United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	BRIAN LANGSTAFF QC Instructed by: Mr R Arthur UNISON 1 Mabledon Place London WC1H 9AJ
For the Third Respondent For the Second Respondent For the First Respondent	PATRICK ELIAS QC Messrs Berwin Leighton Solicitors Adelaide House London Bridge London EC4R 9HA BRIAN NAPIER (of Counsel) Messrs Mackay Simon Solicitors 63 Frederick Street Edinburgh EH2 1LH THE FIRST RESPONDENT NEITHER PRESENT NOR REPRESENTED


 


MR JUSTICE MORISON (PRESIDENT): The question at issue on this appeal relates to the scope of article 119 of the Treaty of Rome.

This appeal is part of a running battle, primarily, by former employees of the North Yorkshire County Council ['NYCC'] in relation to their pay. Some of the applicants, who prepared school meals, were employed by NYCC and made an equal value claim against them, which was ultimately successful. Whilst the litigation in relation to that claim was continuing, in response to Government requirements that they should do so, NYCC put out to competitive tender the provision of school meals and cleaning services for the schools for which, as an education authority, they had statutory responsibility. The education authority was divided into areas and competitive tenders were sought in relation to each area. In respect of some of the areas, outside contractor's tenders were accepted and the relevant staff became employed by them. In relation to the first and third respondents, when the staff were taken on they were paid off by NYCC, and given a redundancy payment. These contractors thought that the Transfer of Undertakings (Protection of Employment) Regulations [ the Regulations] did not apply. In relation to the second respondents, NYCC did not dismiss or purport to dismiss the employees concerned because this contractor believed that the Regulations did apply. In all cases the employees are working on different (they say less favourable) terms than they enjoyed with NYCC. They say that unless they can now compare themselves with those persons who are currently employees of NYCC whose work was rated as of equal value to their own, they will be deprived of the fruits of their success in the litigation. There remains outstanding the question whether the Regulations applied and what the effect would be of dismissals and changes in terms and conditions. The answer to these questions is held over pending a decision of the House of Lords in Wilson & Meade.

With complex litigation of this kind, it is seldom possible to organise a hearing whose outcome may not be affected by other decisions awaited from other courts. Understandably, it was common ground in this case that it would be sensible if we were to deal with a quite self-contained argument upon which the appellants rely regardless of the workings of the Regulations. As we understand the position, no concession has been made by any party that the Regulations did or did not apply at the time of the contracting-out, and we are not concerned with their effect at this time.

What the appellants argue, in a nutshell, is that Article 119 is wide enough in its scope to entitle the appellants (who include staff recruited after the 'transfer') to compare themselves with staff employed by NYCC who are doing work of equal value to their own, even though they are now employed by one of the Respondents. In other words, are the rights conferred by Article 119 wide enough to permit an employee of company A to make a comparison with the work done by an employee of company B, and claim unlawful discrimination? The appellants say that either the answer to that question is 'yes' or alternatively we should refer it to the European Court of Justice for them to give guidance. Mr Elias QC on behalf of the third respondents described this submission as outrageous; Mr Brian Napier on behalf of the second respondents adopted Mr Elias' submissions. On the one hand, it was said that such a construction of Article 119 would not cause any undue difficulty because the applicant would have to prove that a fair comparison could be made with the circumstances of the other employee, and that it would not lead to a flood of employees up and down the country seeking to compare themselves with others allegedly doing like work or work of equal value. On the other hand, it was said that if Article 119 applied where there was not a common employer, then it would be a recipe for inflation because of the ratchet effect, and unfair on the respondent to such a claim. How, it was asked rhetorically, could the employer of the applicant put forward a section 1(3) defence if he did not know the circumstances in which the comparator came to receive the particular wage. It was implicit in Article 119 that the rights extended only to those who were employed by the same employer who employed the 'comparator', but that the concept of associated employers was permissible, as section 1(6) of the Equal Pay Act, as amended, makes clear.

We have set out the general argument, to reveal its potential importance. If Mr Langstaff QC, on behalf of the appellants were correct, the potentiality for wide ranging claims is obvious. Outrageous or not, the submission he so ably made deserves respect and scrutiny. The forensic outrage of the respondents was, we thought, somewhat over the top.

It was common ground between the parties, for the purposes of this appeal only, that Article 119 confers directly enforceable rights upon citizens of Member States. The right is not free-standing but operates as an adjunct to the United Kingdom's domestic legislation, requiring the courts to dis-apply any statutory provision which is incompatible with the Article.

On behalf of the appellants, Mr Langstaff took us through a number of decisions of the European Court of Justice to emphasise the aim and breadth of Article 119.

First, in Defrenne v Sabena [No 2], judgment dated 8 April 1976, the Court said:

"8. Article 119 pursues a double aim.

9. First, in the light of the different stages of the development of social legislation in the various Member States, the aim of Article 119 is to avoid a situation in which undertakings established in States which have actually implemented the principle of equal pay suffer a competitive disadvantage in intra-Community competition as compared with undertakings established in States which have not yet eliminated discrimination against women workers as regards pay.

10. Secondly, this provision forms part of the social objectives of the Community, which is not merely an economic union, but is at the same time intended, by common action, to ensure social progress and seek the constant improvement of the living and working conditions of their peoples, as is emphasised by the Preamble to the Treaty.

11. The aim is accentuated by the insertion of Article 119 into the body of a chapter devoted to social policy whose preliminary provision, Article 117, marks "the need to promote improved working conditions and an improved standard of living for workers, so as to make possible their harmonisation while the improvement is being maintained".

12. This double aim, which is at once economic and social, shows that the principle of equal pay forms part of the foundations of the Community.

...

18. For the purposes of the implementation of these provisions a distinction must be drawn within the whole area of application of Article 119 between, first, direct and overt discrimination which may be identified solely with the aid of the criteria based on equal work and equal pay referred to by the article in question and, secondly, indirect and disguised discrimination which can only be identified by reference to more explicit implementing provisions of a Community or national character.

19. It is impossible not to recognise that the complete implementation of the aim pursued by Article 119, by means of the elimination of all discrimination, direct or indirect, between men and women workers, not only as regards individual undertakings but also entire branches of industry and even of the economic system as a whole, may in certain cases involve the elaboration of criteria whose implementation necessitates the taking of appropriate measures at Community and national level.

20. This view is all the more essential in the light of the fact that the Community measures on this question, to which reference will be made in answer to the second question, implement Article 119 from the point of view of extending the narrow criterion of "equal work", in accordance in particular with the provisions of Convention No 100 on equal pay concluded by the International Labour Organisation in 1951, Article 2 of which establishes the principle of equal pay for work "of equal value".

21. Among the forms of direct discrimination which may be identified solely by reference to the criteria laid down by Article 119 must be included, in particular, those which have their origin in legislative provisions or in collective labour agreements and which may be detected on the basis of a purely legal analysis of the situation.

22. This applies even more in cases where men and women receive unequal pay for equal work carried out in the same establishment or service, whether public or private.

23. As is shown by the very findings of the judgment making the reference, in such a situation the court is in a position to establish all the facts which enable it to decide whether a woman worker is receiving lower pay than a male worker performing the same tasks.

24. In such situation, at least, Article 119 is directly applicable and may thus give rise to individual rights which the courts must protect."

Thus, Mr Langstaff submitted, the Article is capable of being interpreted so as to eliminate all discrimination based on gender across entire branches of industry. Its provisions are not confined to individual undertakings.

The second case is E.C. Commission v Denmark, case no: 143/83, The issue was whether the Danish Government had given effect to the principles of Article 119 when it confined the domestic legislation to a comparison between the same work at the same place. The Commission brought proceedings, arguing that the legislation failed to give effect to the principle that a comparison could be made between work of equal value.

In his Opinion, Advocate General Mr Pieter VerLoren van Thermaat, said:

"The legal problem thus presented to the Court seems at first sight to be a simple one. The Council directive in question provides clearly in Article 1 that the principle of equal pay means "for the same work or for work to which equal value is attributed, the elimination of all discrimination on grounds of sex with regard to all aspects and conditions of remuneration". Section 1 of the Danish measure implementing the directive, Act 32 of 4 February 1976, however, states that the principle of equal pay applies only to "the same work" (samme arbejde), "at the same place of work". At first sight it therefore seems clear that the Kingdom of Denmark has indeed "failed to take the measures necessary to extend the principle of equal pay ... to activities of equal value", to quote the closing passage of the reasoned opinion. Although in its reasoned opinion and in its application the Commission raises a number of additional grounds and arguments, that apparently obvious conclusion therefore constituted the main argument put forward by the Commission during the proceedings in support of the conclusions in its application. For the Commission's other arguments reference may be made to the Report for the Hearing.

...

In certain circumstances comparison with work of equal value in other undertakings covered by the collective agreement in question will be necessary. As is correctly observed in the annual report for 1980 of the Danish Council for Equal Treatment of Men and Women (Ligestillingsrådet), submitted by the Commission in evidence, in sectors with a traditionally female workforce comparison with other sectors may even be necessary. In certain circumstances the additional criterion of "the same place of work" for work of equal value may therefore place a restriction on the principle of equal pay laid down in Article 119 of the EEC Treaty and amplified in the directive in question. The mere fact that such a supplementary condition for equal pay which has no foundation in Article 119 or in the directive has been added must in any event be regarded as an infringement of the Treaty. That supplementary condition limits the scope, governed by the Treaty, of the extension of the principle of equal pay for men and women to activities of equal value, which in principle, according to the background of the Danish law and the arbitration award referred to, is recognised in Denmark. It therefore falls within the ambit of the Commission's application as it is to be interpreted in the light of its reasoned opinion of 25 October 1982."

In its judgment, the Court stated:

"[14] The conclusion must therefore be that the Kingdom of Denmark has failed to fulfil its obligations under the first paragraph of Article 1 of Directive 75/117 by failing, in the text of Act 32 of 4 February 1976, to extend the principle of equal pay to work of equal value. Since that finding implies that the Act in question does not ensure that employees who consider themselves wronged by failure to apply that principle in a case of work of equal value are able to pursue their claims by judicial process in accordance with Article 3 of the directive, there is no need to make a separate finding on that head.

[15] It should be added that during the hearing doubts were expressed with regard to the condition laid down in section 1 of the Danish Act, according to which the principle of equal pay for the same work is to be interpreted in relation only to a "single workplace". Since, however, the Commission did not formally raise that objection there is no reason to decide that question.

[16] For all those reasons it must be declared that by failing to adopt within the prescribed period all the measures necessary to implement Council Directive 75/117 of 10 February 1975 on the approximation of the laws of the Member-States relating to the application of the principle of equal pay for men and women, the Kingdom of Denmark has failed to fulfil its obligations under the EEC Treaty."

Mr Langstaff emphasised the reference by the Advocate general to "work of equal value in other undertakings covered by the collective agreement in question" which implied at the least that having a common employer could not be a pre-requisite to the application of Article 119. Mr Elias noted that the Commission apparently did not challenge the Danish law requirement that the comparison had to be made with someone else at the same place of work.

In Macarthys ltd v Smith [1980] ICR 672, the question at issue was whether the principle of equal pay for equal work in Article 119 was confined to situations where the applicant and comparator were employed by the same employer contemporaneously or could the female applicant compare herself to the work and pay of a man who had previously been employed by the employers. On a reference by the Court of Appeal, the ECJ held that the principle was not so confined.

In giving judgment it said this:

"9. According to the first paragraph of article 119 the member states are obliged to ensure and maintain "the application of the principle that men and women should receive equal pay for equal work".

10. As the court indicated in Defrenne v Sabena [1976] ICR 547, that provision applies directly, and without the need for more detailed implementing measures on the part of the Community or the member states, to all forms of direct and overt discrimination which may be identified solely with the aid of the criteria of equal work and equal pay referred to by the article in question. Among the forms of discrimination which may be this judicially identified, the court mentioned in particular cases where men and women receive unequal pay for equal work carried out in the same establishment.

11. In such a situation the decisive test lies in establishing whether there is a difference in treatment between a man and a woman performing "equal work" within the meaning of article 119. The scope of that concept, which is entirely qualitative in character in that it is exclusively concerned with the nature of the services in question, may not be restricted by the introduction of a requirement of contemporaneity.

12. It must acknowledged, however, that, as the Employment Appeal Tribunal properly recognised, it cannot be ruled out that a difference in pay between two workers occupying the same post but at different periods in time may be explained by the operation of factors which are unconnected with any discrimination on grounds of sex. That is a question of fact which it is for the court or tribunal to decide.

13. Thus the answer to the first question should be that the principle that men and women should receive equal pay for equal work, enshrined in article 119 of the E.E.C. Treaty, is not confined to situations in which men and women are contemporaneously doing equal work for the same employer.

14. The second question put by the Court of Appeal and expressed in terms of alternatives concerns the framework within which the existence of possible discrimination in pay may be established. This question is intended to enable the court to rule upon a submission made by the employee and developed by her before the European Court of Justice to the effect that a woman may claim not only the salary received by a man who previously did the same work for her employer but also, more generally, the salary to which she would be entitled were she a man, even in the absence of any man who was concurrently performing, or had previously performed, similar work. The employee defined this term of comparison by reference to the concept of what she described as "a hypothetical male worker".

15. It is clear that the latter proposition, which is the subject of question 2(a), is to be classed as indirect and disguised discrimination, the identification of which, as the court explained in Defrenne v Sabena [1976] ICR 547, implies comparative studies of entire branches of industry and therefore requires, as a prerequisite, the elaboration by the Community and national legislative bodies of criteria of assessment. From that it follows that, in cases of actual discrimination falling within the scope of the direct application of article 119, comparisons are confined to parallels which may be drawn on the basis of concrete appraisals of the work actually performed by employees of different sex within the same establishment or service.

16. The answer to the second question should therefore be that the principle of equal pay enshrined in article 119 applies to the case where it is established that, having regard to the nature of her services, a woman has received less pay than a man who was employed prior to the woman's period of employment and who did equal work for the employer.

17. From the foregoing it appears that the dispute brought before the national court may be decided within the framework of an interpretation of article 119 of the Treaty alone. In those circumstances it is unnecessary to answer the questions submitted in so far as they relate to the effect and to the interpretation of E.E.C. Council Directive (75/117/E.E.C.).

This case was relied upon by both parties. Mr Langstaff stressed the words "in particular" in paragraph 10. If the same employer is merely a particular example of a case where the Article has direct effect, then the possibility remains of a wider interpretation including cases where two different employers were involved. On the other hand, Mr Elias, emphasised the distinction between cases of 'direct discrimination' where the Article had direct effect and cases of indirect or disguised discrimination which requires, "as a prerequisite" further elaboration by the Community and the national legislature. In the former case, and this litigation was a case of 'direct discrimination' in the sense being used by the ECJ, comparisons "are confined to parallels which may be drawn ....of the work actually performed by employees of different sex within the same establishment or service".

In Hasley v Fair Employment Agency [1989] IRLR 106, a Northern Ireland case, the applicant and comparator were employed by different statutory bodies corporate: the applicant by the Fair Employment Agency, and the comparator by the Equal Opportunities Commission. The allegation was that the FEA and the EOC were associated employers. The FEA did not wish to contest the claim but the Department of Economic Development [DED] and the Department of Finance and Personnel [DOFAP] did. These two entities exercised detailed financial control over the terms and conditions of employment of those employed by the FEA and EOC, although the FEA and EOC had functional independence from the State so that neither was directly or indirectly controlled by DED or DOFAP.

In giving the judgment of the Court Lord Lowry CJ said:

"10. First, as to question 2 set out above, the Industrial Tribunal concluded that the FEA and the EOC, by virtue of their functional independence (which the statutory enactments setting them up were careful to emphasise), were not either directly or indirectly controlled by DED or DOFAP. On the other hand those departments have financial control of the FEA and the EOC and also control of the numbers and grades of the persons employed and of their terms and conditions of employment: see para. 6 of Schedule 3 to the Sex Discrimination (Northern Ireland) Order 1976 and para. 5(1) of Schedule 1 to the Fair Employment (northern Ireland) Act 1976. By comparison with this control, the functional independence of the FEA and the EOC is, in my view irrelevant. As Mr Kerr QC, who appeared with Mr Treacy for the applicant, rightly said, the Equal Pay Act (Northern Ireland) 1970 was "an Act to prevent discrimination as regards terms and conditions of employment between men and women", and s.1(7)(c) ought to be constructed in a manner which is consistent with and takes due account of the object of the legislation. The Tribunal was therefore wrong on this point, considered by itself, but I recognise that para.(c) must be considered as a whole and that the word "controlled" (which on one tenable view is referable only to the control of a majority shareholder: Hair Colour Consultants v Mena [1984] IRLR 386 must be read in its context.

...

20. The principle that "men and women should receive equal pay for equal work" is so general that there must be some limits or boundaries to its operation in practice. The court's decision in Defrenne v Sabena, the case in which an air hostess successfully claimed that her work was the same as that of a male cabin steward receiving higher pay, contained the following observation at p.568D

"The reply to the first question must therefore be that the principle of equal pay contained in Article 119 may be relied upon before the national courts and that these courts have a duty to ensure the protection of the rights which this provision vests in individuals, in particular as regards those types of discrimination arising directly from legislative provisions or collective labour agreements, as well as in cases in which men and women receive unequal pay for equal work which is carried out in the same establishment or service, whether private or public".

The reference to "the same establishment or service" was cited in the court's decision in Macarthys Ltd v Smith (supra) at p.215, paragraph 62 [citation set out]:

...

22. It has to be observed that neither the Defrenne nor the Macarthy judgment treats the remedy given by Article 119 as confined to work carried out in the same establishment or service. Both, however, were decisions of the European Court of Justice and are therefore valuable insofar as the judgments cast light on the meaning of Article 119. I therefore draw attention to paragraph 10 of the passage cited above, which states that Article 119 applies to:

"all forms of direct and overt discrimination which may be identified solely with the aid of the criteria of equal work and equal pay referred to by the article in question".

Paragraph 12 of the Macarthy judgment acknowledges that the kind of difference in pay with which the court was concerned in that case:

"may be explained by the operation of factors which are unconnected with any discrimination on grounds of sex".

The court then observed:

"That is a question of fact which it is for the court or tribunal to decide".

23. These statements lend force to the interpretation which I have already adumbrated, namely, that Article 119 is aimed at inequality caused by discrimination based on sex. I refer also to the cases mentioned at paragraphs 1585-6 of Harvey's Industrial Law at pp.I/275 A-B. It is true that s.1(7) does not call for a finding in an employee's favour on that point, but the concluding words of paragraph 12 in the Macarthy judgment clearly imply that such a finding is required. In this respect the 1970 Act may favour the employee more than Article 119, but Jenkins v Kingsgate (Clothing Productions) Ltd contemplates this possibility.

26. It can no doubt be argued against the applicant, by reference to Defrenne and Macarthy, that she and [the comparator] are not in the same establishment or the same service, and it has been conceded that they are not covered by section 1(9) [the subsection dealing with Crown employment]. But, if one takes a broader view, it can be said that, although expressly not civil servants, they are in public service of the same kind, holding posts which are graded by the same officers and on the same principles of job evaluation and that the fact that the statutory corporations which employ them are not emanations of the Crown is due solely to the political desirability of making the FEA and the EOC appear to be independent of the State (although in reality they depend on the State for their existence and their financial upkeep.

27. On this broad view, therefore, it can be argued that Article 119 must apply, although those employed by the FEA and the EOC are the victims of a casus omissus according to the domestic law, if I have correctly construed section 1(7) [the Northern Ireland equivalent of section 1(6) of the Equal Pay Act 1970]."

At least, this case shows that in order to give effect to Article 119, a broad interpretation of section 1(7) of the Act may be required; but that the Article does not have an unlimited scope of application.

In Enderby v Frenchay Health Authority [1994] ICR 112, speech therapists employed in the National Health Service, prior to the more recent organisational changes, sought to compare themselves with two male comparators employed by the same health authority as themselves. The Court of Appeal referred three questions to the European Court of Justice. First, does the principle of equal pay enshrined in Article 119 require the employer to justify objectively the difference in pay between the two jobs; second, is it sufficient for the employer to say that the rates of pay were determined by two separate collective bargaining processes, which, taken on their own did not disadvantage women on grounds of sex; third, can the difference be justified by difference in market forces relating to recruitment.

The Court stated:

"13. It is normally for the person alleging facts in support of a claim to adduce proof of such facts. Thus, in principle, the burden of proving the existence of sex discrimination as to pay lies with the worker who, believing himself to be the victim of such discrimination, brings legal proceedings against his employer with a view to removing the discrimination.

14. However, it is clear from the case law of the court that the onus may shift when that is necessary to avoid depriving workers who appear to be the victims of discrimination of any effective means of enforcing the principle of equal pay. Accordingly, when a measure distinguishing between employees on the basis of their hours of work has in practice an adverse impact on substantially more members of one or other sex, that measure must be regarded as contrary to the objective pursued by article 119 of the Treaty, unless the employer shows that it is based on objectively justified factors unrelated to any discrimination on grounds of sex: see Bilka-Kaufhaus G.m.b.H. v Weber von Hartz (Case 170/84) [1987] ICR 110, 125, para. 31; Kowalska v Freie und Hansestadt Hamburg (Case C-33/89)[1992] I.C.R. 29, 35, para. 16 and Nimz v Freie und Hansestadt Hamburg (Case C-184/89)[1991] ECR I-297, 320, para 15. Similarly, where an undertaking applies a system of pay which is wholly lacking in transparency, it is for the employer to prove that his practice in the matter of wages is not discriminatory, if a female worker establishes, in relation to a relatively large number of employees, that the average pay for women is less than that for men: see Handels-og Kontorfunktionoerernes Forbund i Danmark v Dansk Arbejdsgiverforening (Case 109/88)[1991] I.C.R. 74, 80, para. 16.

15. In this case, as both the health authority and the United Kingdom observe, the circumstances are not exactly the same as in the cases just mentioned. First, it is not a question of de facto discrimination arising from a particular sort of arrangement such as may apply, for example, in the case of part-time workers. Secondly, there can be no complaint that the employer has applied a system of pay wholly lacking in transparency since the rates of pay of National Health Service speech therapists and pharmacists are decided by regular collective bargaining processes in which there is no evidence of discrimination as regards either of those two professions.

16. However, if the pay of speech therapists is significantly lower than that of pharmacists and if the former are almost exclusively women while the latter are predominantly men, there is a prima facie case of sex discrimination, at least where the two jobs in question are of equal value and the statistics describing that situation are valid.

17. It is for the national court to assess whether it may take into account those statistics, that is to say, whether they cover enough individuals, whether they illustrate purely fortuitous or short term phenomena, and whether, in general, they appear to be significant.

18. Where there is a prima facie case of discrimination, it is for the employer to show that there are objective reasons for the difference in pay. Workers would be unable to enforce the principle of equal pay before national courts if evidence of a prima facie case of discrimination did not shift to the employer the onus of showing that the pay differential is not in fact discriminatory: see, by analogy, Handels-og Kontorfunktionoerernes Forbund i Danmark v Dansk Arbejdsgiverforening (Case 109/88)[1991] I.C.R.74, 79, para.13.

19. In these circumstances, the answer to the first question is that, where significant statistics disclose an appreciable difference in pay between two jobs of equal value, one of which is carried out almost exclusively by women and the other predominantly by men, article 119 of the Treaty requires the employer to show that that difference is based on objectively justified factors unrelated to any discrimination on grounds of sex.

22. ... If the employer could rely on the absence of discrimination within each of the collective bargaining processes taken separately as sufficient justification for the difference in pay, he could, as the German Government pointed out, easily circumvent the principle of equal pay by using separate bargaining processes.

23. Accordingly, the answer to the second question is that the fact that the respective rates of pay of two jobs of equal value, one carried out almost exclusively by women and the other predominantly by men, were arrived at by collective bargaining processes which, although carried out by the same parties, are distinct, and, taken separately, have in themselves no discriminatory effect, is not sufficient objective justification for the difference in pay between those two jobs.

...

29. The answer to the third question, therefore, is that it is for the national court to determine, if necessary by applying the principle of proportionality, whether and to what extent the shortage of candidates for a job and the need to attract them by higher pay constitutes an objectively justified economic ground for the difference in pay between the jobs in question."

It seems to us that this case is of peripheral relevance only. Mr Elias relied upon statements in the Opinion of Advocate General Letz to the effect that the claimant must put forward a male comparator from the same undertaking, and later he referred to "the same plant or undertaking", but the Court was not concerned with the question at issue on this appeal. What can be said, is that the Court has used language which is consistent only with the applicant and comparator sharing the same employer: see the words "the employer" in paragraphs 14, 19 and 22.

In Strathclyde Regional Council & Others v Wallace & Others [1998] ICR 205, the House of Lords was considering claims by unpromoted women teachers employed by different councils who were comparing their pay to that of head teachers employed by the same employer. Their case was that they did like work to a head teacher but were paid at a lower rate. The employers relied on a section 1(3) defence. The significance of this authority relates to Mr Elias' contention that an employer would, effectively not be able to prove such a defence if he did not employ both the applicant and the comparator. In giving judgment, Lord Browne Wilkinson said:

"Finally, I must state an agreed fact of the greatest importance. The disparity in pay between the appellants and principal teachers has nothing to do with gender. Of the 134 unpromoted teachers who claimed to be carrying out the duties of principal teachers, 81 were men and 53 women. The selection by the appellants in this case of male principal teachers as comparators was purely the result of a tactical selection by these appellants: there are male and female principal teachers employed by the respondents without discrimination. Therefore the objective sought by the appellants is to achieve equal pay for like work regardless of sex, not to eliminate any inequalities due to sex discrimination. There is no such discrimination in the present case. To my mind it would be very surprising if a differential pay structure which had no disparate effect or impact as between the sexes should prove to be unlawful under the Equal Pay Act 1970. The long title to that Act describes its purpose as being "An Act to prevent discrimination, as regards terms and conditions of employment, between men and women".

...

To establish a subsection (3) defence, the employer has to prove that the disparity in pay is due to a factor "which is not the difference of sex", i.e. is not sexually discriminatory. The question then arises "what is sexually discriminatory?" Both the Sex Discrimination Act 1975 and article 119 of the E.C. Treaty (O.J. 1992, C.224, p.6) recognise two types of sex discrimination. First, there is direct discrimination, i.e. a detriment suffered by women which they would not have suffered but for being women. Second, there is indirect discrimination, i.e. a detriment suffered by a class of individuals, men and women alike, but the class is such that a substantially larger number of women than men suffer the detriment. The classic example of indirect discrimination is a policy under which part-time workers, whether male or female, are paid less than full-time workers. There are many more women than men who are part-time workers. Accordingly such a policy applied to part-time workers is indirectly discriminatory against women.

Under the Sex Discrimination Act 1975, direct sexual discrimination is always unlawful. But, both under the Sex Discrimination Act 1975 and under article 119, indirect discrimination is not unlawful if it is "justified": Sex Discrimination Act 1975, section 1(1)(b)(ii); Bilka-Kaufhaus G.m.b.H. v Weber von Hartz (Case 170/84)[1987] ICR 110. Indirect discrimination can be "justified" if it is shown that the measures adopted by the employer which cause the adverse impact on women "correspond to a real need on the part of the [employer], are appropriate with a view to achieving the objectives pursued and are necessary to that end:" Rainey v Greater Glasgow Health Board [1987] I.C.R.129.

The cases establish that the Equal Pay Act 1970 has to be construed so far as possible to work harmoniously both with the Sex Discrimination Act 1975 and article 119. All three sources of law are part of a code dealing with unlawful sex discrimination: see Shields v E.Coomes (Holdings) Ltd. [1978] I.C.R. 1159 and Garland v British Rail Engineering Ltd. [1982] ICR 420. It follows that the words "not the difference of sex" where they appear in section 1(3) of the Equal Pay Act 1970 must be construed so as to accord with the Sex Discrimination Act 1975 and article 119 of the E.C. Treaty, i.e. an employer will not be able to demonstrate that a factor is "not the difference of sex" if the factor relied upon is sexually discriminatory whether directly or indirectly. Further a sexually discriminatory practice will not be fatal to a subsection (3) defence if the employer can "justify" it applying the test in the Bilka-Kaufhaus case [1987] ICR 110.

In North Yorkshire County Council v Ratcliffe [1995] I.C.R. 833, 839, this House expressed the view, obiter, that the Equal Pay Act 1970 has to be interpreted without introducing the distinction between direct and indirect discrimination drawn by section 1 of the Sex Discrimination Act 1975. That dictum must not be carried too far. Whilst there is no need to apply to the Equal Pay Act 1970 the hard and fast statutory distinction between the two types of discrimination drawn in the Sex Discrimination Act 1975, this House did not intend, and had no power, to sweep away all the law on equal pay under article 119 laid down by the European Court of Justice, including the concept of justifying, on Bilka grounds, practices which have a discriminatory effect on pay and conditions of service. The law on article 119, whilst recognising that in many cases there is a de facto distinction between direct and indirect discrimination, does not draw the same firm legal demarcation between the two as does the Sex Discrimination Act 1975 which permits justification of indirect discrimination but not of direct discrimination. The correct position under section 1(3) of the Equal Pay Act 1970 is that, even where the variation is genuinely due to a factor which involves the difference of sex, the employer can still establish a valid defence under subsection (3) if he can justify such differentiation on the grounds of sex, whether the differentiation is direct or indirect. I am not aware as yet of any case in which the European Court of Justice has held that a directly discriminatory practice can be justified in the Bilka sense. However, such a position cannot be ruled out since, in the United States, experience has shown that the hard and fast demarcation between direct and indirect discrimination is difficult to maintain.

From what I have said, it is apparent that, in considering section 1(3) of the Equal Pay Act 1970, the only circumstances in which questions of "justification" can arise are those in which the employer is relying on a factor which is sexually discriminatory. There is no question of the employer having to "justify" (in the Bilka sense) all disparities of pay. Provided that there is no element of sexual discrimination, the employer establishes a subsection (3) defence by identifying the factors which he alleges have caused the disparity, proving that those factors are genuine and proving further that they were causally relevant to the disparity in pay complained of.

...

In my judgment the law was correctly stated by Mummery J. giving the judgment of the Employment Appeal Tribunal in Tyldesley v T.M.L. Plastics Ltd.[1996] I.C.R.356, in which he followed and applied the earlier appeal tribunal decisions in Calder v Rowntree Mackintosh Confectionery Ltd.[1992] I.C.R.372 and Yorkshire Blood Transfusion Service v Plaskitt [1994] I.C.R.74. The purpose of section 1 of the Equal Pay Act 1970 is to eliminate sex discrimination in pay not to achieve fair wages. Therefore, if a difference in pay is explained by genuine factors not tainted by discrimination that is sufficient to raise a valid defence under subsection (3): in such a case there is no further burden on the employer to "justify" anything. However if the factor explaining the disparity in pay is tainted by sex discrimination (whether direct or indirect) that will be fatal to a defence under subsection (3) unless such discrimination can be objectively justified in accordance with the tests laid down in the Bilka [1987] I.C.R.110 and Rainey [1987] I.C.R.129 cases."

Mr Elias makes the valid point that an employer not only has to prove that the factors which he alleges have caused the disparity were genuine but also "causally relevant" to the disparity in pay complained of. It would be difficult if not impossible for an employer to run a justification defence if he was not the employer of the comparator because he would not know precisely what the factors were that gave rise to the pay of that person. Furthermore, it would be difficult to understand how the applicant's employer could say that any factor was causally connected to the disparity when their pay was most likely determined quite independently of one another, and in ignorance of the differential.

In Scullard v Knowles & Another [1996] ICR 399, the EAT, presided over by Mummery J, was considering whether a manager employed by a regional council funded by the DOE could compare herself with male managers employed by other regional councils even though the councils were not associated employers within the meaning of section 1(6) of the Equal Pay Act 1970, as amended. There, the EAT was faced with a bold submission by the councils that it was fatal to the applicant's case that she and the comparator were employed by different employers. Amongst the cases considered by the EAT was a decision of the Northern Ireland Court of Appeal in Halsey v Fair Employment Agency [1989] IRLR 106.

The EAT said this:

"(3) In Hasley v Fair Employment Agency [1989] I.R.L.R. 106 the Northern Ireland Court of Appeal recognised that the principle of article 119 is so general that there must be some limits or boundaries to its operation in practice. Lord Lowry C.J. cited passages in Defrenne v Sabena (Case 43/75)[1976] ICR 547 and Macarthys Ltd. v Smith (Case 129/79)[1980] ICR 672 which referred to the "same establishment or service" though, as observed by Lord Lowry, at p. 111, the judgment in Defrenne did not treat article 119 as "confined to work carried out in the same establishment or service". See also p. 112 where Lord Lowry C.J. set out the argument for the view that article 119 takes in people in public service of the same kind as bodies dependent on the state for their existence and financial upkeep.

(4) The crucial question for the purposes of article 119 is, therefore, whether the applicant and the male unit managers of the other councils were employed "in the same establishment or service". The industrial tribunal did not ask or answer that question. To the extent that that is a wider class of comparators than is contained in section 1 (6) of the Equal Pay Act 1970, section 1(6), which is confined to an "associated employer", is displaced and must yield to the paramount force of article 119. On this aspect of the claim it will be relevant for the industrial tribunal to examine factual areas which have not so far been explored, namely, whether the regional councils, even though none is a company, were directly or indirectly controlled by a third party - the directorate - the extent and nature of control and whether they constitute the "same establishment or service". For that purpose, it will also be relevant to consider whether common terms and conditions of employment were observed in the regional advisory councils for the relevant class of employees."

Whilst the ambit of Counsels' able and well presented arguments, has been indicated, we set out, slightly more fully, the detailed submissions.

For the appellants reliance was placed on the "special circumstances of this case". Here, the applicants' jobs had been evaluated against those of the comparators. The employers will be able to deploy their defences to the claims; what is in issue is the 'right to bring a claim'. Article 119 will apply wherever the facts permit or justify: thus the applicant and comparator need not be employed at the same time and, arguendo, when they are employed by different employers. The width of the Article is to be found in its origins and the policy behind it as stated in the Defrenne case. The criteria of same employer or same establishment or service merely assist where equality is not otherwise apparent. As was observed by Lord Lowry in Hasley, comparisons are not restricted to the same establishment or service. But even if a more restricted interpretation is correct, here any such criterion has been met. The principle of seeking to eliminate all discrimination in pay between men and women extends to entire branches of industry. There was nothing in the Article to support Mr Elias' thesis that the same person must 'control' the wages of the applicant and comparator: that represents a confusion between whether a comparison can be made and the reason for the difference or disparity which is an evidential matter to be dealt with under section 1(3). If the question is: 'would but for their sex the applicants have received the higher pay of the male comparators', the answer can be given regardless of whether the employers are common. If Mr Elias were correct, it would be easy to evade the fundamental principle of equal pay between men and women, either by hiving off employees into separate companies or creating separate and distinct companies where one employed exclusively or predominantly men, and the other women.

For the respondents, it is stated, as appears to be common ground, that on a proper interpretation of the words of section 1(6) of the Act the Respondents are not associated employers. The Respondents are non-statutory commercial organisations carrying on business with a view to profit; local authorities are fundamentally different. The question at issue is whether the provisions of Article 119 may be invoked so as to disapply section 1(6), on the grounds that this is a provision which offends against community law. The cases referred to show that the employees concerned must be in the same establishment or service. Whilst certain dicta taken from Defrenne might support a wider view, there must be some limits to the ambit o the Article.

The Industrial Tribunal in this case said:

"Whilst we accept that national Governments should not put any artificial limitations or constraints upon the wording of Article 119, nonetheless we accept Lord Lowry's view ..... that the "principle that 'men and women should receive equal pay for equal work' is so general that there must be some limits or boundaries to its operation in practice". We have accepted the argument of Mr Elias that essentially these are cases of alleged discrimination. In order to discriminate there has to be a discriminator and we accept the view that the person who discriminates has to be in control both of the women's wage and the comparator's wage. That is, of course, for the purpose of a claim under the Equal Pay Act. We do not accept that because the County Council is in a position to award the contracts and supervise them, they are in any position to directly control the wages or salaries paid or payable by the respondents to their individual employees. All the North Yorkshire County Council is controlling is the working of the contract itself and the monitoring of the respondents' performance under the terms of the contract."

We can express our own conclusions shortly. There are two general principles of note from the authorities:

1. The purpose of Article 119, like section 1 of the Equal Pay Act, is not to achieve fair wages but to eliminate discrimination on grounds of sex. In other words, the target of the legislation and the Treaty is not to eliminate inequality in pay but to eliminate inequality in so far as it is caused by discrimination on grounds of sex.
2. Whilst it is the policy of Article 119 eventually to eliminate all such discrimination across industries [for example, catering and cleaning have traditionally been regarded as 'women's work' and probably thereby been poorly paid] a radical assault across industries will require further agreement between Member States, and detailed implementation in domestic laws [see paragraph 19 of the judgment in Defrenne]. The precise ambit of the Article, as it stands and without further agreement or direction, is not precisely defined. Case law of the Court will assist on a case by case basis. Technical limitations, such as, the dates when the comparator and applicant were employed, will not be allowed to defeat the application of the Article. But there must be a line to be drawn somewhere, as the ECJ recognised in the Defrenne case, as we read it.

The ECJ distinguished between "individual undertakings" on the one hand and "entire branches of industry" and "even of the economic system as a whole" on the other. We agree with Mr Elias that a feature of this distinction is that in the one case there is a single employer and in the other a multiplicity of employers, but that may not be the only distinction. Sometimes the identity of the employer is different from the entity which controls the work and fixes the pay, for example, where a person's services are 'assigned' to subsidiary companies within a group, but where the parent is formally the employer. In such a case the subsidiaries would clearly be associated and fall within section 1(6). But what if the employers were different, such as the Northern Ireland EOC and FEA? Not every case where Article 119 applies will the same entity be employer of both applicant and comparator; nor will they necessarily be associated employers within the meaning of the section. But it does not follow that the Article applies whenever the employers are unconnected other than by the nature of the industry to which they belong. There must be something other than common identity or direct association which provides the boundary line. The word "therefore" in paragraph (4) of the EAT's judgment in Scullard may be a typographical error. As my learned predecessor observed, the ECJ had not confined the principle of Article 119 to "work carried out in the same establishment or service" as the words "even more" and "at least" in paragraphs 22 and 24 of the judgment in Defrenne makes clear. It seems to us that absent any further agreement between members states or a directive, we cannot say more precisely where the boundary line lies save that the applicant and comparator must be 'in a loose and non-technical sense in the same establishment or service'. By 'loose and non-technical sense' we mean to embrace within the definition such cases as Hasley and Scullard and any other similar cases.

It follows, therefore, that we reject Mr Langstaff's argument that Article 119 is to be given a much wider range of application. Such a construction would be likely to create a substantial economic effect of the sort which, no doubt, the Court had in mind in the Defrenne case and which would need 'legislation'. Further, without such legislation, a wide interpretation would deny the respondent any effective opportunity for a defence of justification. Again, no doubt, the ECJ had in mind the need for progressive implementation of any industry wide application with proper safeguards built in to accommodate some kind of a justification defence. It seems to us that Mr Langstaff's submission that the line would be drawn naturally on the basis of what an applicant could prove, was unrealistic. He cannot escape from the fact that there is nothing about this case which would distinguish it from any other case where an applicant claimed equal pay with a comparator employed by another company, not necessarily even engaged in the same industry. But equally, we reject Mr Elias' claim of outrage. Control over both wages may be a feature of cases on one side of the line, but control may be indirect, as in the Northern Ireland case.

Essentially, we agree with the conclusion of the Industrial Tribunal on this issue, although we would put the matter somewhat differently from them.

In the light of the authorities to which we have referred and for the reasons we have attempted to give we do not consider that this is a case which should be referred to the ECJ.

Therefore, the appeal will be dismissed on the Article 119 issue.