EAT/0162/08/ZT COVENTRY CITY COUNCIL v 1) MRS M NICHOLLS & OTHERS (UNISON Union Claimants) 2) MRS M NICHOLLS & OTHERS (UNITE) [2009] UKEAT 0162_08_2702

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2009] UKEAT 0162_08_2702Case No Appeal No. UKEAT/0162/08/ZT UKEAT/0387/08/ZT UKEAT/0388/08Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
EAT/0162/08/ZT COVENTRY CITY COUNCILAPPELLANT1) MRS M NICHOLLS & OTHERS (UNISON Union Claimants) 2) MRS M NICHOLLS & OTHERS (UNITE)RESPONDENTSEAT/0387/08/ZT MRS M NICHOLLS & OTHERS (UNISON Union Claimants)APPELLANTS1) COVENTRY CITY COUNCIL 2) MRS M NICHOLLS & OTHERS (UNITE Union Claimants)RESPONDENTSEAT/0388/08/ZT MRS M NICHOLLS & OTHERS (UNITE Union Claimants)APPELLANTS1) COVENTRY CITY COUNCIL 2) MRS M NICHOLLS & OTHERS (UNISON Union Claimants)RESPONDENTS
Before
Mr Justice EliasDate 27 February 2009
[1]APPEARANCES For the Appellant Council EAT/0162/08/ZT the First Respondent EAT/0387/08/ZT and EAT/0388/08/ZT MR ADRIAN LYNCH (One of Her Majesty's Counsel) Instructed by: Messrs Geldards LLP Solicitors Dumfries House Dumfries Place CARDIFF CF10 3ZF For the First Respondent UNISON Union Claimants EAT/0162/08/ZT the Appellant EAT/0387/08/ZT and Second Respondent EAT/0388/08/ZT MR ANTONY WHITE (One of Her Majesty's Counsel) and MS IJEOMA OMAMBALA (of Counsel) Instructed by: Messrs Thompsons Solicitors The McLaren Building 35 Dale End BIRMINGHAM B4 7LF For the Second Respondent UNITE Claimants EAT/0162/08/ZT and EAT/0387/08/ZT and the Appellant EAT/0388/08/ZT MR ANTONY WHITE (One of Her Majesty's Counsel) MS CATHERINE RAYNER (of Counsel) Instructed by: Messrs EAD Solicitors Prospect House Columbus Quay LIVERPOOL L3 4DB SUMMARY EQUAL PAY ACT EQUAL PAY ACT: Material factor defence and justification The claimants brought various equal pay claims naming refuse collectors as comparators. The claimants were in predominantly female jobs and the comparators in an almost exclusively male job. The council advanced three genuine material factor (GMF) defences. They lost on two and succeeded on the third. They succeeded on the basis that they were justified in limiting a pay protection scheme to those who actually suffered a reduction in income when a new job evaluation scheme was introduced. The council appealed the two GMFs that it lost and the claimants cross appealed the successful GMF. The EAT held that the Tribunal had been entitled to find that the council had failed to establish the two GMFs on which they failed. They allowed the cross appeal on the grounds that the Employment Tribunal had placed significant emphasis on the EAT decision in Middlesbrough City Council v Surtees [2007] IRLR 869 but that had been overturned by the Court of Appeal in Redcar and Cleveland Borough Council v Bainbridge [2008] IRLR 776 . The issue remitted to the same Tribunal to consider the protected pay GMF afresh. THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT) Introduction The respondents to this appeal (who we shall hereafter refer to as the claimants, as they were below) worked for Coventry City Council. They alleged breaches of the Equal Pay Act 1970 . They contended that they had been paid less than their comparators, refuse collectors, because of their sex. The claimants are all employed in jobs where the great majority of employees are women. By contrast, the refuse workers are all, save for one, men.[2]In 1997 local authorities and trade unions nationally agreed to implement a unified pay and conditions structure for local government employees, known as single status. This involved merging the manual worker and white collar worker posts. It entailed subjecting all jobs to a job evaluation study to be conducted locally. The council wanted to obtain agreement on the new scheme and negotiated extensively with the trade unions.[3]In 2001 negotiations resulted in an agreement on the pay protection package for those who would be adversely affected by the new job evaluation assessment, even though by that stage the new job evaluation exercise had still not been completed or agreed. Inevitably some staff would have their pay reduced under the new scheme. The effect of that pay protection agreement was that their old pay would be protected for five years, with the hope that by the end of that period the reduced new level of pay of those adversely affected would have risen with inflation so that they would never actually have to take a drop in pay.[4]The pay protection package was reached in anticipation of the parties reaching agreement on single status itself. That was, in fact, never achieved. Notwithstanding considerable efforts by the council, it was impossible to reach agreement with the unions. Accordingly, in June 2005 the council unilaterally imposed single status. It had been under the impression that it could not do that, but once it realised that it could lawfully act in that way, it did so.[5]These equal pay claims were lodged in February 2006. They were advanced on the basis that the jobs were rated as equivalent or, in the alternative, were jobs of equal value to those done by the chosen male comparators. It is important to note that they include claims for equal pay with respect to the period prior to the introduction of single status.[6]It is now established, following the Court of Appeal decision in Redcar and Cleveland v Bainbridge [2008] IRLR 776 , paragraphs 267-285, that employees whose jobs are rated as equivalent in a job evaluation scheme cannot seek to claim back pay with respect to the application of that scheme. They cannot contend, in effect, that the scheme has retrospective effect. They can, however, make a claim that in the years preceding the introduction of the job evaluation scheme their jobs were of equal value to those of workers whose jobs were rated as equivalent in the job evaluation scheme. The fact that their jobs were subsequently rated as equivalent does not of itself establish that the jobs were of equal value, but the assessment of the value of the jobs made in the course of the job evaluation scheme is potentially relevant evidence in determining whether the jobs were formerly of equal value or not: see Dibro v Hore [1990] IRLR 129[7]The employers have conceded for the purposes of this preliminary issue that the jobs of the claimants and the jobs of the refuse collectors are of equal value and were so at all material times, including the period before the job evaluation scheme came into force. In the normal way, that would entitle the claimants to the same pay as the men. However, the council submitted that there were three genuine material factors (GMFs), other than sex, which explained and justified the difference in pay which exists between the claimants and their chosen comparators. They failed with respect to two of the defences but succeeded with the third. The council now appeal the points on which they lost, and the claimants cross appeal on the point on which the council won. Before analysing the nature of the issues and the contending arguments, we will briefly set out the relevant law relating to the application of the GMF defences. The defence of genuine material factor: legal principles .[8]The concept of genuine material factor defence is found in sections 1(3) of the Equal Pay Act . Once it is determined or conceded that jobs are indeed of equal value, and that the female claimant is paid less than her chosen male comparator, there is a presumption that the difference in pay is on grounds of sex. However, the employer can set up a defence which is as follows:
"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 and that factor … constitutes a material difference [between the two cases]."
[9]On its face this would appear to suggest that it is enough for an employer to show - the onus being on him - that the reason is not sex. In fact, it does not work in quite such a simple way. The court first applied the traditional concept of indirect discrimination in this field; if the pay criterion adopted by the employer in fact adversely affects women, then it will have to be justified: see Jenkins v Kingsgate (Clothing Productions) Ltd [1981] IRLR 228 (ECJ) and Rainey v Greater Glasgow Health Board [1987] IRLR 26 (HL).[10]Then in Enderby v Frenchay Health Authority [1993] IRLR 591 the ECJ held that at least where the statistics are sufficiently striking, if a group who are predominantly male are paid more than a group who are largely female and yet employed on equal work, the difference in pay will generally have to be justified. Underlying this approach is a recognition that much current discrimination in pay has historical roots and stems from stereotypical assumptions about the nature of jobs which are suitable for men and women, and the pay appropriate to those jobs. There is a debate as to whether, in the circumstances such as Enderby, the difference will always and inevitably have to be justified - in other words, whether there is an irrebuttable presumption of prima facie indirect discrimination requiring justification where the statistics demonstrating discrimination are sufficiently striking - or whether it is in principle open to an employer to show that notwithstanding apparently stark statistics, in fact there is an explanation for the difference in pay which is wholly unrelated to sex so that the issue of justification does not arise.[11]In Armstrong v Newcastle upon Tyne NHS Hospital Trust [2006] IRLR 124 the Court of Appeal held that the latter was the case, and this would indeed seem to be correct given that the purpose of the legislation is to eliminate discrimination on grounds of sex and not merely to bring about equal pay. However, the Court of Appeal in the Bainbridge case, whilst inclined to think that this analysis was correct, declined to reach a concluded view upon it. In Middlesbrough City Council v Surtees [2007] IRLR 869 paras.51-55 the EAT sought to identify the kinds of case where this defence might in principle run and where it would not.[12]It is not necessary to examine these cases or their implications, in any detail. The following principles were accepted before the Tribunal and in my view they are consistent with the authorities: where the employer relies upon a genuine material factor defence it is for the employer to demonstrate what that factor is and that the factor relied upon is:
"(a) A genuine reason and not a sham or a pretence, which existed and was known to the employer at the date that the pay was fixed and which continues to the point of the hearing; (b) That the less favourable treatment is due to this reason. The factor must be a material factor and must be causative, not just justificatory; (c) The reason must not be the difference of sex. This can include direct or indirect discrimination; (d) The factor relied upon is a significant and relevant difference between the woman's case and the man's case; (e) If the factor relied upon is indirectly discriminatory on the grounds of sex, that reliance upon it is justified."
The issues before the Tribunal.[13]As we have said, there were three GMF defences relied upon by the employers. First, the refuse collectors were subject to a productivity arrangement negotiated in 1999 which provided them with a significant increase on their basic pay and provided for certain bonuses designed to reduce the levels of absenteeism and to improve efficiency. We shall call this the "bonus GMF". Second, they were receiving the benefit of pay protection arrangements as a result of the implementation of the single status agreement which the claimants were not receiving (the "pay protection" GMF). This latter justification related to the differential that existed after the job evaluation study had been brought into force.[14]The employers contended that these two elements constituted genuine material factors, other than sex, which explained the difference in pay. As to the bonus GMF, they contended that it did not even raise the issue of justification. The decision to award the bonuses as part of the productivity agreement was wholly unrelated to the sex of the refuse collectors and therefore did not need to be justified. Alternatively, they contended that even if the bonus payments were not wholly independent of sex, so that the concept of indirect discrimination was engaged, they were objectively justified. Similarly, the decision to give protected pay to the comparators who would otherwise lose out as a consequence of the job evaluation study was justified.[15]The employers also ran a much broader argument, relying on another GMF defence, to this effect. They submitted that they had taken considerable pains to seek to introduce the new job evaluation agreement and that it was only because of action by the unions, who sought continually to frustrate their best endeavours, that it had not been possible to reach agreement.[16]The council considered it highly desirable that the move into single status should be achieved by agreement. They contended that had the unions been more co-operative, an agreement would inevitably have been reached much sooner than the date when single status finally had to be imposed. Had the unions been more constructive, any inequality resulting from the different pay arrangements would have been removed much earlier. Hence even if the difference in pay had originally been on grounds of sex, this had been overtaken by a separate and distinct cause, namely union intransigence. By the time the claims were lodged, it was this, submitted the council, which caused the difference in pay. We shall refer to this as the "supervening cause" GMF defence.[17]The Employment Tribunal concluded that the argument about supervening cause was wholly unsustainable. They did so without even allowing the council to adduce evidence to establish (which was in dispute) that the council had indeed taken all steps to achieve agreement, and that it was simply the intransigent stance of the unions that had prevented this. The Tribunal took the view that even if that factual premise were established, it would not avail the employers since it was not capable in law of constituting a genuine material factor defence.[18]The Tribunal then turned to consider the other specific GMF defences. They accepted that the two factors were material and caused the difference in pay. They also rejected a submission by the claimants that the bonus arrangements were a sham. The issue therefore was whether it could be explained by reasons wholly unrelated to sex, and if not, whether it was justified.[19]The Tribunal concluded that the bonus GMF was tainted by sex with the consequence that the employers were obliged objectively to justify the difference in pay. The Tribunal further held that the bonus arrangement was not objectively justified and did not, therefore, provide a lawful basis for the variation in pay between the claimants and the refuse collectors.[20]However, they concluded with respect to the protected pay provisions that although it required justification, since it adversely impacted on women, the council was justified in extending those payments only to employees who would otherwise actually suffer a loss of income as a result of the implementation of the job evaluation scheme. The council was justified in not extending that payment to those claimants who would have received that payment had they been paid equal pay from the date when they ought to have been, but who in fact were not given equal pay at that time and therefore would not suffer the loss of income.[21]The council now appeals the findings on which they lost, and the claimants cross appeal on the finding that the differential in pay resulting from the protected pay arrangements was justified. We will deal with the cross appeal separately at the end of this judgment. Analysing the appeal.[22]We turn to consider the specific grounds of appeal by considering each of the GMFs in turn. The supervening cause?[23]Mr Lynch QC, counsel for the council, advanced much the same arguments before us as he had before the Tribunal. He submits that whatever may have been the position in 1999 when the new agreement for refuse workers was first introduced, by the time these claims were lodged, there was a new supervening cause, not related to sex, which wholly explained the difference in pay between the claimants and the refuse workers. It rendered any sex discrimination no longer material as an explanation for the difference in pay. Mr Lynch points to other areas of the law where the law selects from a whole series of potential causes one legally relevant cause such as, for example, when a court has to determine what losses flow from a particular act of negligence.[24]Here, he submits, the Tribunal ought to have found that if the necessary factual foundation could be established, the council could in principle rely upon a supervening cause whose effect was to bring any earlier discriminatory act to an end. The necessary factual premise - which we will assume for present purposes is correct, although it is disputed - is that the council has taken all the steps it could to seek to reach an agreement with the trade unions over the introduction of the single status pay arrangements and that it was only the wholly intransigent and uncooperative action of the unions that frustrated the move to equality.[25]In our judgment, this argument is unsustainable. We think the Tribunal was right to conclude that there is no place in this jurisprudence for a supervening cause of this kind, even if the factual premise of the argument could be sustained.[26]The issue in equal pay cases of this nature is whether sex is a cause of the difference in pay. The assumption for the purpose of the preliminary hearing is that the jobs were of equal value and yet the women were paid less than the men in 1999 and thereafter. Absent some specific GMF defence, that constituted a breach of the Equal Pay Act . If that was so in 1999, we do not see how it can cease to have been the case in 2006. It cannot in any sensible way be said that the union's hostile stance has negated sex as a cause of the difference in pay. On the contrary, the difference in sex continues to explain why there is a difference in pay. Properly analysed, the union's stance may be said to explain why the discrimination was not removed earlier than it was, but it does not supersede, in the sense of replacing, the original discriminatory explanation for the difference in pay.[27]We do not discount the possibility that supervening circumstances could, albeit very exceptionally, remove the element of discrimination. For example, a market forces defence may emerge because of a shortage of skills in a particular area and it may justify a pay differential which was initially only explicable on grounds of sex discrimination. From the point when the market forces defence operates, it can be relied upon to explain, and in an appropriate case to justify, the difference in pay. The sex taint will as a consequence be removed.[28]However, in such a case the historical explanation for the difference, namely sex, is no longer operating. That is not so here. It cannot be said that the union's stance provides an explanation for the difference in pay which is wholly independent of the original sex discrimination.[29]The unions' position does not cause the pay levels to be where they are, in the sense that market forces may cause the comparator's rate to be where it is. Rather it provides an explanation as to why the sex discrimination continues. But for the original discrimination on grounds of sex (and assuming no other GMF defence) the pay should now have been the same. That is not the case with the market forces example. The fact that the council has faced difficulties in bringing about equality, and that its motive and energy in seeking to do so has been commendable, does not affect that simple fact. 30. We should add that in any event we do not accept the premise underlying this argument, namely that the council was disabled from putting the situation right. In our judgment, this is not a matter of fact. Ultimately the ability to remedy unequal pay was always in the council's own hands - as they recognised by acting unilaterally in 2005. They could at any time have chosen to impose equality against the wishes of the unions if need be. They were not compelled to accept that they could do nothing in the light of the unions' hostile opposition.[31]We do understand and have some sympathy for the difficult choice that the council was facing. It was obviously highly desirable for the council to carry the unions with them in any move to single status, and the risks of industrial action were real and serious. We very much doubt whether the threat of industrial action of that nature could ever be capable of justifying a continued difference in pay which originated in sex discrimination, but that is not an issue we have to determine and we have heard no argument about it.[32]The argument here is not justification but cause; it is alleged that the difference in pay is no longer to be attributed to sex and that no issue of justification arises. We reject that submission. We are fully satisfied that union hostility to change is incapable of constituting a new explanation for the difference in pay such that it can be said that a pay differential whose roots lay firmly in sex discrimination, has at some indeterminate point ceased to have anything to do with sex.[33]We find support for this analysis in Prison Service v Beart (No.2) [2005] ICR 1206 . In that case a woman had been discriminated against contrary to the Disability Discrimination Act and had subsequently been unfairly dismissed. The employers submitted that the unfair dismissal set a limit to the compensation that could be recovered for breach of the Disability Discrimination Act . It was, they submitted, a supervening cause breaking the chain of causation so far as loss was concerned. The Court of Appeal rejected this argument. It was not permissible for a party to rely upon its own act as a supervening cause. In our judgment, that is in essence the argument which is being relied upon by the council here. Once it is recognised that the council always had it in its power to impose equal pay on the recalcitrant trades unions, it necessarily follows that in relying on this particular supervening cause it is relying on its own failure to stand up to the unions.[34]Mr Lynch submits that the policy considerations support his position. It would, he says, be wholly unjust for an employer who has done all he can to introduce the principle of equal pay to be found liable for discrimination because of the complete lack of union co-operation. It would serve no sensible purpose to hold the council liable in those circumstances.[35]A similar argument was advanced before the Employment Tribunal and in our view rightly rejected. The policy underlying the fundamental principle of equal pay is that pay discrimination on grounds of sex should be eliminated. That policy is one which, in our judgment, would be fundamentally undermined if Mr Lynch's argument were right. Employers could seek to avoid liability by hiding behind the unions' skirts. The unions would effectively become the arbiters of equal pay. We do not think that this is conceivably what Parliament could have intended, particularly when, as we have said, the employers have always in fact retained the whip hand and were able to ride roughshod, if necessary, over the unions' objections. 36. In its conclusion with respect to this defence, the Tribunal said this:
"… A narrative explaining the failure of the employer to end disparate pay fails to address the central question of whether that disparate pay is discriminatory on the grounds of sex and deals instead with why any breach of the claimants' equality clauses has not been repaired. In effect, it amounts to a plea in mitigation."
In our judgment, that puts succinctly and accurately the true nature of this argument. We reject this ground of the appeal. The bonus GMF.[37]Before dealing with the nature of the submissions, it is necessary to set out the background to the creation of the bonus arrangement.[38]The roots of the bonus arrangements for refuse workers lie in a productivity agreement made in 1999. By that stage the service was performing poorly. Levels of absenteeism were high, there was significant over-manning, and the council had to resort to agency labour, which was expensive. There had been an earlier compulsory competitive tendering exercise in 1991 which had led to a more efficient service and under which significant bonuses could be earned. However, the standards were not maintained. The Tribunal found as a fact that even if in 1991 the bonus payments were based on achieving a particular level of productivity, that had ceased to be the case by 1999. In effect the bonus being paid at that time was little more than a supplement to basic pay; it was paid as a matter of course whether productivity targets were reached or not.[39]The 1999 Agreement brought about a number of important changes designed to correct the failings of the services. It involved a reduction in the number of staff, a significant increase (some 30 pr cent) in productivity, and the payment of a bonus. In large part, the bonus rewarded attendance at work - or, more accurately, penalised those who did not attend. There was also a bonus of £10 per week which would be lost if the number of complaints about the service reached a sufficiently high level. In practice, however, this reduction was never likely to arise. Complaints were running in the region of 30 per week and the £10.00 penalty only applied if there were some 600 complaints about the service in any particular week. Accordingly, there had to be a very substantial deterioration of the service before that number of complaints would be made and the element of the bonus would be lost.[40]It is relevant to note that although an important feature of the 1999 scheme was the productivity improvements, this did not constitute an element of the GMF defence. The assumption underlying this case (for the purpose of the preliminary issue on section 1(3) only) is that the jobs are of equal value. Mr White QC, counsel for the claimants, submitted that this means that the jobs must be deemed to have been of equal value at the time when the claims were lodged and at relevant earlier dates. We agree. The consequence is that the claimant is deemed to be working on equal value with the comparator after taking account of the 30 per cent productivity improvement achieved by the 1999 Agreement. So the differential in pay cannot be justified by an argument that the refuse workers should be paid more because they work harder or more efficiently than the claimants, and that argument has not been advanced by the council.[41]However, the fact that the bonuses were introduced as part of an overall productivity package is not wholly without significance. It meant that the new bonus system was self-financing; the benefits derived from employing fewer staff and increasing productivity justified the increase in pay, including the bonuses, which the refuse collectors were (for the most part) receiving after 1999. The savings effected by this scheme could not have been achieved with respect to any of the claimant groups, as the Tribunal explicitly found. Accordingly, although the Tribunal did not accept the council's submission that no equivalent bonus arrangements could be introduced for the claimant groups, they did conclude that it was not possible for such bonus schemes to be introduced on a self financing basis.[42]There were two issues arising out of this particular GMF defence. First, did the issue of justification arise at all? Second, if it did, did the bonus payments justify the difference in pay? Did the issue of justification arise?[43]Mr Lynch submits that the decision to award bonuses under the 1999 agreement was vital in turning the refuse service around and converting it into an efficient and well run operation. The problems facing the council were very serious and intractable. They had to be dealt with and the manner of doing so was entirely free of any sex taint; the fact that the refuse collectors were predominantly male was wholly immaterial. A similar approach would have been necessary if they had been a female group. Accordingly, this was not a case of indirect or sex tainted discrimination where the bonuses had to be justified. Here there was a genuine non-sexed based reason which explained the difference in pay. Nothing further had to be established.[44]As part of this argument, Mr Lynch submitted that in any event it would not have been possible to have structured a similar bonus arrangement for the claimant groups. The Tribunal rejected that. They concluded that there was no reason, in principle, why a bonus linked to work attendance and to the level of complaints could not have been adopted for all the relevant workers.[45]We agree. In any event, we also accept the Tribunal's analysis that if Mr Lynch were right, far from supporting the conclusion that there was no indirect discrimination requiring justification, it would demonstrate that there was such prima facie discrimination. The Tribunal relied upon the following passage of the EAT (Elias P) in Cumbria County Council v Dow [2008] IRLR 91 , a case in which a similar argument was advanced. It was asserted that it would not have been possible to confer certain productivity benefits on the claimants because of the nature of their work. The EAT held that if this were indeed correct, then it would necessarily constitute prima facie indirect discrimination (para 114):
"…if the benefit is given only to those who perform traditionally male jobs and cannot be conferred on the claimants doing traditionally women's work, then prima facie indirect discrimination inevitably arises. On that premise, only the predominantly male groups benefit from the way the pay arrangements are structured. It is akin to paying more to full timers rather than part timers. The differential may be justified, but the need to justify plainly arises."
[46]Similarly here: if it is possible to make a payment only to an exclusively or almost exclusively male group, because of particular features of their job not shared by the female claimants, then it necessarily involves a form of prima facie indirect discrimination against those women. The payment is being made by reference to characteristics of a job which in practice are held by job holders who are predominantly of one sex only. That does not, of course, mean that to pay such bonuses is necessarily unlawful, but it will be unless it can be justified.[47]The Tribunal did, however, accept that there was a good reason why the bonuses could not in fact readily be given to the claimants, namely that they could not be self-financing. The Tribunal then asked itself why that should be. Was it in any way connected to the sex of the relevant groups? The Tribunal concluded that it was. The 1999 agreement had to be seen in the context of its predecessor, an agreement reached in 1991. That had involved the payment of bonuses to the refuse workers - a payment which had in fact ceased to be justified well before 1999, and was in effect simply part of basic pay - and it was assumed that the new agreement would have to secure similar payments.[48]The question was, therefore, whether historically there had been any element of discrimination in the payments made to the refuse collectors. The Tribunal concluded that there had been (paras 8.3.4.16-18):
"Mr Dronfield gave evidence, which we accepted, that the large size of the bonus reflected the "high profile nature of the job."
This we took to be a reference to the fact that refuse workers had a collective industrial muscle, granted to them by the political consequences of their taking industrial action, which other staff did not enjoy. It is a natural conclusion that budgets for the refuse service have always been of a size to meet the pay demands which this position brought about. …. It is evident that the Council was unwilling or unable to find extra money to increase budgets merely to reward better paid staff. However, any consideration of what was "self-financing" must start with a consideration of the size of the budget in the first place. The inability of the budget for Social Services transport drivers, and indeed of the budgets for other job groups occupied by the claimants, to yield savings which would "self-finance" bonuses has, as we have noted, been advanced as a reason for not being able to extend bonus schemes to those workers. Indeed, we were told, and we accept, that those services had, by and large, been pared down to the point where they were running at high levels of efficiency. Unlike the refuse scheme, that paring down was achieved with no extra cost to the employer in terms of the wage bill and, in any event, those budgets were rooted, historically, in the context of pay structures which, we now know under-rewarded jobs occupied almost exclusively by women and vice versa. … The 1999 scheme was capable of being self-financing because it started with a budget that reflected the historically high levels of pay enjoyed by workers in a traditionally male job. We take the view that this history taints the 1999 refuse bonus scheme."[49]Mr Lynch submits that this is an error. First, the Tribunal ought not to have had regard to the historical background. The only relevant issue was why the 1999 Agreement had been entered into, and it was plain that this had nothing to do with sex. The reason was the dire state of that service, a crisis which did not exist with respect to the services performed by the claimants. Moreover, even if the history was material, the Tribunal itself identified a non-sex based reason why historically the refuse workers were paid more, namely the industrial muscle they could wield because of the "political" nature of their jobs. The Tribunal made no finding that this was related to their sex.[50]We see some force in these submissions, but ultimately we reject them. The starting point must be that there is a striking disparate impact in this case. The situation is akin to the facts in Enderby , although we have regard to Mr Lynch's point that unlike that case, this one is not about differentials resulting from collective bargaining. Whilst we accept that it is not impossible for an employer to establish that what might appear to be prima facie unlawful discrimination can in fact be explained by non-discriminatory factors, it is no easy task, particularly where the pay differential is significant and long lasting.[51]Mummery LJ in the Bainbridge case (para 59) expressed the view, obiter, that even if Armstrong were right, it would in practice be impossible to rebut sex discrimination where the statistics are as overwhelming as they are here. That is perhaps putting it too strongly, but the hurdle facing an employer in such circumstances is a very high one.[52]As the EAT pointed out in Surtees , it is a fundamental objective of equal pay law that it should seek to eradicate differences between different groups of workers where, for reasons which are located deep within the structures of society, they consist of workers who are predominantly of one sex or another.[53]In this case one of the findings of the Tribunal was that the refuse collectors had historically been paid more. Furthermore, they were paid significantly more by the time the 1999 agreement was introduced, in part by way of a bonus which had lost any justification, and this effectively determined the parameters of the 1999 agreement. It is true that there was a vital need to improve the service, and that was the immediate cause of the bonus arrangements. But we agree with the Employment Tribunal that the nature and amount of those payments could not be divorced from the historical context; and on the assumption that the jobs were of equal value, that strongly suggested that the likelihood was that historically the difference in pay was not unrelated to sex.[54]We do accept Mr Lynch's point that if the "high profile" nature of the job alone explained the historical difference in pay, then it would be necessary at least to remit the matter back to the Tribunal to determine whether that profile was to any real extent the product of the sex of the job holders. We suspect that it was, and that there is, and certainly historically was, a tendency for men to be more likely to resort to industrial action than women. However, it is right to say that there was no evidence to that effect and the Court of Appeal in Armstrong held that it would be wrong for a court to act on such an assumption: see the observations of Buxton LJ at paragraph 117. But we do not believe that the Tribunal was concluding that this was the sole reason for the pay differential. They also recognised, which cannot we think be seriously in doubt, that given the pattern of pay differentials across these range of jobs, the sex of the job holder, or features relating to it, must have had some influence on the pay levels. Once the difference in pay is to some extent related to the sex of the job holder, then the obligation to justify arises. Was the differential justified on the facts ?[55]That gave rise to the question: was the differential justified on the facts? The Tribunal held that it was not. They accepted that the council was seeking to pursue a legitimate aim. The council had sought to deal with the structural inefficiencies in the delivery of the refuse service when they entered into the 1999 agreement with respect to the refuse workers. This was a legitimate business objective. There is no challenge to that conclusion. The central issue, as the Tribunal recognised, was whether the differential was necessary and proportionate to achieve that aim. The burden rests on the employer to show that it was.[56]The Tribunal considered that the burden had not been discharged. They focused on the two elements relied upon to justify the bonus pay, namely the payment referable to attendance at work, and the element referable to customer satisfaction. (For reasons we have given, the productivity benefits could not be considered under this head). They noted the well established principle that justification will not be established if the same objective could be achieved by less discriminatory means: see Kutz Bauer v Freie und Hansestad Hamburg [2003] IRLR 368. As to the former, they considered that there was no evidence that the employers had sought to deal with the problem of absenteeism by means other than cash incentives. In particular, there was evidence from the council's own witness that the council had not given thought as to whether a less discriminatory procedure, such as the council's usual procedure for dealing with absenteeism, might have sufficed. This was so notwithstanding that it was used elsewhere in the council. Furthermore, by 2004 the link between the payment of the bonus and absenteeism had virtually disappeared so that the payment was no longer referable to the objective of improving the service. There could not conceivably be any justification after that date.[57]As to the customer satisfaction objective, again the Tribunal was not satisfied that the imposition of effective management supervision arrangements would not have sufficed to ensure satisfactory performance. The bonus arrangements gave extra money to these particular workers merely for doing what they were contractually obliged to do. It was far from obvious that cash incentives were the only effective way to ensure satisfactory performance. This was particularly so given that the payment was automatic unless the level of dissatisfaction reached very significant levels. There would need to be 600 complaints a week before any deduction was made, and the average was 30. In effect the link between pay and performance was extremely tenuous.[58]Finally, the Tribunal noted that £30 was paid without reference to either of these factors, and they said that they had no satisfactory explanation as to why that was done. Mr Lynch criticised this particular conclusion on the grounds that a council witness had proffered an explanation. However, as Mr White observed, the tribunal did not say that they had received no explanation, simply no satisfactory one.[59]Mr Lynch argued that the Tribunal erred in law. Their analysis was wholly unrealistic. It would have been impossible to have achieved these objectives without giving suitable rewards to the refuse collectors. There was evidence that the effect of what was done was that the absenteeism level did drop significantly; it was fanciful to think that the same result would have been achieved by stricter managerial controls alone.[60]We must remind ourselves that it is not for the EAT to assess the evidence, but merely to determine whether there was a proper basis for the conclusion reached below. We are satisfied that there was. The Tribunal received evidence that the absenteeism procedures were not even considered as a possible way of achieving the objective; it was simply assumed that bonuses should be maintained in order to retain (and in some cases improve) pay levels. No doubt it would have been open to a tribunal to find that the alternatives were not realistic possibilities. But that is not the point. In our judgment the finding was open to this Tribunal for the reasons it gave.[61]It is also alleged that in concluding that alternative means for dealing with absences might have been adopted, the Tribunal failed to have regard to the evidence of a Mr Lech who had expressly stated that normal management techniques would not have sufficed. However, the Tribunal was not obliged to refer specifically to his evidence, let alone to accept it, particularly in circumstances where it was not an opinion expressed when the bonus scheme was introduced,[62]As we have said, the evidence overall clearly demonstrated that no consideration had been given to the potentially discriminatory effects of the bonus scheme at that time by the manager adopting the scheme. Whilst this does not of course defeat a justification claim, it does oblige the court to look with some care at arguments relied upon by way of ex post facto justifications: see the observations of Mummery LJ in R (on the application of Elias) v Secretary of State for Defence [2006] IRLR 934 para 129.[63]The Tribunal's conclusions with respect to the £10 payment is plainly justified. In truth it has no real impact on the standard of service at all. In practice, it is an addition to basic pay which is never likely to be taken away even where performance is very poor. In our judgment, it was manifestly open to the Tribunal to say that there were other management supervision techniques which could have achieved this particular objective of preventing performance becoming chronically bad.[64]In our judgment, the Tribunal was entitled to find that the twin objectives of reducing absenteeism and securing an effective service could have been achieved by less discriminatory means. It follows that the appeal against the Tribunal's finding on the bonus GMF fails.[65]We should add that in the course of an appeal there were a number of arguments advanced about the nature of the evidence before the Tribunal, such as whether they had properly taken account of certain evidence or given it the significance they ought. We have not found it fruitful to analyse these points in any detail. It is trite law that a Tribunal does not have to identify all the evidence before it, and issues of weight are for the Tribunal. Absent perversity, the only issue is whether there was a proper evidential basis for the decision made, and in this case we are satisfied that there was. The Cross Appeal[66]The Tribunal first determined that the pay protection arrangements had a disparate impact on women and therefore had to be justified. There is no appeal against that conclusion. The statistics before the Tribunal plainly justified that analysis. The issue was whether the pay protection arrangements ought to have been extended to those who should have received equal pay before the job evaluation scheme was introduced but did not do so. Was the council justified in limiting the payments to those who, in fact, actually did suffer a reduction in pay as a result of the introduction of the scheme, or should they have extended it to those who did not do so but would have done had they received equal pay when they ought to have done?[67]The Tribunal concluded first that the adoption of pay protection arrangements were in principle necessary and proportionate. It was important that those who might suffer a reduction in income as a result of the new job evaluation scheme should be protected against what would be a sudden and, in some cases, drastic reductions in income. The Tribunal noted that it was difficult to see how else that could be done save by a pay protection scheme.[68]It then focused on the question whether the protected pay should have been extended to those who did not in fact have had an actual reduction in income at the time the job evaluation scheme was introduced, but would have had if their equal pay rights had been respected.[69]The Tribunal made a number of factual findings. They noted that at the material time when the agreement on pay protection was reached, and indeed even when it was implemented, there were no equal pay claims which sought to establish that pay protection should be extended to claimants in this way. Not surprisingly, neither the union nor the council had given any thought to the possibility of such claims. The Tribunal noted that as a consequence there had been no costing of the potential liabilities. However, at the hearing before the Tribunal itself it was estimated to be some £31 million per annum. We confess to having some considerable difficulty with that figure; it looks unrealistically large and counsel could not assist us in explaining where it came from or how it had been calculated. It was, however, the figure relied upon by the Tribunal and was not challenged at the time, and we do not think that we can now go behind it.[70]The Tribunal also found that the council must have known that they would face a number of equal pay claims, some of which would almost inevitably be successful, particularly since the bonus had lost its link with the level of absenteeism in 2004.[71]The Tribunal then focused on two decisions of the EAT. The first was Redcar and Cleveland Borough Council v Bainbridge [2007] IRLR 91 . In that case the EAT (Elias P) had held that the protected pay arrangement should have been extended in circumstances where the employers had conceded even before the pay protection arrangements came into force that some of the claimants were entitled to equal pay. No basis was advanced for distinguishing this group from other claimants and the EAT treated them all in the same way. The employers could not justify failing to extend the pay protection arrangements to them.[72]The second case was the Surtees case, already mentioned. In that case Bainbridge was distinguished. The EAT departed from orthodoxy by asserting that these cases are not really fact sensitive; they sought to lay down a principle which could be followed by all tribunals dealing with similar multiple equal pay claims. The essential conclusion of the EAT, summarised in paragraph 108, was as follows:
"In our judgment the Council was justified in not applying the scheme to those claimants who might succeed after its introduction in establishing the right to equal pay. We consider given that the purpose of the scheme was to cushion employees from the potentially disastrous effects of a sudden drop in pay, the Council was entitled to take the view that it should limit the benefit to those actually in that group and to exclude all others even if some of them ought to have been in the group. Unless the pay was actually being received, there was nothing to protect. We think that is itself sufficient justification, but it is reinforced by the fact that the need to reach a protected pay arrangement, with the agreement of the unions, was crucial to the making of the job evaluation scheme. Any assessment of future costing would inevitably be highly speculative and would undermine the ability to obtain agreement for the scheme."
[73]The Employment Tribunal specifically adopted this reasoning with respect to the need to cushion employees from the adverse consequences of a sudden drop in pay. They also noted that the sums involved were very significant and would have had a very severe effect upon the ability to reach an agreement at all. Accordingly they concluded that it was proportionate not to extend the pay protection agreement in the manner sought.[74]In our view this would plainly have been sustainable but for the fact that on appeal in the Bainbridge case (which in fact heard both the Surtees and Bainbridge appeals) the Court of Appeal held that the approach of the EAT in Surtees was unjustified. They restored orthodoxy and held that these matters are always for the fact finding tribunal and that the EAT was not entitled effectively to substitute its view for that of the Employment Tribunal.[75]This is the basis of the cross appeal. Mr White's submission can be shortly stated. The decision in Surtees was held by the Court of Appeal to have involved misdirection in law. Since the Tribunal had laid such emphasis on the Surtees decision it inevitably meant that its analysis was flawed and could not be relied upon.[76]Mr White goes further. He submits that if the Tribunal had directed itself properly in the manner in which the Court of Appeal now requires, then the only realistic conclusion was that the decision to limit the pay protection to those who actually suffered loss of income could not be justified. This was particularly so since the council knew that there would be equal pay claims that were likely to succeed. In particular, Mr White referred to paragraph 175 of the Court of Appeal decision in Bainbridge , which was as follows:
"The argument accepted by the EAT in the Middlesbrough case is … the employer will always be entitled to say that it must continue to discriminate against the women for another three or four years (albeit to a reducing extent) because it cannot afford to bring them into line with the men at the time of re-organisation. We find that a very surprising and undesirable general conclusion. We accept that a large public employer might be able to demonstrate that the constraints on its finances were so pressing that it could not do other than it did, and that it was justified in putting the need to cushion men's pay reduction ahead of the need to bring women up to parity with the men, but we do not accept that the result should be a foregone conclusion. The employer must be put to proof that what he has done was objectively justified in the individual case."
[77]Mr Lynch says that if one looks at the reasoning of the Tribunal it is in fact entirely consistent with the approach required by the Court of Appeal in the Bainbridge case. Any reliance on Surtees was immaterial. In particular, he emphasises the fact that the Court of Appeal was stressing above all that the question is fact-sensitive. Here the Tribunal focused on certain key features, in particular the need to cushion employees from loss of income, the importance of which every employee would respect; the threat to reaching any agreement if that principle were significantly undermined; and the very significant costs involved. He rejected Mr White's submission that the Court of Appeal in paragraph 175 was intending to indicate that tribunals should be reluctant to place the interests of employees who would lose out on the introduction of a job evaluation scheme above the interests of the right for women to have full equal pay. They were merely saying that it was wrong to assume that they should always be preferred.[78]We see force in Mr Lynch's submission. The Tribunal did in fact focus on the particular circumstances, as the Court of Appeal enjoins. They were plainly very influenced by the very substantial costs and the risk to any protected pay arrangements if the protection were to be extended in this way. The importance of those arrangements to securing agreement for job evaluation schemes is reflected in the fact that the Equality and Human Rights Commission intervened in Bainbridge to support them.[79]However, there is no doubt that Mr White is correct to say that the Tribunal has misdirected itself by relying - as it had to do - on the judgment in Surtees . Plainly, it was significantly influenced by that judgment and the Court of Appeal has directed that the principle enunciated by the EAT in that case, namely that it is unhelpful to see and treat multiple equal pay claims of this nature as truly fact-sensitive issues, was wrong. The Court of Appeal did not say that the Tribunal could not have reached the same result as the EAT did. On the contrary, they said in terms that the EAT decision would have been justified had they been the Tribunal at first instance and made the relevant findings of fact. The court criticism was directed at the failure of the EAT loyally to follow the factual findings of the Employment Tribunal.[80]We therefore would remit this case back to the Tribunal. We decisively reject Mr White's submission that the only rational decision is that the defence of justification is bound to fail. We do not think that this follows at all from paragraph 175. In our judgment, the court was simply observing that it was wrong to give such prominence to the interests of those who lose out in a job evaluation scheme at the expense of the women who have not been afforded their full rights to equality.[81]In effect, the Court of Appeal was saying that even if a single answer should be applied to all these cases, they were not at all persuaded that it should have been the answer given by the EAT. But the essential message from the Court of Appeal is that the Employment Tribunal must reach its own decision in the light of the evidence, and appellate courts should be loyal to their findings. Indeed, the Court of Appeal stated in terms that tribunals should simply apply the traditional approach to justification established in such cases as Barry v Midland Bank plc [1999] IRLR 581 (HL) and Cadman v Health and Safety Executive [2006] IRLR 569 (ECJ). Disposal[82]Accordingly, we dismiss the appeal but uphold the cross appeal.[83]In the circumstances, we think the issue of protected pay can properly be remitted back to the same Tribunal. They have produced a very impressive judgment and are fully acquainted with the material facts. It will be for them to determine whether they wish to hear any further evidence or whether they will simply revisit the issue in the light of the Court of Appeal judgment in Bainbridge .