England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
UKEAT/0135/06/LA

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/09/2007

Lord Justice Maurice Kay :

1. By its very nature, equal pay assumes a process of comparison. From its inception, the Equal Pay Act 1970 has embraced the job evaluation study (JES) as one of its tools for comparison. It is axiomatic that if two employees are placed in the same grade as a result of a JES, there is a presumed entitlement to equal pay in the sense that there should not be an inequality based on gender. That is the principle enshrined in section 1(2)(b) of the Act which applies when the two jobs are "rated as equivalent" (RAE). The point addressed in this judgment is whether a woman, who could undoubtedly base an RAE claim on comparison with a man in the same grade, can alternatively base such a claim on comparison with a man who has been placed in a lower grade by the JES but who in fact receives more pay. It would be surprising if she cannot, but that is the proposition advanced on behalf of Redcar and Cleveland Borough Council (the Council).
2. This point arises as part of an appeal by the Council against a judgment and order of the Employment Appeal Tribunal (Elias J, Mrs McArthur and Mr Smith) dated 15 November 2006. I say "part of an appeal" because the EAT granted the Council permission to appeal on two grounds. The first ground is one of some complexity concerning pay protection in the context of the Equal Pay Act. However, on 17 July 2007, the EAT, with Elias J again presiding, handed down judgment in another appeal which raised the same issue and again granted permission to appeal. That case is Middlesbrough Borough Council v Surtees UKEAT /0077/07/CEA. It is common ground between the parties in the present appeal and also in the Middlesbrough case that it would be of benefit to all concerned if the Council's appeal on the pay protection issue were to be heard at the same time as the appeal in the Middlesbrough case. Accordingly, consideration of the first ground of appeal has been adjourned so as to be joined with the anticipated appeal in the Middlesbrough case. There was not enough time for us to hear both appeals this week. Accordingly we are concerned only with the Council's second ground of appeal raising the RAE point which both sides agree can be dealt with as a discrete issue. No such issue arises in the Middlesbrough case.
3. As this second ground of appeal concerns a pure question of statutory interpretation, it is not necessary to refer in detail to the complex factual background to the case. In a nutshell it arises in the context of a large number of equal pay claims brought by female employees of the Council. It is part of a network of cases in which women employed by local authorities, many of them in the north east, are claiming equal pay with male comparators. The total number of claims exceeds 10,000. There are 12 local authorities against which claims have been made. This is the sixth case against the Council and it relates to 1, 440 applicants. Women employed in manual jobs such as caterers and care workers are seeking parity with male comparators such as road sweepers, gardeners and refuse collectors. The terms and conditions of employment for both groups were set out in a document called the White Book in 1988. It resulted from a nationally agreed JES which followed negotiations between local authorities and relevant trade unions. In most cases, the White Book claimants sought comparators in the same grade, in which case the complaint of disparity related to bonuses and other supplementary payments which had come to be added to the pay of employees performing tasks where male employees predominated. However, in some cases applicants sought to refer to comparators who were graded lower in the JES, either because there was no appropriate comparator in the same grade or for other reasons. The JES produced six grades. Road sweepers, who are predominantly male, were placed in grade 1, the lowest grade. We are concerned with catering employees and care workers who were placed in grades 2, 3, 4 or 5. They are predominantly female. The Employment Tribunal, in part of a long decision dated 13 December 2005, which covered many issues of which this was only one, held that it was permissible for a claimant to rely on a comparator who was placed in a lower grade in the JES. The EAT upheld that decision. The Council contends that the Employment Tribunal and the EAT have misconstrued section 1(2)(b) of the Act. The case for the Council is that where a proposed comparator has been placed in a lower grade, a claimant is not employed on work "rated as equivalent" with his. There is a sub-plot. The Council has made a concession that, if the disputed comparison is legally appropriate, the Council is unable to establish a "genuine material factor which is not the difference of sex" under section 1(3). In other words, it will have no defence in relation to the claims in which the RAE issue arises. All these claims relate to employment before 1 April 2004. On that date, the White Book, together with the Purple Book which had governed white collar employees since 1988, gave way to a new Green Book which is based on a local JES. We are not concerned with it on this appeal.

The statutory framework

4. The Equal Pay Act has to be seen in the context of Article 141 of the EU Treaty, which reproduces Article 119 of the Treaty of Rome. It provides:

"Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied."

5. In addition, Article 1 of the Equal Pay Directive provides that the principle of equal pay means "the elimination of all discrimination on grounds of sex with regard to all aspects and conditions of employment".
6. The Equal Pay Act was enacted before our accession to membership of the European Community, but nothing turns on that. The material provisions of section 1 of the Act (as amended) are as follows:

"(1) If the terms of a contract under which a woman is employed at an establishment in Great Britain do not include (directly or by reference to a collective agreement or otherwise) an equality clause they shall be deemed to include one.

(2) An equality clause is a provision which relates to terms (whether concerned with pay or not) of a contract under which a woman is employed (the "woman's contract"), and has the effect that –

(a) where the woman is employed on like work with a man in the same employment –

(i) if (apart from the equality clause) any term of the woman's contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and

(ii) if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman's contract shall be treated as including such a term;

(b) where the woman is employed on work rated as equivalent with that of a man in the same employment –

(i) if (apart from the equality clause) any term of the woman's contract determined by the rating of the work is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and

(ii) if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed and determined by the rating of the work, the woman's contract shall be treated as including such a term;

(c) where a woman is employed on work which, not being work in relation to which paragraph (a) or (b) above applies, is, in terms of the demands made on her (for instance under such headings as effort, skill and decision), of equal value to that of a man in the same employment –

(i) if (apart from the equality clause) any term of the woman's contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman's contract shall be treated as so modified as not to be less favourable, and

(ii) if (apart from the equality clause) at any time the woman's contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman's contract shall be treated as including such a term.

(3) 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 –

(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

(4) A woman is to be regarded as employed on like work with men if, but only if, her work and theirs is of the same or a broadly similar nature, and the differences (if any) between the things she does and the things they do are not of practical importance in relation to terms and conditions of employment; and accordingly in comparing her work with theirs regard shall be had to the frequency or otherwise with which any such differences occur in practice as well as to the nature and extent of the differences.

(5) A woman is to be regarded as employed on work rated as equivalent with that of any men if, but only if, her job and their job have been given an equal value in terms of the demand made on a worker under various headings (for instance effort, skill, decision), on a study undertaken with a view to evaluating in those terms the jobs to be done by all or any of the employees in an undertaking or group of undertakings, or would have been given an equal value but for the evaluation being made on a system setting different values for men and women on the same demand under any heading."

7. Thus, it can be seen that RAE work is provided for by section 1(2)(b) and that, by section 1(5) work is RAE with that of any men

"if, but only if, her job and their job have been given an equal value … "

8. The case for the Council is that a JES which has put two jobs in different grades has not rated them as equivalent or given them an equal value.

Discussion

9. Section 1 provides for three ways in which a claimant can sustain an equal pay claim. By section 1(2)(a) she can establish that she is "employed on like work with a man in the same employment". By section 1(2)(b) she can rely on "work rated as equivalent with that of a man in the same employment". By section 1(2)(c), if the work does not fall within section 1(2)(a) or (b), she can point to work "of equal value to that of a man in the same employment". As a matter of history, section 1(2)(a) and (b) were in section 1 as originally enacted, whereas section 1(2)(c) was only added in 1983 by way of amendment after a decision of the European Court of Justice which had held that the original provision did not amount to full implementation of our treaty obligations: Commission of the European Communities v United Kingdom [1982] ICR 578. Before the amendment a claimant in this country had to put her case either on the basis of "like work" or on the basis of RAE work which assumed the existence of a JES. The Court of Justice stated:

"5….It is noteworthy that, as the United Kingdom concedes, British legislation does not permit the introduction of a job classification system without the employer's consent. Workers in the United Kingdom are therefore unable to have their work rated as being of equal value with comparable work if their employer refuses to introduce a classification system.

6.The United Kingdom attempts to justify that state of affairs by pointing out that Article 1 of the Directive says nothing about the right of an employee to insist on having pay determined by a job classification system. On that basis it concludes that the worker may not insist on a comparative evaluation of different work by the job classification method, the introduction of which is at the employer's discretion."

10. The Court of Justice concluded that the position adopted by the United Kingdom was untenable and that there was a protection gap by reference to Community law. This led to the amendment of the Act by the introduction of section 1(2)(c) in 1983. Thenceforth, even if there has been no JES so as to bring a case within section 1(2)(b), a woman can still advance an "equal value" claim under section 1(2)(c). At the same time, a new section 2A was added to the Act to make procedural provision for "equal value" claims under section 1(2)(c). This provided a procedure whereby an Employment Tribunal could require a member of a panel of independent experts to prepare a report in the form of a JES, "unless it is satisfied that there are no reasonable grounds for determining that the work is of equal value". By section 2A(2) it was provided that

"… there shall be taken … to be no reasonable grounds for determining that the work of a woman is of equal value as mentioned in section 1(2)(c) above if … that work and the work of the man in question have been given different values on a study such as is mentioned in section 1(5) above; …"

and there were no reasonable grounds for determining that the evaluation was made on a sexually discriminatory basis. Section 2A has been further amended with effect from 1 October 2004 but that amendment does not apply to the circumstances of this appeal. Thus, since 1983, an equal pay claimant has had three comparative routes available to her – "like work", RAE work or "equal value" work. It is apparent from the terms of section 1(2)(c) that an "equal value" claim thereunder can only be advanced where a "like work" claim under section 1(2)(a) and a RAE claim under section 1(2) (b) are unavailable.

11. It is next necessary to refer to the decision of the Court of Justice in Murphy v Bord Telecom Eireann [1988] ICR 445. Mrs Murphy made an equal pay claim by reference to the Irish Anti-Discrimination (Pay) Act 1974. That Act is based on the concept of "like work" and, by section 3, "like work" is defined by reference to work which is "the same work", or "of a similar nature" or "equal in value". It does not expressly refer to work rated as equivalent in a JES. It provides for investigation by an equal pay officer who is appointed to the Labour Court. Mrs Murphy's chosen comparator was a man whose job had been given a lower grading by such an officer. The High Court referred a number of questions to the Court of Justice for a preliminary ruling under Article 177 of the Treaty of Rome. The main question was

"Does the Community law principle of equal pay for equal work extend to a claim for equal pay on the basis of work of equal value in circumstances where the work of the claimant has been assessed to be of higher value than that of the person with whom the claimant sought comparison?"

12. The Court of Justice stated:

"8. Bord Telecom Eireann contends that the principle does not apply in the situation where a lower wage is paid for work of higher value. In support of its view it maintains that the term "equal work" in Article 119 of the EEC Treaty cannot be understood as embracing unequal work and the effect of a contrary interpretation would be that equal pay would have to be paid for work of different value.

9. It is true that Article 119 expressly requires the application of the principle of equal pay for men and women solely in the case of equal work or, according to a consistent line of decisions of the Court, in the case of work of equal value, and not in the case of work of unequal value. Nevertheless, if that principle forbids workers of one sex engaged in work of equal value to that of workers of the opposite sex to be paid a lower wage than the latter on grounds of sex, it a fortiori prohibits such a difference in pay where the lower-paid category of workers is engaged in work of higher value.

10. To adopt a contrary interpretation would be tantamount to rendering the principle of equal pay ineffective and nugatory. As the Irish government rightly emphasised, in that case an employer would easily be able to circumvent the principle by assigning additional or more onerous duties to workers of a particular sex, who could then be paid a lower wage."

13. The Court of Justice then answered the referred question in these terms:

"Article 119 of the EEC Treaty must be interpreted as covering the case where a worker who relies on that provision to obtain equal pay within the meaning thereof is engaged on work of higher value than that of the person with whom a comparison is to be made."

14. Reference should also be made to SITA UK Ltd v Hope (UKEAT/0787/04/MAA, 8 March 2005), where Murphy is not referred to in the judgment of the EAT but which is founded on a similar analysis. It concerned a "like work" claim under section 1(2)(a). The employer contended that the female applicant was not doing "like work" because she undertook more responsibilities than the male comparator. In rejecting this manifestly unattractive submission, the EAT said (at paragraph13):

"The principle of equal pay for men and women outlined in Article 119 of the Treaty of Rome is to outlaw discriminatory practices which primarily disadvantage women. The Equal Pay Act 1970 domestic legislation treated as implementing the Council Directive regarding equal pay. On any purposive construction of the Act, the fact that a promoted woman undertakes more duties than her male predecessor cannot result in a conclusion that the two are not undertaking like work in order to justify her being paid less."

15. Mr Cavanagh suggests that SITA is distinguishable because it concerns only section 1(2)(a) which is, in his words, a "less precise" provision than section 1(2)(b). I do not accept this distinction. SITA is a useful example of the approach for which Murphy is authority. It would be odd to hold that such an approach is appropriate to section 1(2)(a) and 1(2)(c) but not to section 1(2)(b). Perhaps it is apprehension of that obvious oddity that drove Mr Cavanagh in his skeleton argument to submit in the alternative that SITA was wrongly decided. I am quite satisfied that it was not.
16. In the present case the EAT concluded that Murphy was decisive in relation to the RAE issue. The submission of Mr Cavanagh QC in the EAT and in this Court is that Murphy is applicable only to "equal value" claims under section 1(2)(c) and not to RAE claims under section 1(2)(b); that RAE is a purely domestic concept not foreshadowed in the Treaty or the Directive; and that it is not necessary to construe it more broadly because a claimant can still rely on section 1(2)(c) and advance an "equal value" claim when she is outside section 1(2)(b), safe in the knowledge that, in her "equal value" claim, she will be able to rely on Murphy and refer to the lower grade comparator.
17. The EAT rejected such submissions in this passage (at paragraph 114):

"There is no justification for distinguishing between work rated as equivalent and equal value claims since they have to be read together as the implementation of the Article 141 duty to provide equal pay for work of equal value. This in our judgment is plainly so, since an equal value claim is not open to a claimant whose work has been rated as equivalent. It is not, therefore, possible to treat section 1(2)(c) as the implementation of that provision and section 1(2)(b) as providing merely an additional and purely domestic remedy."

18. In later passages, the EAT described the position contended for by Mr Cavanagh as "bizarre" (paragraph 116) and said (paragraph 117) that it would be

"… extraordinary to suggest that the law should be framed to enable the coherence of the job evaluation scheme to be undermined by a legal challenge in which the employer can only succeed if he accepts that the scheme he is adopting and applying is manifestly distorted."

19. I respectfully agree with the analysis and comments of the EAT and with the submission of Mr Allen QC that section 1(2)(b) and (c) are intended to implement the same Community principle of equal pay for equal work or work of equal value. I reject the submission that section 1(2)(b) is, in effect, a purely domestic rose between two Community-related thorns. Claims under section 1(2)(b) and section 1(2)(c) are two different and mutually exclusive ways of securing equal pay for work of equal value. The fact that the concept of a JES is not expressly referred to in the European instruments is nothing to the point. As I have related, from the time of our accession until 1984, section 1(2)(b) was the only means whereby our domestic legislation gave effect to the Treaty obligation requiring adoption of the principle of equal pay for work of equal value, rather than for "equal work".
20. I am unattracted by Mr Cavanaugh's submission to the effect that a narrow construction of section 1(2)(b) is justifiable because a claimant who falls outside its terms may nevertheless still advance an equal value claim under section 1(2)(c). It is well known that equal value claims which cannot be based on an existing JES can be very expensive and time-consuming. I have referred to the procedure under section 2A. It is difficult to see why a claimant should be burdened with the cost and delay when her employer already has a JES in place which establishes that she is being paid less than a male comparator in a lower grade. Mr Cavanagh points to the fact that the JES in the present case – the White Book – is of some antiquity and was based on a national rather than a local exercise. So be it. If the Council could establish a genuine material factor other than the difference of sex under section 1(3) any anomaly or injustice flowing from such facts would be avoided. However, it has been conceded by the Council that it has no such defence here.
21. There is a further matter which seems to me to have some relevance in this context. I have referred to the problems of cost and delay which face a claimant who is confined to section 1(2)(c). In Adeneler v Ellinikos Organismos Gelatos (Case – 212/04, 4 July 2006), the Grand Chamber of the Court of Justice observed (paragraph 95) that national rules which implement Community obligations

"… must … not be less favourable than those governing similar domestic situations (principle of equivalence) or render impossible in practice or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness)." (Emphasis added)

In my judgment that has some resonance in the present case.

22. I now return to the language of section 1(2)(b) and (5). It is common ground that it is appropriate to adopt a purposive construction to this important socio-economic legislation, even within a purely domestic context. Once it is accepted that section 1(2)(b) also has a Community context and purpose, such an approach is all the more appropriate. In Autologic Holdings plc v Inland Revenue Commissioners [2006] 1 AC 118, 2005 UKHL 54, Lord Nicholls of Birkenhead (with whom Lord Steyn and Lord Millett agreed) said (at paragraphs 16 and 17):

"The second basic principle concerns the interpretation and application of a provision of United Kingdom legislation which is inconsistent with a directly applicable provision of Community law. Where such an inconsistency exists the statutory provision is to be read and take effect as though the statute had enacted that the offending provision was to be without prejudice to the directly enforceable Community rights of persons having the benefit of such rights. That is the effect of section 2 of the European Communities Act 1972 …

17. Accordingly, if an inconsistency with directly enforceable Community law exists, formal statutory requirements must where necessary be disapplied or moulded to the extent needed to enable those requirements to be applied in a manner consistent with Community law."

23. In the judgment of the EAT in the present case, there was found to be

"… no problem at all in reading section 1(2)(b) to give effect to Article 141, consistent with the Autologic case, simply by reading in the words 'or rated higher than' after 'with' in the first sentence of section 1(2)(b)" (paragraph 114).

24. If section 1(2)(b) stood alone, that modest adjustment would suffice. The catchment of the provision would be work "rated as equivalent with or rated higher than that of a man in the same employment." However, it overlooks the fact that section 1(2)(b) does not stand alone. It falls to be read with section 1(5), which provides that a woman is to be regarded as employed on work rated as equivalent with that of any men

"… if, but only if, her job and their job have been given an equal value …"

25. Initially, I had thought that the issue of interpretation, or "moulding" to use Lord Nicholls's word, would require the insertion of words into both section 1(2)(b) and section 1(5). However, I am persuaded by the observation made by Lord Justice Wilson in the course of the hearing that section 1(2)(b) requires no additional words once section 1(5) has been suitably moulded. On this basis, it seems to me that it is appropriate to add to the wording of section 1(5) in the following way:

"A woman is to be regarded as employed on work rated as equivalent with that of any men if, but only if, her job and their job have been given an equal value or her job has been given a higher value, in terms of the demand made on a worker under various headings (for instance effort, skill, decision), on a study undertaken with a view to evaluating in those terms the jobs to be done by all or any of the employees in an undertaking or group of undertakings, or would have been given an equal value, or her job would have been given a higher value, but for the evaluation being made on a system setting different values for men and women on the same demand under any heading."

26. This solution is consistent with and comparable to the one effected in relation to the Transfer of Undertakings (Protection of Employment) Regulations 1981 by the House of Lords in Litster v Forth Dry Dock and Engineering Co Ltd [1989] IRC 341. It is within the ambit of permissible moulding and, consequently, does not necessitate disapplication.

Conclusion

27. It follows from what I have said in the preceding paragraphs that I would dismiss this appeal for essentially the same reasons as did the EAT. I would give effect to this conclusion by reading into section 1(5) the wording which I have set out in paragraph 25 above.

Lord Justice Wilson:

28. I agree.

Lord Justice Mummery:

29. I also agree.