us as a matter of logic that where direct discrimination is found not to exist no question of objective justification can arise. The factor relied on by the employer is untainted by sex and Article 119 (now 141) is, as the ECJ pointed out in Brunnhofer concerned with prohibiting differences in treatment based on the difference in sex .[30]Equally, where the factor relied upon amounts to direct sex discrimination, again the question of objective justification cannot arise.[31]Conversely, where a prima facie case of indirect discrimination is made out in relation to the factor relied upon by the employer to establish the S1(3) defence then that factor is tainted by sex discrimination unless it can be objectively justified. That, we think, is the effect of Bilka , itself a case of alleged indirect sex discrimination.[32]Which brings us to Brunnhofer . It is important to note the relevant question posed by the National Court.

(b) reads:

"Are Article 119 (now Article 141) of the Treaty and Article 1 of [the Equal Treatment] Directive 75/117/EEC to be interpreted as meaning that the fixing of different pay may be objectively justified by circumstances which can be established only ex post facto, such as in particular a specific employee's work performance?"
[33]It is that question which is addressed in paragraph 63 and following of the judgment. Thus, the reference to the Bilka test at paragraph 67, on which Mr Allen relies, must be seen in the context of the specific question posed to the Court. We do not understand the Court to be laying down, in that case, any requirement that in a case where the factor relied on by the employer is not tainted by direct sex discrimination, and where no suggestion of prima facie indirect sex discrimination is raised, that it is nevertheless necessary for the employer to objectively justify the pay difference in the Bilka sense.[34]In these circumstances the majority are not persuaded that the European jurisprudence requires us to depart from the approach set out in the domestic jurisprudence to which we have referred.[35]Mr. Bleiman takes a different view on the European jurisprudence. He reasons that, as Mr Allen submitted, the ECJ decision in Brunnhofer does require the employer in the present case to show objective justification for the variation in pay and that, accordingly, the Employment Tribunal has not misdirected themselves in law insofar as they expected this of the employers. His detailed reasoning follows.[36]He notes that the Vienna court asked six questions (paragraph 23)and that the ECJ took these in a wide ranging way, saying that these questions "can be examined together" and that they essentially concerned three points, the second of which being especially relevant to the present case, that is "the rules of evidence concerning the existence of unequal pay for men and women and of possible objective justification for any difference in treatment".[37]Mr. Bleiman notes that at paragraph 30 the ECJ makes a very clear statement of the fundamental principle which "precludes unequal pay as between men and women for the same job or work of equal value, whatever the mechanism…unless the difference in pay is justified by objective factors unrelated to any discrimination linked to the difference in sex…"[38]He notes that ECJ sets out a stage by stage approach with the onus firstly on the plaintiff (the employee) to prove that her pay is less than that of her comparator and that her work is the same or of equal value "so that prima facie she is the victim of discrimination which can be explained only by the difference in sex" (paragraph 58). Moving to the next stage, ECJ say that "If the plaintiff…adduced evidence to show that the criteria for establishing the existence of a difference in pay between a woman and a man and for identifying comparable work are satisfied in this case, a prima facie case of discrimination would exist and it would then be for the employer to prove that there was no breach of the principle of equal pay" (paragraph 60). The employer could deny that the conditions for application of the principle were met, for example by showing that the activities were not in fact comparable (paragraph 61). Here the word "conditions" seems clearly synonymous with "criteria" in the previous paragraph. Finally, the "employer could also justify the difference in pay by objective factors unrelated to any discrimination based on sex" (paragraph 62).[39]Mr Bleiman is impressed in particular by the repetition of the requirement of objective justification, without qualification, throughout Brunnhofer. Paragraph 66 recalls case law that a difference in pay for men and women for the same work or work of equal value is contrary to Article 119 and to the Directive and says "it would be otherwise only if the difference in treatment were justified by objective factors unrelated to any discrimination based on sex". Paragraph 67 adds that the employer's grounds "must correspond to a real need of the undertaking, be appropriate to achieving the objectives pursued and necessary to that end". Paragraph 79 recaps on the broad principle enunciated earlier:
"As is already clear from paragraphs 30 and 66 of this judgment, the difference in pay between a woman and a man occupying the same job can be justified only by objective factors unrelated to any discrimination linked to the difference in sex."
Mr Bleiman notes that here the ECJ is highlighting paragraphs which emphasise unequivocally and without qualification the need for objective justification in a case such as the present case, where a man and woman are shown to be in like work with different pay. He is struck also by the fact that paragraph 40 (analysed above by the majority) is not here recalled as any kind of qualification to this unequivocal statement.[40]The minority has however considered carefully the statement in Brunnhofer paragraph 40 that "the differences in treatment prohibited by Article 119 are exclusively those based on the difference in sex of the employees concerned". He notes that this one line paragraph is not brought to bear by ECJ on any of the facts of the Austrian case and because it contains a reference to case 96/80 Jenkins [1981] IRLR 228 appears intended to be no more than a restatement of that judgment. The reference is specifically to paragraph 10 of the ECJ decision in Jenkins (which is at paragraph 67 of the IRLR report and is therefore referred to as paragraph 67 below).[41]He notes that ECJ in Jenkins was dealing with a request from the EAT for a preliminary ruling on a number of questions relating to a lower hourly rate for a woman working part time as compared with a man doing like work who worked full time. His hourly rate was 9.5 pence higher than hers. The issues in that case are pointed up by the fact that the European Commission "contended that Article 119 prohibited any differences in time rates for the same work as between full-time and part-time workers." (From head note of the facts). Paragraph 67 of Jenkins says the purpose of Article 119 is to ensure equal pay for men and women for the same work. "The differences in pay prohibited by that provision are therefore exclusively those based on the difference of the sex of the workers. [The line recalled, with approval, in Brunnhofer paragraph 40]. Consequently the fact that part-time work is paid at an hourly rate lower than pay for full-time work does not amount per se to discrimination prohibited by Article 119 provided that the hourly rates are applied to workers belonging to either category without distinction based on sex." Discrimination against part time workers per se is now of course prohibited under the Council Directive of 15 December 1997 but paragraph 67 of Jenkins states in terms that such discrimination was not prohibited by Article 119 because the differences in pay prohibited by that Article were exclusively those based on the difference of the sex of the workers. That paragraph 67 does not contradict the need for objective justification is reinforced by paragraph 68 where ECJ says that (in circumstances where both men and women are paid in each category- note that in Jenkins one man was paid on the lower part-time hourly rate) the fact that the hourly rate varies according to the number of hours worked per week "does not offend against the principle of equal pay…in so far as the difference in pay between part-time work and full-time work is attributable to factors which are objectively justified and are in no way related to any discrimination based on sex." Paragraph 69 gives as an example, where the employer is trying to encourage full time work, irrespective of the sex of the worker, "on economic grounds which may be objectively justified".[42]The minority therefore reads Brunnhofer paragraph 40 as merely a brief recollection, with approval, of the fuller statement in Jenkins and that explicitly requires objective justification to escape the ambit of Article 119.[43]The minority notes the complication that the ECJ decision in Jenkins was itself hard to interpret at the time. For example, it goes on to refer to the national court taking into account the "employer's intention". When the case returned to the EAT, Jenkins v Kingsgate (Clothing Productions) Ltd (respondents) (No 2), [1981] IRLR 388 , Mr Justice Browne-Wilkinson (as he then was) said that unfortunately the ECJ judgment had not given clear guidance on the question EAT had posed and that which had caused EAT greatest difficulty. That question was whether it was sufficient for the employer to show only that he had no intention of discriminating or must he also show that the differential in pay is objectively justified for some other reason (paragraph 27 of 1981, IRLR 392, 393). He went on to note that there were passages in the ECJ judgment which support the view that it is not enough for the employer to show that he had no intention of discriminating. On the other hand the formal ruling seemed to approach the matter on the basis that if by showing some other intention the employer negated any covert intention to discriminate there would be no infringement of Article 119. In the end, the EAT assumed, "without deciding", that Article 119 did not apply to cases of unintentional indirect discrimination and went on to allow the employee's appeal on the basis of domestic law even if arguably this conferred greater rights than she would enjoy under the Treaty. The IRLR commentary at the time commented on the unsatisfactory answer provided by the ECJ to the key question before it in this case.[44]The minority acknowledges that the one line statement in paragraph 40 of Brunnhofer seems to introduce an element of ambiguity in an otherwise unequivocal decision, the more so because the statement rests on the ECJ's earlier judgment in Jenkins which EAT found unclear in 1981. However, the reference to Jenkins is to a particular paragraph which is far from contradictory to the requirement of objective justification stated in the much clearer paragraphs in Brunnhofer cited above. These other statements come both before and after paragraph 40 in the judgment and in none of them is paragraph 40 referred to as a qualification. For the minority, there is therefore clear and repeated instruction in Brunnhofer to require objective justification from an employer in an equal pay case, once the employee has made out the prima facie case, by showing like work (or work of equal value) and a difference in pay with a comparator of the opposite sex. The present case[45]It follows, in the opinion of the majority that this Employment Tribunal misdirected themselves in law at paragraph 29 EWR when they required the Respondent to objectively justify the factors advanced by way of defence under S1(3) Eq PA in addition to those matters identified by Lord Nicholls in Marshall , to which they were referred. That was a material misdirection which requires us to remit this part of the case for rehearing by a fresh Employment Tribunal. We are unable to conclude, either that the Employment Tribunal's conclusion on the material factor defence was plainly and unarguably wrong or right. It will require rehearing in accordance with the law as it has been stated by the House of Lords in Wallace and Marshall .[46]In the view of the minority the Employment Tribunal has not misdirected themselves in law. Although apparently unaware of the ECJ ruling in Brunnhofer the Tribunal held the employer to the correct standard of proof in accordance with the requirement for objective justification, once it had been established (as facts not disputed by the respondents) that Mr Fernandez and his comparator, Ms Moulder, were doing like work and being paid at varying rates in respect of the three factual differences summarised at paragraph 6 of this judgment. The Tribunal points out at paragraph 34 of their decision that the employer failed to produce as witnesses any of those who actually took the decisions complained of. The Tribunal found the employer's witness, Mr Musho'd "an unconvincing witness". He is not blamed as they go on to say that much of his evidence appeared to be guesswork based on the documents. The Tribunal go on to explain, in paragraph 35, the implications of such an approach by the employers to the defence of " a case which substantially turns on proof by the Respondent of the basis for its defences to the claims." At paragraph 45 the Tribunal state that their decision "on the question of equal pay rests primarily upon the fact that the Respondent has failed to prove the existence of a material factor in any of the three situations of pay and equality. The applicant is entitled to equal pay with Ms Moulder." If, as the minority believes, Brunnhofer requires the employer to prove the material factor defence in accordance with the principle of objective justification, then the Tribunal's finding on equal pay resting on lack of proof of a material factor cannot be faulted. Racial discrimination[47]The Employment Tribunal having, by a majority, rejected the first 2 heads of the Applicant's complaint of direct racial discrimination, this appeal focuses on the 3 rd ground.[48]The relevant facts, as found, were that in the 2000 annual appraisal the Applicant's performance was assessed by a Mr G T Lawson and Ms Moulder's by Mr J Kellet. In the Applicant's case the countersigning officer was Ms Maunsell and in that of Ms Moulder it was Ms Hilary Bainbridge.[49]The Employment Tribunal accepted that, despite guidance given to reporting officers, there is a high degree of subjectivity in the marking. At paragraph 15 EWR the Employment Tribunal observe that they had an obvious difficulty in validly commenting on the appraisals because they did not hear from Ms Moulder, nor from any of the reporting or countersigning officers. Indeed the only witness called by the Respondent, Mr Harun Masho'd from Personnel, they found to be an unconvincing witness. They there conclude that it is very difficult to see a basis for the distinction drawn in favour of Ms Moulder (overall box 2 marking; as opposed to the lower, box 3+ marking for the Applicant), save on the basis that it was the subjective judgment of two different people.[50]At paragraph 42 they considered the annual increase awarded to the Applicant and Ms Moulder respectively in the context of the Eq PA claim and, whilst finding that it was impossible to say that Ms Moulder should not have been awarded a box 2, it was clear that by comparison with her a box 3 for the Applicant was plainly wrong.[51]Then, at paragraph 43, they say this:
"It is true that these are subjective judgments reached by two different sets of people and it seems likely that Mr Lawson, the reporting officer in the Applicant's case was certainly well disposed towards him. His view seems to be that the Applicant will certainly achieve a box 2 in the next round. Ms Bainbridge … was also well disposed to Ms Moulder. There is no reason, therefore, to think that the differing assessments were arrived at on the basis of different attitudes to the two members of staff concerned."
[52]Having directed themselves as to the law of direct racial discrimination at paragraphs 31, 32 EWR, by reference to King v Great Britain-China Centre [1992] ICR 516 (approved by the House of Lords in Glasgow City Council v Zafar [1998] ICR 120 ), the Employment Tribunal express their unanimous conclusion on this part of the race claim at paragraph 51 EWR thus:
"The Tribunal is unanimous in its conclusion that the Applicant did suffer racial discrimination in relation to the appraisal rating. We have indicated that we think this appraisal rating has not been shown to be justified and the Respondent has therefore failed to prove any other reason for the different grading. In our view there is nothing to suggest that had he been white he would have received the lower grading. We consider the inference is justified that the Applicant was assessed more rigorously and his obvious merits played down because of his racial origins."
[53]Mr Paines attacks that finding in a number of ways. First, he submits that, contrary to their own self-direction at paragraph 31, the Employment Tribunal has in fact placed the burden of disproving racial discrimination on the Respondent. Secondly, they have not made the necessary comparison with an actual or hypothetical comparator. Thirdly, they have substituted their own view for that of the officers assessing the Applicant. Fourthly, they have given inadequate reasons for their conclusion that the Respondent unlawfully discriminated against the Applicant on grounds of his race. Finally, that their conclusion was legally perverse.[54]First, the burden of proof. It is well-established that, prior to the change in the burden of proof effected by the Race Relations Act 1976 (Amendment) Regulations 2003, which came into force on 19 July 2003, it was for the Applicant to show a difference in treatment and a difference in race when comparing himself with an actual or hypothetical like for like comparator. At that stage the burden did not shift to the Respondent, but he was required to provide an explanation for the treatment unconnected with race. If no innocent explanation is offered the Employment Tribunal may, not must, draw an inference of unlawful discrimination.[55]Mr Allen submits that having so directed themselves that is what the Employment Tribunal did. He points to the approach taken by the majority members of the Employment Tribunal to the first and second grounds of complaint which were rejected for the reasons given at paragraphs 49-50 EWR. We accept that no error of law appears in that reasoning.[56]However, the reasoning in paragraph 51 is a different matter. We are persuaded by Mr Paines that the Employment Tribunal there clearly demonstrate that the burden of proof has been wrongly reversed and placed on the Respondent to disprove discrimination. We say that for 2 reasons; first, because the Employment Tribunal refer back to their finding, itself erroneous in the opinion of the majority for their reasons given earlier, that the Respondent had failed to objectively justify the Applicant's appraisal rating in the context of the Equal Pay claim and then to go on to find, in the context of the race discrimination claim, that the Respondent has failed to prove any other reason for the different grading. Dealing with Mr Paines' second point we perceive the Employment Tribunal to be making the comparison for present purposes between the Applicant and Ms Moulder. Secondly, the Employment Tribunal observe:
"In our view there is nothing to suggest that had he been white he would have received the lower grading."
[57]That, in our unanimous judgment, is a finding which stems from the Employment Tribunal's misdirection in practice (as opposed to their earlier self-direction) requiring the Respondent to prove that the Applicant would not have been so treated had be been white.[58]As to the question of substitution, the Court of Appeal made clear in Marks & Spencer PLC v Martins [1998] ICR 1005 that it is not for the Employment Tribunal to substitute its own assessment or appraisal of the Applicant for that of the of the employer. In Martins the complaint of direct race discrimination was based on a failed job application following interview; in our view similar considerations apply in the present case where, in the absence of direct evidence called by the Respondent, the Employment Tribunal themselves reassessed the Applicant, concluding that his overall box marking was 'plainly wrong'. That must be compared with their finding that it was difficult to see a basis for the distinction drawn in favour of Ms Moulder, save on the basis that it was the subjective judgment of two different people. In the light of the Employment Tribunal's further finding that Mr Lawson was certainly well disposed to the Applicant we are quite unable to see any evidential basis for an inference of conscious or subconscious unlawful discrimination being drawn, even if the Respondent's explanation was rejected.[59]In these circumstances we have concluded that the Employment Tribunal's finding of unlawful racial discrimination cannot stand and must be set aside. Disposal[60]It follows that the appeal is allowed; the Equal Pay claim will be remitted to a fresh Employment Tribunal for rehearing on the issue of the material factor defence under S1(3) Eq PA. The finding of racial discrimination is set aside, as is the award of £3000 for injury to feelings contained in the Employment Tribunal's remedies decision dated 17 October 2002. Finally, it should be noted that that part of the Employment Tribunal's substantive decision which records that the Applicant's claim of sex discrimination succeeds is an error; see paragraph 18 EWR.