"(3) An equality clause falling within subsection (2) (a), (b) or (c) above 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— (a) in the case of an equality clause falling within subsection (2) (a) or (b) above, must be a material difference between the woman's case and the man's; and (b) in the case of an equality clause falling within subsection (2) (c) above, may be such a material difference."
" Bonusability The main GMF defence that will be relied upon by the respondent in relation to the period up to 31 st March 2007 is that, where there is a pay differential between the claimant and comparators who, at the material time, were engaged on work rated as equivalent or work of equal value, the differential is explained by the fact that the comparators received a performance related bonus and the claimant jobs were not suitable for a performance related bonus. This will be described as the "bonusability defence."
"Accordingly, the respondent will say that it is sufficient in all cases, in order to succeed with its GMF defence, that the respondent can prove that there is a reason other than the difference in sex, for the pay differential. The respondent will further say that in all cases it is able to prove such a reason other than the difference in sex for the pay differential."
"The bonuses that were received by the holders of the comparator jobs were genuine performance related bonuses (PRBs). If they need to be justified, they are justified on the basis of efficiency, effectiveness and productivity. The bonuses incentivised the employees concerned to work more productively and/or efficiently and/or at a faster pace, thus enabling the respondent to make efficiency savings. They were wholly or largely self-financing, and, in particular, enabled the work to be done by fewer employees than would otherwise have been the case and/or the saving of overtime. The PRBs enabled the respondent to require the employees concerned to work at a pace and performance level that was consistently above standard level."
"As the years passed, the bonuses stabilised, in the sense that it became unnecessary to measure the performance of the employees in the way that it had previously been done. Employees were known to be working to the higher productivity and so it was no longer cost-effective to expend money and resources on measurement, evaluation and monitoring. Moreover it was known that the workforce was working to the level of performance which merited the full bonus, because the tasks given to the employees for a particular day could only be accomplished if the employees worked to the level of performance which qualified for a full bonus."
"The bonuses continued to be genuine performance related bonuses, notwithstanding the fact that they were not measured in the same way as before. The fact that employees usually or always received the full bonus resulted from the fact that they were always working to the full bonus performance level. During the period when bonuses were paid, the standard and productivity of the work done in the departments which paid bonuses was at a high level, and the respondent was much more successful than most local authorities in retaining work that was required to go to tender in-house."
"The reasons for providing a PRB to the holders of the comparator jobs did not apply to the claimants. Their jobs were not suitable for PRBs and/or efficiency savings could not be made through the use of PRBs. No bonus could be designed for the claimant jobs that would have been beneficial for service delivery or which would have been cost-effective."
"20. It is certainly possible that a scheme which was sex-tainted at its inception could, because of changed circumstances, cease to be so at a later date. Equally a bonus scheme that was not sex-tainted when first introduced might become so in the light of changed circumstances. There were very significant changes in the bonus schemes and how they operated in the course of the years between their first introduction and 2001. In particular, well before 2001, the link with measured work had disappeared and different reasons for the payment of bonus at particular levels had emerged. The transition was associated with the dates when bonus became consolidated as part of basic pay, and with the onset of CCT. The original linkage which had, to an extent, existed between measured productivity and pay ceased to exist when there was a move to what is conveniently described as "tender-led" values. In other words, the earnings of employees came to be fixed not by how much work they did or how fast they did it, but by what could be paid to them if their employer was to operate in a competitive market. The reach of the schemes themselves, however, did not change with this fundamental move away from measured work – there was never any serious attempt to bring in female-dominated occupations; indeed there would appear to have been no thought given to this even as a possibility, and no awareness that within Bury that the pay inequality arising from the existence of bonus schemes might give rise to equality questions. That was not appreciated by all accounts until the arrival of Mr. Berry as Director of Personnel in 2001. 21. What did happen over time, however, is that bonus became automatic, so that it was never withheld. It became part of pay, notwithstanding the continuation of formal documentation by the administrative systems of the Respondent which suggested the contrary. The Tribunal is invited to look at the reality of the situation, and the reality is that bonus payments were, at the very latest by the mid-1990s, to all intents and purposes, part of pay, and seen as such by almost all of those who received them. After measurement of work ceased to be a determining principle in the fixing of pay, it was no longer possible to link payment to any defined level of performance (i.e. level 75, 100, 104 etc.). Neither was there any interest on the part of the Respondent in so doing."
"A sham or non-genuine explanation is a false one, designed to disguise the true reason for the difference in pay, itself tainted by sex … ."
"If the explanation is a sham, then it matters not whether the true reason is tainted by sex."
"The respondent therefore has, in short, to prove: an explanation which is genuine and not a sham; that the more favourable treatment is due to that reason and is significant and relevant; and that the reason is not the difference of sex. Should the respondent fail to prove any of those matters then the genuine material factor defence fails and there is no room for a justification defence. On the other hand, if the respondent succeeds, the burden reverts to the claimant to show prima facie indirect discrimination." (5) The Tribunal's reasoning and conclusion in relation to the issue appear in a final section entitled "
"In conclusion accordingly, upon this issue, we consider that while not a sham when first introduced, the bonus schemes became a sham and were not genuinely linked to productivity. There being no satisfactory evidence of a link between the bonus schemes and productivity we find … that the genuine material factor [defence] fails."
"We found Mr. Rutter and Mr. Hale both to be honest witnesses. Genuine schemes were introduced which increased productivity, which were monitored and were self-financing. Up to the advent of CCT, the Tribunal is of the view there is more than ample evidence that the bonus schemes introduced by Mr. Rutter and/or maintained and monitored by him and his work study team were genuine. It was due to that factor that the male bonus earners were earning more than the female job groups. It was accordingly, a relevant material factor." (2) At the end of para. 326 it holds that "the non-introduction of bonus schemes into the female work groups was not caused by the difference of sex" and gives its reasons for that conclusion. In essence it accepts the argument that the Claimants' jobs were "not apt or amenable to a bonus scheme of this type". (3) Thus far, therefore, the Tribunal's findings favoured the Council. However, it went on to accept Mr. Napier's case that the position as at the introduction of the schemes later changed fundamentally. At paras. 329-330 it says: "329. We are, of course, concerned principally with the period between 2001 and 2007. The evidence demonstrates that there were very significant changes in the bonus schemes and how they operated over the 20-year period (or thereabouts) to 2001. Mr. Napier submitted that well before 2001, the link with measured work disappeared and different reasons for the payment of bonus at particular levels had emerged. The transition was associated with the dates when bonus schemes became consolidated as part of basic pay and with the onset of CCT. He goes on to say (in paragraph 20 of his submission) that the original link between measured productivity and pay ceased to exist and there was a move to "tender-led" values. The earnings of employees came to be fixed not by how much work they did or how fast they did it, but by what could be paid to them if their employer was able to operate in a competitive market. The payment of bonus became automatic. 330. We consider that Mr. Napier and Miss Bourke (who made similar submissions) are correct in their assertion that the link between productivity and pay had long since ceased prior to 2001. Accordingly, we conclude that although not a sham from the start, the bonuses became a sham well before 2001." (4) The Tribunal then goes on to make good that general conclusion in relation to each of the particular schemes in issue. It summarises the results at paras. 349-350 as follows: "349. The Tribunal considers that, looking at the work undertaken in the comparator work departments, the reality was that employees were simply deemed to be working at the required performance level. There was no evidence of any measurement to check that this was so. With the advent of CCT, there was often a need for employees to work at a rate which was competitive. There was no evidence that the respondents had used work study for planning bonus schemes for more than 10 years. No proper costings of schemes were undertaken. Costings were often the result of negotiation rather than based on work study and measured performance and productivity. There was, in the comparator departments, no satisfactory evidence of a link between bonus and productivity from well before 2001. 350. The position is, we think, more than adequately summarised in Mr. Berry's letters sent to the comparator groups of December 2007 (an example of which appears at C2-766). He says there that during the consultation meetings, "concerns were raised that the bonus schemes were outdated and the links between payment of bonus, attendance and productivity may have been lost"
"20. Where particular Claimants are able to rely on the provisions of Section 1 (2) (b) of the Act, the First Respondent will contend that at all material times variations in pay were genuinely due to material factors which were not the difference of sex and which amounted to a material difference between the Claimants' cases and the relevant Comparators. 21. In relation to the Comparators who were formerly employed under the provisions of the White Book in the jobs listed in Paragraph 10.5 above, differences in pay between them and other workers rated as equivalent were explained by cost-neutral bonus payments arising out of productivity/efficiency incentive schemes which was a material difference which is not the difference of sex. The use of such a scheme to meet the objectives of the First Respondent is objectively justifiable if the same needs to be justified which is denied. 22. Although it is denied that the First Respondent is required to prove that a bonus scheme should, or could have been made available to the Claimants, the nature of the work of the Claimants is/was such that no similar scheme, or term could in any event have been transposed in their case because the nature of the work was quite different and it was not possible to provide bonuses based on enhanced productivity. The work done by the Comparators involved the provision of different types of services. It is denied that a bonus scheme, cost-neutral to the First Respondent could have been developed for the Claimants that would be beneficial for service delivery. 23. The local negotiations and agreements entered into with the trade unions were free of discrimination and reflected an objectively assessed need on the part of the First Respondent for such bonus schemes. 24. There could be no advantage to the First Respondent, to service users, or to ratepayers in introducing any bonus scheme to the Claimants in that the Claimants' salaries already compared favourably with that of the private sector. Further, bonus schemes were introduced on a cost neutral basis and, where appropriate, were introduced alongside a reduction in the numbers of the relevant workforce. The nature of the work performed by the Comparators was such that such an outcome was achievable. The nature of the Claimants' work was such that a reduction in the workforce associated with an increase in output would be detrimental to service delivery." (The "market forces" arguments adumbrated at para. 24 was not in the end persisted in.) The Claimants did not have to plead an answer to the Council's response and we have not seen their written submissions before the Tribunal. However, the nature of their case appears sufficiently from the Tribunal's Reasons as summarised below. In particular, it is clear that they took the point that, at least as regards the relevant period, the Council's proffered explanation for the differential complained of was a sham. THE TRIBUNAL'S REASONS The structure of the Reasons is as follows: (1) After an introductory section the Tribunal at paras 9-18 gives, as section I and II, a summary of the relevant law. (2) Section III is headed "
"Whether the bonuses paid to the comparators by the first respondent were paid by the first respondent genuinely to encourage and reward productivity."
"In our judgment, by 1998 the purported bonus payments had long since ceased to have anything to do with productivity – even on the basis of maintaining rather than increasing standards – and were, as they were seen to be by workforce and management alike, a fixed part of salary."
"… by 1998 the payments had … long since ceased to have anything to do with productivity … and were perceived as being and were a fixed part of salary."
"As with the other schemes, it may very well be that the amount of work actually being carried out by each employee … was important to the respondent in calculating its tenders under CCT but the bonus had long since ceased to be, or to be seen as being, linked to productivity. In our judgment, neither the workforce nor management would have thought otherwise."
" … for the reasons we have given, we came to the conclusion that the bonus schemes were not genuine and thus that they were sex-tainted in relation to all claimants other than the leisure centre attendants … Accordingly, with regard to all [except the leisure centre attendants], the purported defence under section 1 (3) fails."
"Whatever these three bonus schemes were originally intended to do and actually did in the 1970s, we had to consider that question in the context of a period commencing in the late 1990s. The position as it was more than 20 years earlier was, of course, of relevance and evidential value. However, in the intervening period a great deal had changed. In our judgment, with regard to none of these schemes was there the maintenance of the achievement of productivity improvements. Within the meaning of the test laid down in Marshall as explained in Dolphin , each of these three bonus schemes was a sham and a pretence and therefore could not be a explanation for the variations in pay."
"Accordingly, we rejected the genuineness of the first respondent's proffered explanation."
"It would frustrate the principle of equality to deny [the claimants] benefits which, as everyone accepted , they were legally entitled to receive [our emphasis]. Had the employers corrected the inequality when they ought to have done, then there can be no doubt that these women would have been in exactly the same position as their comparators. They would have had the benefit of the pay protection ." • In Middlesbrough the employment tribunal also rejected the section 1 (3) defence and thus upheld the claimants' claims to pay protection. It found that, although at the time that it entered into the single status agreement the council had not accepted that its previous pay arrangements were discriminatory, it should have appreciated that there was a real risk that that would be held to be the case: see the Court of Appeal's summary of the reasoning at para. 148 (p. 180 D-E). Against that background it held that: " [a]lthough … a period of protection of previously discriminatory pay, limited in time in order to phase it out, would be a legitimate aim, it had not been shown that this scheme was an appropriate and proportionate means of achieving that objective when the size of the disadvantaged group and the cost of including or excluding that group had not been calculated" (see, again, the Court of Appeal's summary of the reasoning at para. 149 (p. 180G)). In that connection it attached particular weight to the fact that the pay protection arrangements had not been costed. That decision was overturned by this Tribunal, again presided over by Elias P, which held that the only possible conclusion on the facts as found was that the council had established its justification defence. The Court of Appeal held that in both cases the decision of the employment tribunal was unimpeachable, and in the case of Redcar it added that the decision was plainly correct. It also endorsed the reasoning of this Tribunal in Redcar on the question of justification (albeit that it held that that reasoning had been unnecessary because the employment tribunal had not in fact misdirected itself). The analysis is very lengthy, but it can be sufficiently summarised as follows [18] : (1) In any case where the existence of past direct discrimination has been "recognised", the continuation for the future of such discrimination in the form of transitional or phasing-out arrangements cannot be justified: see para. 129 of the judgment (pp. 175-6), applying the decision of the European Court of Justice in Smith v Avdel Systems Ltd[1995] ICR 596 . The removal of such discrimination must be "immediate and full". (2) The position as regards transitional arrangements which continue past indirect discrimination is more subtle. The key passage in the judgment is at paras. 131-5 (pp. 176-7). There appear to be some differences of emphasis in different parts of that passage, but the essential message is at para. 134 (p. 177 A-B), where the Court holds that in cases of indirect discrimination a "more flexible principle" should apply, under which the continuation of past indirect discrimination will not be unlawful if it can be justified. The tribunal will need to apply the proportionality test, but in doing so it will be relevant to consider "the employer's state of knowledge about the discriminatory effect of his provisions and the extent to which he tries to minimise that effect"
"As we have said, we do not think that it was correct to say that, merely because the employer knew that it had been discriminating in the past, it became impossible to justify the continuation of some discrimination after the reorganisation. We think it would still be possible (although more difficult) for an employer to justify where he was aware of the past discrimination. He could do so by demonstrating that he had done all he could to minimise the effect of the continuing discrimination but he was unable to eliminate it immediately." (3) The employer in Redcar , having made the concession that it did (see para. 54 above), knew or ought to have known at the time that it agreed the pay protection arrangements that its previous pay system was discriminatory in the relevant respects. That being so, both the employment tribunal and this Tribunal were right to hold that the transitional arrangements could not be justified, and the claimants were entitled to the benefit of the pay protection provisions: see paras. 136-140 (pp. 177-8). (4) In Middlesbrough the employer had at the material time made no such concession. The Court of Appeal reversed the decision of this Tribunal that the employment tribunal's reasoning, as summarised at para. 54 above, was flawed and held that its conclusion was legally open to it: see paras. 169-171 (p. 186). (5) Although that was enough to dispose of the appeal, the Court of Appeal made some observations on the reasoning of this Tribunal in deciding that Middlesbrough's pay protection arrangements could be justified. At paras. 172-3 it commented on a particular passage which we have to consider below (see para. 66) and which we will accordingly not set out here. It then proceeded to criticise an observation to the effect that "all schemes of this nature" were likely to be justifiable. It said: "174. We are concerned about this statement which appears, in this kind of case, to take away from tribunals the task of deciding whether the employer's arrangements can be objectively justified notwithstanding the fact that they are prima facie indirectly discriminatory. The EAT seems to think that the same answer will apply in every case where, following pay reorganisation, pay protection is given to the employees who have been the advantaged group under the old arrangements and is denied to the gender group who have been discriminated against in the past. We do not think it can be right to take that essential evaluation away from tribunals. Moreover, we cannot accept that the answer will always be as the EAT thinks. 175. It is apparent that the EAT in the Middlesbrough case was sympathetic to the position of an employer who, on finding that he has been or might have been discriminating against women seeks to reorganise his pay structure so as to avoid discrimination in the future. The EAT recognises that employers (or at least public employers such as these local authorities) will have a limited budget and many calls upon their resources. The argument accepted by the EAT in the Middlesbrough case is that in such circumstances, 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 reorganisation. 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 the men's pay reduction ahead of the need to bring the women up to parity with the men. But we do not accept that that result should be a foregone conclusion. The employer must be put to proof that what he had done was objectively justified in the individual case. 176. A significant part of Mr. Jeans' submission to this Court was concerned with the difficulties faced by local authorities with large workforces. His submissions began from the premise that the authorities were not in any way to blame where the pay of women employees had fallen behind the men's in a discriminatory way. It was unrealistic to expect the authorities to be able to prevent such inequalities arising. So, in cases of this kind, he submitted, that was where they were starting from. "
"It would not have been practicable for the Council to offer pay protection to the claimants who had not actually suffered a drop in pay, but who might have suffered a drop in pay had they been paid the same as the bonus earners, because it would have been impossible to be certain who had a good claim, until the litigation had run its course. And at the time when pay protection was under consideration for the bonus earners, no equal pay claims had been lodged against the Council. Even if it were possible to determine who had a good claim in advance, it would not have been possible to calculate their "loss" and therefore what they would have been entitled to receive by way of pay protection, because the amount would have varied depending upon which bonus earner was selected for that exercise. It would therefore have been grossly irresponsible and contrary to the Council's fiduciary duty to offer pay protection to the claimants on this basis and in any event it would have imposed a financial liability on the Council which it could ill-afford. And had the Council offered pay protection to those who had not actually suffered a drop in pay, this would have been a payment made for different reasons from the reasons why payments were being made to the comparators."
"353. … Mr. Cavanagh accepts that, in the circumstances of our findings, there will be prima facie discrimination in relation to pay protection regardless of the disparate impact issue … . This is because the Court of Appeal held in Bainbridge that the existence of historic pay discrimination which benefited the people who are now receiving pay protection means that there is prima facie discrimination as regards pay protection. It follows, therefore, that historically, the respondent in this case having chosen to benefit a predominantly male group in circumstances where the female group was disadvantaged, the application of pay protection post1 April 2007 is, inevitably, tainted by indirect sex discrimination. 354. At paragraph 156 of Bainbridge, the Court of Appeal said this: "
"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 a job evaluation scheme. Any assessment of future costing would inevitably be highly speculative and would undermine the ability to obtain agreement for the scheme." 356. Mr. Cavanagh submitted that only the comparators were going to suffer a drop in pay and that is the reason why the comparators were given pay protection and the claimants were not. 357. The Tribunal does not accept that the granting of pay protection to the comparators was not tainted by sex. It clearly was. On any view, the GMF having failed, there arises the statutory presumption of the difference of salary between the claimants and their comparators as being due to the difference of sex. That presumption may be displaced by the respondent establishing a genuine material factor defence under Section 1(3). This respondent cannot so do. The reason why the comparators were in receipt of pay protection (and therefore a higher salary) than the claimants was tainted by sex discrimination. The Equal Pay Act provides for that statutory presumption of sex discrimination. 358. Nevertheless, the Tribunal considers that the respondent has made out its case that it can justify the indirect discrimination resulting from the pay protection policy. The measures adopted by the respondent correspond to a real need upon the part of the respondent to implement single status and abolish the bonuses. There was recognition by the respondent that the bonuses were potentially discriminatory (as indeed we find they were). The co-operation of the unions was essential to the implementation of single status and, as a prelude thereto, of undergoing a job evaluation. We agree with Mr. Cavanagh's submissions, accordingly, that pay protection for the previous bonus earners was essential in industrial relations terms. Mr. Berry experienced a vivid illustration of the strength of the unions when industrial action was threatened by the refuse collectors in March 2008. 359. The dilemma facing Mr. Berry was well illustrated by the documents to which we have just referred at D327 to 328. The respondent was clearly caught in the dilemma of facing potential equal pay claims from the claimants and potential unfair dismissal claims from the comparators. 360. Many witnesses said that morale dropped when the issue was raised by Mr. Berry (by his letters of December 2006) that bonus was to be withdrawn. Pay protection was also recommended in the Green Book (see M-8). 361. We also accept Mr. Berry's evidence that there was no way of working out with any degree of precision to whom to make pay protection payments to (other than the former bonus earners). It would be an extremely difficult exercise to calculate how much pay protection payment to make to each individual employee not in receipt of bonus. For example, at A-282, the Stefan Cross claimant cites 94 comparators for her position of Night Care Assistant. 362. We agree with Mr. Cavanagh that this was not a case where the respondent was "bang to rights"
"We would accept that, if the appeal tribunal had been the tribunal of first instance, it would have been entitled to decide the issue of justification in that way. However, it was not and that passage must be treated with reserve. We note that the reasoning in that passage would have been equally applicable to the Redcar case and it would be unsatisfactory if the appeal tribunal were to promulgate two quite different decisions in two cases which were factually very similar without providing a rational basis for distinguishing them."
"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 the men's pay reduction ahead of the need to bring the women up to parity with the men. But we do not accept that that result should be a foregone conclusion. The employer must be put to proof that what he had done was objectively justified in the individual case."
"(3) An equality clause falling within subsection (2) (a), (b) or (c) above 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— (a) in the case of an equality clause falling within subsection (2) (a) or (b) above, must be a material difference between the woman's case and the man's; and (b) in the case of an equality clause falling within subsection (2) (c) above, may be such a material difference."
" Bonusability The main GMF defence that will be relied upon by the respondent in relation to the period up to 31 st March 2007 is that, where there is a pay differential between the claimant and comparators who, at the material time, were engaged on work rated as equivalent or work of equal value, the differential is explained by the fact that the comparators received a performance related bonus and the claimant jobs were not suitable for a performance related bonus. This will be described as the "bonusability defence."
"Accordingly, the respondent will say that it is sufficient in all cases, in order to succeed with its GMF defence, that the respondent can prove that there is a reason other than the difference in sex, for the pay differential. The respondent will further say that in all cases it is able to prove such a reason other than the difference in sex for the pay differential."
"The bonuses that were received by the holders of the comparator jobs were genuine performance related bonuses (PRBs). If they need to be justified, they are justified on the basis of efficiency, effectiveness and productivity. The bonuses incentivised the employees concerned to work more productively and/or efficiently and/or at a faster pace, thus enabling the respondent to make efficiency savings. They were wholly or largely self-financing, and, in particular, enabled the work to be done by fewer employees than would otherwise have been the case and/or the saving of overtime. The PRBs enabled the respondent to require the employees concerned to work at a pace and performance level that was consistently above standard level."
"As the years passed, the bonuses stabilised, in the sense that it became unnecessary to measure the performance of the employees in the way that it had previously been done. Employees were known to be working to the higher productivity and so it was no longer cost-effective to expend money and resources on measurement, evaluation and monitoring. Moreover it was known that the workforce was working to the level of performance which merited the full bonus, because the tasks given to the employees for a particular day could only be accomplished if the employees worked to the level of performance which qualified for a full bonus."
"The bonuses continued to be genuine performance related bonuses, notwithstanding the fact that they were not measured in the same way as before. The fact that employees usually or always received the full bonus resulted from the fact that they were always working to the full bonus performance level. During the period when bonuses were paid, the standard and productivity of the work done in the departments which paid bonuses was at a high level, and the respondent was much more successful than most local authorities in retaining work that was required to go to tender in-house."
"The reasons for providing a PRB to the holders of the comparator jobs did not apply to the claimants. Their jobs were not suitable for PRBs and/or efficiency savings could not be made through the use of PRBs. No bonus could be designed for the claimant jobs that would have been beneficial for service delivery or which would have been cost-effective."
"20. It is certainly possible that a scheme which was sex-tainted at its inception could, because of changed circumstances, cease to be so at a later date. Equally a bonus scheme that was not sex-tainted when first introduced might become so in the light of changed circumstances. There were very significant changes in the bonus schemes and how they operated in the course of the years between their first introduction and 2001. In particular, well before 2001, the link with measured work had disappeared and different reasons for the payment of bonus at particular levels had emerged. The transition was associated with the dates when bonus became consolidated as part of basic pay, and with the onset of CCT. The original linkage which had, to an extent, existed between measured productivity and pay ceased to exist when there was a move to what is conveniently described as "tender-led" values. In other words, the earnings of employees came to be fixed not by how much work they did or how fast they did it, but by what could be paid to them if their employer was to operate in a competitive market. The reach of the schemes themselves, however, did not change with this fundamental move away from measured work – there was never any serious attempt to bring in female-dominated occupations; indeed there would appear to have been no thought given to this even as a possibility, and no awareness that within Bury that the pay inequality arising from the existence of bonus schemes might give rise to equality questions. That was not appreciated by all accounts until the arrival of Mr. Berry as Director of Personnel in 2001. 21. What did happen over time, however, is that bonus became automatic, so that it was never withheld. It became part of pay, notwithstanding the continuation of formal documentation by the administrative systems of the Respondent which suggested the contrary. The Tribunal is invited to look at the reality of the situation, and the reality is that bonus payments were, at the very latest by the mid-1990s, to all intents and purposes, part of pay, and seen as such by almost all of those who received them. After measurement of work ceased to be a determining principle in the fixing of pay, it was no longer possible to link payment to any defined level of performance (i.e. level 75, 100, 104 etc.). Neither was there any interest on the part of the Respondent in so doing."
"A sham or non-genuine explanation is a false one, designed to disguise the true reason for the difference in pay, itself tainted by sex … ."
"If the explanation is a sham, then it matters not whether the true reason is tainted by sex."
"The respondent therefore has, in short, to prove: an explanation which is genuine and not a sham; that the more favourable treatment is due to that reason and is significant and relevant; and that the reason is not the difference of sex. Should the respondent fail to prove any of those matters then the genuine material factor defence fails and there is no room for a justification defence. On the other hand, if the respondent succeeds, the burden reverts to the claimant to show prima facie indirect discrimination." (5) The Tribunal's reasoning and conclusion in relation to the issue appear in a final section entitled "
"In conclusion accordingly, upon this issue, we consider that while not a sham when first introduced, the bonus schemes became a sham and were not genuinely linked to productivity. There being no satisfactory evidence of a link between the bonus schemes and productivity we find … that the genuine material factor [defence] fails."
"We found Mr. Rutter and Mr. Hale both to be honest witnesses. Genuine schemes were introduced which increased productivity, which were monitored and were self-financing. Up to the advent of CCT, the Tribunal is of the view there is more than ample evidence that the bonus schemes introduced by Mr. Rutter and/or maintained and monitored by him and his work study team were genuine. It was due to that factor that the male bonus earners were earning more than the female job groups. It was accordingly, a relevant material factor." (2) At the end of para. 326 it holds that "the non-introduction of bonus schemes into the female work groups was not caused by the difference of sex" and gives its reasons for that conclusion. In essence it accepts the argument that the Claimants' jobs were "not apt or amenable to a bonus scheme of this type". (3) Thus far, therefore, the Tribunal's findings favoured the Council. However, it went on to accept Mr. Napier's case that the position as at the introduction of the schemes later changed fundamentally. At paras. 329-330 it says: "329. We are, of course, concerned principally with the period between 2001 and 2007. The evidence demonstrates that there were very significant changes in the bonus schemes and how they operated over the 20-year period (or thereabouts) to 2001. Mr. Napier submitted that well before 2001, the link with measured work disappeared and different reasons for the payment of bonus at particular levels had emerged. The transition was associated with the dates when bonus schemes became consolidated as part of basic pay and with the onset of CCT. He goes on to say (in paragraph 20 of his submission) that the original link between measured productivity and pay ceased to exist and there was a move to "tender-led" values. The earnings of employees came to be fixed not by how much work they did or how fast they did it, but by what could be paid to them if their employer was able to operate in a competitive market. The payment of bonus became automatic. 330. We consider that Mr. Napier and Miss Bourke (who made similar submissions) are correct in their assertion that the link between productivity and pay had long since ceased prior to 2001. Accordingly, we conclude that although not a sham from the start, the bonuses became a sham well before 2001." (4) The Tribunal then goes on to make good that general conclusion in relation to each of the particular schemes in issue. It summarises the results at paras. 349-350 as follows: "349. The Tribunal considers that, looking at the work undertaken in the comparator work departments, the reality was that employees were simply deemed to be working at the required performance level. There was no evidence of any measurement to check that this was so. With the advent of CCT, there was often a need for employees to work at a rate which was competitive. There was no evidence that the respondents had used work study for planning bonus schemes for more than 10 years. No proper costings of schemes were undertaken. Costings were often the result of negotiation rather than based on work study and measured performance and productivity. There was, in the comparator departments, no satisfactory evidence of a link between bonus and productivity from well before 2001. 350. The position is, we think, more than adequately summarised in Mr. Berry's letters sent to the comparator groups of December 2007 (an example of which appears at C2-766). He says there that during the consultation meetings, "concerns were raised that the bonus schemes were outdated and the links between payment of bonus, attendance and productivity may have been lost"
"Whether the bonuses paid to the comparators by the first respondent were paid by the first respondent genuinely to encourage and reward productivity."
"In our judgment, by 1998 the purported bonus payments had long since ceased to have anything to do with productivity – even on the basis of maintaining rather than increasing standards – and were, as they were seen to be by workforce and management alike, a fixed part of salary."
"… by 1998 the payments had … long since ceased to have anything to do with productivity … and were perceived as being and were a fixed part of salary."
"As with the other schemes, it may very well be that the amount of work actually being carried out by each employee … was important to the respondent in calculating its tenders under CCT but the bonus had long since ceased to be, or to be seen as being, linked to productivity. In our judgment, neither the workforce nor management would have thought otherwise."
" … for the reasons we have given, we came to the conclusion that the bonus schemes were not genuine and thus that they were sex-tainted in relation to all claimants other than the leisure centre attendants … Accordingly, with regard to all [except the leisure centre attendants], the purported defence under section 1 (3) fails."
"Whatever these three bonus schemes were originally intended to do and actually did in the 1970s, we had to consider that question in the context of a period commencing in the late 1990s. The position as it was more than 20 years earlier was, of course, of relevance and evidential value. However, in the intervening period a great deal had changed. In our judgment, with regard to none of these schemes was there the maintenance of the achievement of productivity improvements. Within the meaning of the test laid down in Marshall as explained in Dolphin , each of these three bonus schemes was a sham and a pretence and therefore could not be a explanation for the variations in pay."
"Accordingly, we rejected the genuineness of the first respondent's proffered explanation."
"As we have said, we do not think that it was correct to say that, merely because the employer knew that it had been discriminating in the past, it became impossible to justify the continuation of some discrimination after the reorganisation. We think it would still be possible (although more difficult) for an employer to justify where he was aware of the past discrimination. He could do so by demonstrating that he had done all he could to minimise the effect of the continuing discrimination but he was unable to eliminate it immediately." (3) The employer in Redcar , having made the concession that it did (see para. 54 above), knew or ought to have known at the time that it agreed the pay protection arrangements that its previous pay system was discriminatory in the relevant respects. That being so, both the employment tribunal and this Tribunal were right to hold that the transitional arrangements could not be justified, and the claimants were entitled to the benefit of the pay protection provisions: see paras. 136-140 (pp. 177-8). (4) In Middlesbrough the employer had at the material time made no such concession. The Court of Appeal reversed the decision of this Tribunal that the employment tribunal's reasoning, as summarised at para. 54 above, was flawed and held that its conclusion was legally open to it: see paras. 169-171 (p. 186). (5) Although that was enough to dispose of the appeal, the Court of Appeal made some observations on the reasoning of this Tribunal in deciding that Middlesbrough's pay protection arrangements could be justified. At paras. 172-3 it commented on a particular passage which we have to consider below (see para. 66) and which we will accordingly not set out here. It then proceeded to criticise an observation to the effect that "all schemes of this nature" were likely to be justifiable. It said: "174. We are concerned about this statement which appears, in this kind of case, to take away from tribunals the task of deciding whether the employer's arrangements can be objectively justified notwithstanding the fact that they are prima facie indirectly discriminatory. The EAT seems to think that the same answer will apply in every case where, following pay reorganisation, pay protection is given to the employees who have been the advantaged group under the old arrangements and is denied to the gender group who have been discriminated against in the past. We do not think it can be right to take that essential evaluation away from tribunals. Moreover, we cannot accept that the answer will always be as the EAT thinks. 175. It is apparent that the EAT in the Middlesbrough case was sympathetic to the position of an employer who, on finding that he has been or might have been discriminating against women seeks to reorganise his pay structure so as to avoid discrimination in the future. The EAT recognises that employers (or at least public employers such as these local authorities) will have a limited budget and many calls upon their resources. The argument accepted by the EAT in the Middlesbrough case is that in such circumstances, 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 reorganisation. 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 the men's pay reduction ahead of the need to bring the women up to parity with the men. But we do not accept that that result should be a foregone conclusion. The employer must be put to proof that what he had done was objectively justified in the individual case. 176. A significant part of Mr. Jeans' submission to this Court was concerned with the difficulties faced by local authorities with large workforces. His submissions began from the premise that the authorities were not in any way to blame where the pay of women employees had fallen behind the men's in a discriminatory way. It was unrealistic to expect the authorities to be able to prevent such inequalities arising. So, in cases of this kind, he submitted, that was where they were starting from. "
"It would not have been practicable for the Council to offer pay protection to the claimants who had not actually suffered a drop in pay, but who might have suffered a drop in pay had they been paid the same as the bonus earners, because it would have been impossible to be certain who had a good claim, until the litigation had run its course. And at the time when pay protection was under consideration for the bonus earners, no equal pay claims had been lodged against the Council. Even if it were possible to determine who had a good claim in advance, it would not have been possible to calculate their "loss" and therefore what they would have been entitled to receive by way of pay protection, because the amount would have varied depending upon which bonus earner was selected for that exercise. It would therefore have been grossly irresponsible and contrary to the Council's fiduciary duty to offer pay protection to the claimants on this basis and in any event it would have imposed a financial liability on the Council which it could ill-afford. And had the Council offered pay protection to those who had not actually suffered a drop in pay, this would have been a payment made for different reasons from the reasons why payments were being made to the comparators."
"353. … Mr. Cavanagh accepts that, in the circumstances of our findings, there will be prima facie discrimination in relation to pay protection regardless of the disparate impact issue … . This is because the Court of Appeal held in Bainbridge that the existence of historic pay discrimination which benefited the people who are now receiving pay protection means that there is prima facie discrimination as regards pay protection. It follows, therefore, that historically, the respondent in this case having chosen to benefit a predominantly male group in circumstances where the female group was disadvantaged, the application of pay protection post1 April 2007 is, inevitably, tainted by indirect sex discrimination. 354. At paragraph 156 of Bainbridge, the Court of Appeal said this: "
"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 a job evaluation scheme. Any assessment of future costing would inevitably be highly speculative and would undermine the ability to obtain agreement for the scheme." 356. Mr. Cavanagh submitted that only the comparators were going to suffer a drop in pay and that is the reason why the comparators were given pay protection and the claimants were not. 357. The Tribunal does not accept that the granting of pay protection to the comparators was not tainted by sex. It clearly was. On any view, the GMF having failed, there arises the statutory presumption of the difference of salary between the claimants and their comparators as being due to the difference of sex. That presumption may be displaced by the respondent establishing a genuine material factor defence under Section 1(3). This respondent cannot so do. The reason why the comparators were in receipt of pay protection (and therefore a higher salary) than the claimants was tainted by sex discrimination. The Equal Pay Act provides for that statutory presumption of sex discrimination. 358. Nevertheless, the Tribunal considers that the respondent has made out its case that it can justify the indirect discrimination resulting from the pay protection policy. The measures adopted by the respondent correspond to a real need upon the part of the respondent to implement single status and abolish the bonuses. There was recognition by the respondent that the bonuses were potentially discriminatory (as indeed we find they were). The co-operation of the unions was essential to the implementation of single status and, as a prelude thereto, of undergoing a job evaluation. We agree with Mr. Cavanagh's submissions, accordingly, that pay protection for the previous bonus earners was essential in industrial relations terms. Mr. Berry experienced a vivid illustration of the strength of the unions when industrial action was threatened by the refuse collectors in March 2008. 359. The dilemma facing Mr. Berry was well illustrated by the documents to which we have just referred at D327 to 328. The respondent was clearly caught in the dilemma of facing potential equal pay claims from the claimants and potential unfair dismissal claims from the comparators. 360. Many witnesses said that morale dropped when the issue was raised by Mr. Berry (by his letters of December 2006) that bonus was to be withdrawn. Pay protection was also recommended in the Green Book (see M-8). 361. We also accept Mr. Berry's evidence that there was no way of working out with any degree of precision to whom to make pay protection payments to (other than the former bonus earners). It would be an extremely difficult exercise to calculate how much pay protection payment to make to each individual employee not in receipt of bonus. For example, at A-282, the Stefan Cross claimant cites 94 comparators for her position of Night Care Assistant. 362. We agree with Mr. Cavanagh that this was not a case where the respondent was "bang to rights"
"We would accept that, if the appeal tribunal had been the tribunal of first instance, it would have been entitled to decide the issue of justification in that way. However, it was not and that passage must be treated with reserve. We note that the reasoning in that passage would have been equally applicable to the Redcar case and it would be unsatisfactory if the appeal tribunal were to promulgate two quite different decisions in two cases which were factually very similar without providing a rational basis for distinguishing them."
"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 the men's pay reduction ahead of the need to bring the women up to parity with the men. But we do not accept that that result should be a foregone conclusion. The employer must be put to proof that what he had done was objectively justified in the individual case."