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
EAT/0676/04 (BAILII: [2005] UKEAT 0676_04_1908 )

		Royal Courts of Justice Strand, London, WC2A 2LL
		28/07/2008

Lord Justice Sedley :

1. On 23 October 2007 this court (Waller, Sedley and Carnwath LJJ) restored the employment tribunal's finding that British Airways had indirectly discriminated against Mrs Grundy in breach of the equality clause implied into her contract of employment by s. 1 of the Equal Pay Act 1970, by paying her less than an agreed male comparator for doing like work. For reasons explored in the previous judgments, this issue arose not out of the terms of the statute but out of judicial decisions which make available to an employer whose pay structure indirectly discriminates against female employees a defence of objective justification. BA's contingent cross-appeal against the EAT's upholding of the employment tribunal's rejection of this defence was stood over for separate argument at the conclusion of the first part of the appeal, and it is this cross-appeal which we have now heard.
2. The background and many of the essential facts are set out in our previous judgment [2007] EWCA Civ 1020 and need not be repeated here. It is sufficient to recapitulate that Mrs Grundy was one of a predominantly female group of flight attendants known as support cabin crew (SCC), a category introduced by collective agreement in 1985, employed only on days for which they volunteered and on which BA needed them, and excluded (initially at least) from increments, accrual of seniority, holiday pay, sick pay and pension rights. What does need to be set out is a substantial part of the employment tribunal's determination, since it is at this that Christopher Jeans QC has directed BA's fire.

10. When the Burford Bridge Agreement was made there was concern by the full time cabin crew that the support cabin crew may somehow have an advantage over them. Provisions in the agreement addressed this concern to ensure that it did not happen. Support cabin crew were given different (and less favourable) terms and conditions. The numbers and proportions of support cabin crew on each flight were restricted, although such restrictions were later removed. The full time cabin crew received a salary on an incremental pay scale upon which they were entitled to move until they reached the top where they remained unless promoted. Full time and subsequently part-time and job share cabin crew may not receive an increment in any particular year if there was a disciplinary or performance issue in respect of them. There is no reason to believe that at any time there was any such issue in respect of the Applicant. Support cabin crew by contrast were paid at a daily rate in respect of the days they actually worked. The daily rate was calculated by assessing the average pay for full time cabin crew on the incremental pay scale and dividing that by 260. Support cabin crew did not receive; increments; holiday pay; have access to a pension; and were not paid if they did not work unless stood down once they had been called for work. Subsequently changes to the terms and conditions were made so that support cabin crew received holiday pay and access to the Respondent's pension schemes. Support cabin crew did not receive sick pay whereas full time cabin crew did. Support cabin crew were; not provided with a set number of hours to work each month; not guaranteed a minimum amount of work; and sometimes not given any work, although the Applicant always strived to obtain work. Support cabin crew were excluded from the Respondent's seniority scheme but this exclusion was later removed, similarly support cabin crew were not allowed to bid for certain flights but this prohibition was also removed. Seniority was important to all cabin crew as this was a mechanism by which cabin crew could; gain access to promotion; obtain financial benefits connected to working on particular flights; and carry out particular jobs on flights which were regarded as more advantageous or desirable.

11. Long haul support cabin crew, were required to nominate between 15 and 20 (sometimes 21) days each 28 day period. This the Applicant did. That of necessity always included two weekends. Additionally, although not directly relevant to the issue before us, support cabin crew were required to make themselves available for work in alternate years over the Christmas/New Year period whereas other cabin crew were required to work that period when they were rostered, albeit they could apply for annual leave.

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14. In 1994 the Respondent introduced the facility for full time cabin crew to work on a part-time basis. The only distinction between part-time employees and full-time employees were the number of days worked and the salary they received, the salary being paid on a pro rata basis. Full time cabin crew who had elected to work as support cabin crew had been offered a financial incentive (unavailable to the Applicant) which ranged between a payment of £10,000 if the full time cabin crew employee had been working for a period of 10 years to a payment of £4,000 if they had been working for in excess of 3 years at the date they transferred. Any support cabin crew who wished to revert to employee had to re-pay that incentive. The Applicant considered her position and calculated that having regard to the number of days she worked in practice and the point on the incremental scale where she would be required to work, not being given any allowance for the number of years she had then worked for the Respondent, she would have been worse off financially. This is disputed by the Respondent, largely in relation to the Applicant's ability to progress up the pay scale from where she would have been placed (not being given any allowance for the number of years she had then worked for the Respondent). We make no finding on the fact having no appreciable evidence of the days actually worked at or before that time. We do not consider it to be of significance in our deliberations in any event. At this time the Respondent stopped recruiting support cabin crew. Cabin crew were also permitted to job share and they too were entitled to and received increments.

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27. The proportion of women in the disadvantaged group is considerably higher than the proportion in the advantaged group. In the context of the Respondent's cabin crew workforce which is comprised predominantly of women we consider that this reveals, and we find that the policy criterion or practice of not paying increments to support cabin crew was to the detriment of a considerably larger proportion of women than men.

28. Having found that there is disparate impact which was to the detriment of a considerably larger proportion of women than men, and the Applicant, we considered whether the Respondent had justified the scheme. In considering justification we do so objectively. We were referred to and remind ourselves of the guidance given in Hampson v Department of Education and Science 1989 IRLR 69 and Barry v Midland Bank plc 1997 ICR 319. This requires a balance to be struck between the effect of scheme and the reasonable needs of the Respondent. The more serious the disparate impact the more cogent must be the justification. In that balancing exercise we consider whether the objective of the scheme is legitimate, whether the means chosen to achieve that end are appropriate and reasonably necessary to achieve that end bearing in mind that the means chosen need not be the only possible means. The discrimination in proportionate terms is significant. While in numerical terms the numbers of employees discriminated against has reduced (the proportions between male and female within the disadvantaged group remaining broadly similar since 1994) the impact on those affected has been that women, and men within the group, have been unable to obtain incremental increases in salary.

29. The Respondent's position is that, if there was indirect discrimination which it had disputed, it was justified. The justification put forward and to which we address ourselves were threefold, namely:

(i) The collective bargaining process and the incremental pay scale;

(ii) The need to avoid anomalies and excessive administrative burden within the pay structure;

(iii) The need to encourage and reward workers to work for their length of service under a regime which required them to work when the Respondent required them to work rather than when the staff wished to work.

30. The reasons for justification put forward and the evidence we heard were interrelated. The reasons put forward for justification relate to employment relations and business organisational efficiency and effectiveness. They are legitimate aims. We have considered the reasons put forward separately and cumulatively.

31. There was no suggestion by the Respondent that increments were provided because of increased competence gained through experience or otherwise and indeed, the way the support cabin crew team were originally established, as an offshoot of the main cabin crew and subsequently provided with seniority, with all that implied, we would have found such a suggestion implausible. No point was raised by the Respondent that support cabin crew did not receive increments was in any way related to staff turnover.

32. The support cabin crew scheme was introduced by agreement between the Respondent and its workforce (through the trade unions) for the benefit of both. The Applicant agreed to work for the Respondent and sought to work in accordance with the scheme. At times the Respondent was keen, through its incentive scheme, to have its full time employees work on a support cabin crew basis. The roles at work of the full-time, part-time and support cabin crew were the same, it was the terms of the employment contract which were different. The flexible arrangement in terms of availability of or for work had mutual and complementary benefits and disbenefits for both parties.

33. The fact that there were different rostering arrangements for the Applicant and for the part-time cabin crew, reflects the nature of their contracts. The Applicant benefited in being able to offer days but also suffered the disadvantage of not necessarily being required to work them. The Respondent benefited from being able to decline the Applicant's days proffered in whole or part. The difficulties for the Respondent's administration in organising its crews to meet its schedules was a detrimental but inevitable consequence for the Respondent in employing staff on differing terms and conditions regarding the number of days off or time at work or which party determined which days the employer was to (or be available for) work. It was only after the 11 September 2001 terrorist incident that the Respondent acquired its electronic system to roster cabin crew by which time the numbers of support crew were very small.

34. The Respondent considered that as the support cabin crew role was agreed through collective bargaining it could not be changed without further negotiations and agreement with the unions. The termination of the support cabin crew agreement was negotiated and agreed with the Respondent's Trade Unions. The fact that agreement was reached does not in itself provide justification for discrimination.

35. We considered whether the fact that the Applicant was paid effectively at a mid-point on the salary scale was justification. Pay at such a point would mean that, to take an example, if the Applicant was a new starter then for the first four years until the Applicant had worked for five years she would have been paid a higher amount than she otherwise would, for the fifth year the Applicant would be paid at the same amount but thereafter be paid a lower amount. There is no reason to believe that there was a high turnover in support cabin crew. While the Respondent addressed its mind when fixing the salary it was also agreed that, salary apart, in overall terms, the terms and conditions of employment regarding benefits were less beneficial to support cabin crew than full time cabin crew, as the third reason put forward by the Respondent for justification inherently recognises. We do not consider reason, even though the Respondent has a unionised workforce with pay and conditions negotiations conducted at management union level this can on its own justify discrimination.

36. The collective bargaining process aimed to and achieved terms of employment for support cabin crew which were less advantageous than their full time colleagues. This was maintained in respect of the lack of increments for support cabin crew while employed as such and the lack of recognition for the increments support cabin crew would have otherwise been entitled to, when they transferred to full time or part-time contracts in 2003. We do not consider that the fact that the scheme was agreed by the Respondent and the trade unions or any impact on employment relations justifies the discrimination.

37. During the Applicant's employment, after the time that support cabin crew were entitled to apply and transfer to former part-time positions, those who did so began work at the bottom of the pay scale accruing increments in the usual manner. The Respondent considered that it would be unfair on those employees if the Applicant was to effectively leap-frog them on the incremental pay scale.

38. We recognise the sense of injustice which may be felt by some of the Applicant's colleagues if she was to have the benefit of deemed increments as at 1 January 2003. When the support cabin crew scheme was being wound up support cabin crew were required to continue in the Respondent's employment on different terms and conditions (if they wished to remain in the Respondent's employment as cabin crew). While similar, that is a different situation to the one existing at the time other support cabin crew had chosen to change their position. We do not know if consideration was ever given on previous occasions to any possible discriminatory impact of the scheme. We do not consider the Applicant's position at 1 January 2003 to be one which would have created anomalies if she had the benefit of deemed increments. Even if we were wrong on that however, we consider that not to provide recognition for the Applicant's previous service on the basis that other employees on other occasions who changed their terms of employment from support cabin crew to full time or part-time cabin crew did not receive such recognition would not amount to a justification. Rather not to provide this recognition perpetuates any potential discrimination there may have been.

39. The Respondent's position was that there would be administrative difficulties in providing support cabin crew with increments. We have not heard any evidence that any exercise or analysis was undertaken to ascertain if this was so. The Respondent was able to devise a formula to provide pension rights for support cabin crew to reflect the amount of work they did. We do not suggest that the Respondent should necessarily, and we do not express a view, have considered or adopted that formula when considering whether to provide increments for the support cabin crew but it is evident that the Respondent did have the administrative abilities to devise a suitable and fair formula and implement it. Similarly, it is within our knowledge as an employment jury that employers have to devise all sorts of mechanisms in respect of pay, we have in mind the various performance related pay schemes and appraisal mechanisms which are common place. The Respondent is a large employer with, we heard no different and do not doubt, appreciable administrative resources. Allowing for the need for the Respondent to be competitive and not to have unnecessary capacity within those resources we consider that the administrative difficulties which the Respondent sought to portray, including those limitations of the electronic rostering system as reasons why the Applicant could not have the benefit of incremental pay scale, not to be made out.

40. The Respondent sought to justify the incremental pay scales for permanent and part-time workers because of loyalty to the Respondent. We compare that with the fact that the Applicant worked for the Respondent since 1987 and remains in their employ. The Respondent gave no indication that other support cabin crew were in any way disloyal in their service to the company. We do not consider that the increments to those to whom they were paid is explained by any concept of reward for loyalty by full-time or part-time or job-share cabin crew. As to the regime that required employees to work when the Respondent required them rather than when they wished to work we refer to what we have found earlier regarding the reason for the lack of entitlement to increments when the Burford Bridge agreement was entered into and the reasons for the introduction of the scheme. We are not persuaded that the third reason for justification put forward by the Respondent was a significant reason for the Respondent not paying increments to its support cabin crew.

41. The Respondent's position was that should support cabin crew be provided with increments there would be a disincentive for them to transfer to full and part-time cabin crew positions. We accept that the benefits of transferring would be reduced, but no further. The Respondent had a desire to employ cabin crew on terms where it could dictate the days when the employees worked. The Applicant does not have a right to employment by the Respondent. Having been employed by the Respondent however, the Applicant does have a right to the equality clause. We are not persuaded that the Applicant, or other support cabin crew by or in the manner of nominating their days for working, caused the Respondent any significant difficulty although their use to the Respondent was less than would have been the case if they were full and part time employees. We do not consider that the third reason put forward however, is on its own justification for the disparate impact of the policy criterion or practice.

42. We do not consider the fact that the Applicant offered her services to the Respondent and that the Respondent was able to agree or otherwise whether to employ her for a particular period in itself or together with other factors justifies the discrimination. The facts found show that the support cabin crew scheme was introduced for the benefit of both parties and that the Applicant did in fact seek to work in accordance with it. At times the Respondent was keen, through its incentive scheme, to have its full time employees work on a support cabin crew basis, at other times the opposite.

43. We do not consider the fact that support cabin crew could apply to work as full time or part time cabin crew, or even job share on the basis that they became full time no doubt, to be of significance.

44. In carrying out the balancing exercise to which we referred, we are not persuaded that any of the reasons put forward whether separately or cumulatively justify the policy criterion or priorities referred to. We find that the absence of increments for the Applicant was unlawful sex discrimination. We find that reason the Applicant was not placed on the same point of the salary scale as Mr Wynne related to the difference of sex.

3. The test of justification is not in dispute: it is the test set out by the tribunal in §28. Mr Jeans accepts this but contends that the tribunal have either misapplied it or failed intelligibly to explain how they have applied it. He has gone so far as to characterise §28 as the mere recital of a mantra, but the tribunal's closely and carefully reasoned findings show that to be an unworthy remark. If they have erred, it has been in the course of a conscientious attempt to apply the law.
4. I would, however, add a respectful caveat to the accepted test. The proposition that the cogency of the justification must be proportionate to the seriousness of the disparate impact has the authority of Lord Nicholls in Barry v Midland Bank [1999] ICR 859, 870. It derives from, but goes beyond, the ECJ's ruling in Enderby v Frenchay Health Authority [1994] ICR 112, § 29:

"it is for the national court to determine, if necessary by applying the principle of proportionality, whether and to what extent [the justification advanced] constitutes an objectively justified economic ground for the difference in pay between the jobs in question."

For my part I have found it impossible, and experienced counsel on both sides have not been able to help me, to know how to gauge the seriousness of the disparate impact of a particular practice or term. Ex hypothesi the disparity is substantial, not marginal, otherwise justification would not be needed. It cannot matter that it affects a relatively small number of employees, for the right which it invades is a personal contractual right. Nor can it matter that the amount involved is small: for an employee who is unlawfully underpaid 50p an hour, the difference may be between subsistence and poverty.

5. The only reason why this matters to the present case is that Mr Jeans has urged that the breach here is not serious because the advantaged group – full-time cabin crew – was also predominantly female. I simply do not see this. One could equally well – in fact rather more cogently – say that the fact that other female flight attendants were substantially better rewarded made it worse for those in Mrs Grundy's position.
6. If, then, the tribunal have not tried to measure the disparate impact which they have found, it seems to me, with respect, that they have avoided an elephant trap rather than committed an error of law.
7. Mr Jeans' generic critique of the decision is that the tribunal have lost sight of the wood for the trees: they have involved themselves in much detail but have forgotten the big picture – that the disparity was the product of a collective agreement legitimately designed to reward the greater contractual commitment of cabin crew. I do not accept this critique. If the argument was not to degenerate into mere assertion and counter-assertion, and the decision into a bald yes or no (ineluctably attracting a reasons appeal), it was necessary for the tribunal to examine the elements of the justification argument in detail, which is exactly what they did.
8. They correctly took as their starting point the breakdown of reasons advanced on BA's behalf – correctly, because the onus was now on BA to justify an otherwise unlawful pay structure. They set out the elements at §29 and over the succeeding paragraphs dealt with each of them: the materiality of the collective agreement and the incremental pay scale; the effect of anomalies and administrative difficulties; and the desirability of rewarding loyalty. There can be no complaint about this approach.
9. The tribunal begin, Mr Jeans points out, by endorsing the legitimacy of BA's objectives. This is correct; but it is not correct that their decision was such that all that remained was decide the proportionality of what had been held to be a legitimate exercise. The tribunal at §30 are simply reminding themselves that employment relations and business efficiency are in themselves legitimate aims, as of course they are. They do not, either in this paragraph or elsewhere, hold that the more specific aim of reducing the contractual entitlements of SCC below those of CC was legitimate. That was what they now needed to decide in terms of necessity and proportionality.
10. Mr Jeans submits that the Burford Bridge agreement had no such aim: its aim was to enhance the terms of full-time cabin crew rather than to depress those of SCC. This might in many cases be a sterile argument, but in the present case it was not. As Jane McNeill QC, for Mrs Grundy, points out, the tribunal in §10 made a clear finding that the CC terms were the standard terms and that those of SCC were deliberately cut back so as not to jostle them.
11. This is also one reason why the tribunal were right not to be much influenced by the fact that the impugned terms had been collectively agreed. There may be many reasons why, in the give and take of collective bargaining, one group of employees does worse than another. But one of the important messages sent out by the Equal Pay Act has been that attention must be paid by negotiators to the possibility that such differentials will have a disparate impact on employees of one gender. If this is overlooked, with a consequent breach of one group's equality clauses, the oversight cannot logically be justified by reference to the agreement which resulted.
12. The European Court of Justice, in its recent decision in Palacios de la Villa v Cortefiel Servicios SA [2007] IRLR 989, §74, acknowledged that states might legitimately (at least in the field of compulsory retirement) leave the setting of terms to collective negotiation. But in Del Cerro Alonso v Osakidetza-Servicio Vasco de Salud [2007] IRLR 911, §57-8, the Court also made it clear that, if justification was to be established, neither national laws nor collective agreements could by themselves furnish the required "precise and concrete factors, characterising the employment condition to which [the unequal treatment] relates, in the specific context in which it occurs and on the basis of objective and transparent criteria in order to ensure that the unequal treatment in fact responds to a genuine need". It seems to me that this is exactly the search upon which the tribunal embarked in the present case.
13. There is also a telling difference between cases in which the disparate impact of a new contractual provision has been recognised and its justifiability considered before adopting it, and cases in which – as here and too frequently elsewhere – the impact is initially not recognised, then denied, then found to exist and then sought to be justified. As this court said in HSE v Cadman [2005] ICR 1546, §28 (and see Schonheit v Stadt Frankfurt am Main [2004] IRLR 983, §86-7), there is no rule of law that justification must have formed part of the initial decision-making process; but while justification in retrospect is perfectly admissible, it is probably going to start from a lower evidential base.
14. The employment tribunal's decision is therefore, in my judgment, free not only of any frank error of law but of any legal error of approach. As to its specific findings and its evaluation of them, the decision speaks the most part for itself. But Mr Jeans has focused specific criticism on §43, which in short form dismisses as without significance the fact that SCC could apply for work as fulltime or part-time cabin crew or could share a fulltime job. Why? Mr Jeans asks. We simply do not know, he says.
15. Ms McNeill says the answer is apparent from the tribunal's own findings: of course SCC could have applied for a transfer, but it would have been on disadvantageous terms because until 1994 they would have had to change to full-time work and have received no credit in terms of seniority or pay for the years so far served or for the pegging of the SCC pay rate at CC year 5: they would have entered CC on the bottom rung. While it might have been better to spell this out again, it can be found in the earlier parts of the determination: see §10, 11, 14 and 37. But it also seems to me that the tribunal may have had something more fundamental in mind: that you cannot justify pay discrimination by telling the employee that she can always change jobs. That is not the policy of the Treaty or the Directive or the Act. Either way the brevity of §43 is not a ground for oversetting this determination for want of reasons.
16. There was more to Mr Jeans' submissions, but – if he will allow me to say so – much of it was an appeal to the merits. I will say only that I found myself no more stirred, much less shaken, by them than the employment tribunal evidently was.
17. The EAT, having upheld BA's appeal on disparate impact, dealt relatively briefly with justification, but their conclusions included the following:

§68: "Given that the express purpose of the parties to the agreement was to achieve less favourable terms for SCC, it cannot be used as a justification."

§70: "… the respondent failed to present satisfactory material upon which the tribunal [could find] loyalty was a justifiable ground for the disparity in increments."

18. In agreement with the EAT, I would dismiss BA's appeal on justification.

Lord Justice Dyson :

19. I agree.

Lord Justice Waller :

20. I also agree.