United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS SARAH MOORE (of Counsel) Instructed by: Messrs Eversheds Solicitors Senator House 85 Queen Victoria Street London EC4V 4JL
For the Respondent	MISS SARAH MOOR (of Counsel) Instructed by: Messrs Thompsons Solicitors Congress House Great Russell Street WC1B 3LW


 


HIS HONOUR JUDGE PETER CLARK

1. This is an appeal by King's College London, the Respondent before an Employment Tribunal sitting at London (South) under the Chairmanship of Mr M Zuke. Against that Tribunal's reserved decision, promulgated with Extended Reasons on 30 April 2002, upholding the Applicant employee, Mrs Clark's complaint brought under the Equal Pay Act 1970 ("the Act").
2. The appeal focuses on the application of the material factor defence provided to employers by section 1 (3) of the Act. There is also a cross-appeal by the Applicant (we shall use the same description of the parties as below) against a finding by the Tribunal that the employment of the Applicant's male comparator for the purposes of her complaint, Mr Graham Tate, was the subject of a relevant transfer within the meaning of the Transfer of Undertaking (Protection of Employment) Regulations 1981 ("TUPE Regulations") in August 1993.

The Facts

3. In March 1992 the Applicant commenced employment with the United Medical and Dental School of Guy's and St Thomas' Hospitals ("UMDS") as a Medical Laboratory Scientific Officer Grade 1*** (MLSO Grade 1).
4. Prior to August 1993 Mr Tate was employed as a Chief MLSO Grade 3 at the London Hospital Medical College ("LHMC"). On 1 August 1993, so the Tribunal found, Mr Tate's employment was transferred from LHMC to UMDS in circumstances where the Forensic Medicine Department of LHMC merged with that of UMDS. The issue between the parties as to whether a relevant transfer of Mr Tate's employment to UMDS at that date took place was resolved in favour of the Respondent's contention that it had. The Tribunal considered the evidence on the point to be limited, but on the balance of probabilities found that a relevant transfer had then taken place.
5. On 1 August 1998, it was common ground, the employment of both the Applicant and Mr Tate transferred from UMDS to this Respondent in circumstances where the TUPE Regulations applied.
6. Throughout his employment Mr Tate received a higher rate of pay than the Applicant; that is to say, when he joined UMDS on 1 August 1993 he retained the same terms and conditions of employment, including pay, which he had enjoyed with LHMC; that rate of pay was higher than that received by the Applicant at that time; the differential in pay between the two employees remained until Mr Tate's employment with the Respondent terminated in November 2001 by reason of redundancy. At that time, the Tribunal found, Mr Tate was paid approximately £7,500 pa more than the Applicant and was then contractually entitled to six days paid holiday a year more than the Applicant.

Like Work

7. Following their transfer to the Respondent in August 1998 annual appraisals of staff were carried out by Professor Lucas, the Head of Department. During those appraisals the Applicant contended that she carried out similar work to that done by Mr Tate. Professor Lucas disagreed, according to his evidence, attempting to inform her of the difference between their roles. In July 1999, the Tribunal found, the Respondent considered whether the Applicant's post was correctly graded and decided that it was.
8. Before the Tribunal an issue arose as to whether the Applicant and Mr Tate were engaged in like work, that is work of a broadly similar nature, within the meaning of section 1 (2) (a) and (4) of the Act. The Respondent argued that there were differences of practical importance in the work which the two employees performed; that Mr Tate had greater responsibilities than the Applicant and that he was responsible for supervising an MLSO Grade 1 member of staff, Mr Charman. Having considered the evidence the Tribunal rejected that part of the Respondent's case on the facts as found. They accepted that the Applicant was employed on like work when compared with Mr Tate. There is no appeal against that finding.

The Material Factor Defence

9. The purpose of section 1 of the Act, read in conformity with Article 141 (formerly Article 119) of the Treaty of Rome and Article 1 of the Equal Treatment Directive (75/117/EEC), is the elimination of sex discrimination in pay. It is not fair wages legislation as such.
10. Once the Applicant has established like work compared with a man and an unfavourable difference in pay it is for the Respondent employer to prove that the variation in pay is genuinely due to a material factor which is not the difference of sex and that factor must be a material difference between the woman's case and the man's case.
11. The material factor relied upon by the Respondent in the present case was the historical difference in pay between the Applicant and Mr Tate due to the preservation of Mr Tate's terms and conditions of employment including pay stemming back to the transfer of his employment from LHMS to UMDS on 1 August 1993, said by the Respondent and accepted by the Tribunal to be a relevant transfer to which the provisions of TUPE applied.
12. It is convenient at this stage to deal with the Applicant's cross-appeal. Ms Moor submits that there was no evidence of the economic entity which transferred from LHMS to UMDS on that date; in particular the assets or other staff or intangible assets then transferred.
13. We are not persuaded that this is so. Miss Moore, for the Respondent, has taken us to a document, in evidence before the Tribunal, headed "Agreement between the [UMDS] and the [LHMC] concerning the transfer of the Department of Forensic Medicine at the London to establish a combined Department based at UMDS Guy's Campus". That document provided, inter alia:

3 "Staff from the London shall transfer to UMDS with effect from 1 August 1993 or as soon as possible thereafter.

4 On transfer staff shall maintain continuity of service; and shall be offered contracts which shall preserve key terms and conditions of service insofar as this is practicable."

It seems that Mr Charman and a Dr Hill also transferred with Mr Tate from LHMC to UMDS on 1 August 1993.

14. In our judgment there was sufficient material before the Employment Tribunal for them to conclude that a relevant transfer did take place on 1 August 1993 and their reasons for that conclusion, albeit terse, were sufficient to pass the Meek test.
15. In these circumstances we shall dismiss the cross-appeal.
16. The Tribunal were referred to a number of authorities on the proper application of the material factor defence. They list them at paragraph 22 of their reasons, without setting out the principles in detail. Among those cases referred to were the House of Lords decisions in Strathclyde Regional Council v Wallace [1998] 1 WLR 259 and Glasgow City Council v Marshall [2000] 1 WLR 333. We see no material difference between the analysis of the section 1 (3) requirements placed upon an employer to establish the material factor defence contained in the leading speeches of Lord Browne-Wilkinson in Wallace and Lord Nicholls in Marshall. Once the gender based comparison shows that a woman doing like work is paid less than the male comparator the difference in pay is presumed to be due to the difference of sex. That presumption may be rebutted by the employer showing that his explanation for the difference is not "tainted with sex". In order to discharge the burden the employer must show all of the following:

(1) that the proffered explanation, or reason for the difference is genuine and not a sham or pretence;

(2) that the less favourable treatment is due to this reason; it must be causally relevant to the difference in pay;

(3) that the reason put forward is not the difference in sex; it must not be a factor which is directly or indirectly sexually discriminatory;

(4) that factor is a material difference, that is a significant and relevant difference, between the woman's case and the man's case.

17. In rejecting the material factor defence advanced by the Respondent, namely the earlier TUPE transfer of Mr Tate's employment, first to UMDS in 1993 and then to the Respondent in 1998 and the protected terms which he enjoyed, compared with the Applicant, the Tribunal said this, at paragraph 31 of their reasons:

31 "The Tribunal accepted that Mr Tate had transferred to the Respondent's employment by virtue of a transfer of an undertaking. We further accepted that this meant that the Respondent was obliged maintain his terms and conditions of employment. However, we were not persuaded that this was genuinely the reason for the variation between the Applicant's contract and Mr Tate's contract. We arrived at that conclusion because the Respondent had reviewed the Applicant's grading in July 1999, and had decided that her post was correctly graded. That exercise was an opportunity for the Respondent to decide whether the Applicant's terms and conditions of employment should be altered to bring them in line with Mr Tate's terms and conditions. By deciding not to do so, the Respondent was in effect taking a decision that the differences between the Applicant's contract and Mr Tate's contract were justified by factors other than the fact that Mr Tate had transferred to its employment on different terms and conditions. We are therefore not satisfied that the difference between the Applicant's contract and Mr Tate's contract was genuinely due to the fact that Mr Tate's contract of employment had transferred to the Respondent. The reason for maintaining the difference in terms and conditions was the Respondent's firm view (which we have found to be mistaken) that the Applicant and Mr Tate were not doing like work."

18. It follows that, in the view of the Tribunal, the Respondent fell at the first hurdle; their reason put forward for the variation in pay, TUPE protection, was not a genuine reason. Hence the section 1 (3) defence failed without more.

The Appeal

19. Miss Moore puts the Respondent's case in three alternative ways. We begin with her primary submission, that the Tribunal misapplied the reasoning in both Wallace and Marshall in concluding that the reason advanced by the Respondent, TUPE protection, was not the genuine reason for the variation in pay.
20. She points to the Tribunal's findings, first that Mr Tate's employment had been the subject of relevant transfers, both in 1993 and 1998 and further that the Respondent was obliged to maintain his terms and conditions of employment. Further, there is no suggestion that the historical variation between his pay and that of the Applicant was tainted by sex. Pausing there, it seems to us strongly arguable that if that reason was the genuine reason for the difference in pay it would be a gender neutral reason. cf. Nelson v Carillion Services Ltd [2003] EWCA Civ 544.
21. However, the Tribunal found that that was not the real reason for the difference. The real reason was that in July 1999 the Respondent reviewed the Applicant's grading and concluded, mistakenly so the Tribunal found, that her post was properly graded, thus explaining the difference in pay compared with that of Mr Tate.
22. Miss Moore submits that the Tribunal's approach was flawed in law in the following ways. First, a sham or non-genuine explanation is a false one, designed to disguise the true reason for the difference in pay, itself tainted by sex. We accept that analysis. Here, she contends, on the Tribunal's own findings the historical reason for the difference in pay was the difference in pay perpetuated in Mr Tate's case, by the protection afforded by TUPE, a genuine and gender neutral reason.
23. Secondly, that that reason for the less favourable treatment was the real reason. When the Applicant and Mr Tate joined the Respondent in 1998, it made no judgment on the respective gradings but continued their terms and conditions as before, as it was obliged to do under TUPE. The causal chain was not broken by the fact, as the Tribunal found, that the Respondent considered the Applicant's grading in July 1999 but mistakenly concluded that it was correct. There is no finding by the Tribunal that such a conclusion, although mistaken, was other than genuine. In this sense the present case, agues Miss Moore, is no different from that of Marshall, where it was held (per Lord Nicholls, 340G) that the causal connection is not broken simply because the Respondent authorities in that case could have chosen to pay the Applicant instructors more.
24. We should also draw attention to a decision of the EAT, not directly cited by Counsel in this case, but indirectly referred to through the speech of Lord Browne-Wilkinson in Wallace. At 267B of the report Lord Browne-Wilkinson expressly approved the statement of the law by Mummery P in Tyldesley v TML Plastics Ltd [1996] ICR 356, "in which he followed and applied the earlier appeal tribunal decisions in … Yorkshire Blood Transfusion Service v Plaskitt [1994] ICR 74."
25. In Plaskitt the EAT held that a genuine but mistaken belief by the employer in a reason for the difference in pay between the Applicant and her male comparator was capable of and did found the material factor defence.
26. We think that Lord Browne-Wilkinson's approval of the reasoning in Plaskitt, followed in Tyldesley, supports Miss Moore's submission that an employer who holds a genuine but mistaken belief in a material factor explaining the variation in pay can be in no worse position than an employer who does not turn his mind to the respective gradings, as in Marshall.
27. Thirdly, she points out that nowhere in the Tribunal's reasons is it suggested that the variation in pay between the Applicant's case and that of Mr Tate is due to the difference of sex.
28. In response Ms Moor submits that the Tribunal asked themselves the correct question in relation to the material factor and was entitled to conclude that the reason put forward, TUPE protection, was not the real or genuine reason for the difference in pay; it was the Respondent's mistaken conclusion that the Applicant's grading was correct and that accordingly the Applicant and her comparator were not engaged in like work. Having permissibly rejected the reason put forward by the Respondent the material factor defence necessarily failed.
29. We prefer the submissions of Miss Moore. We agree that the grading review in July 1999 did not break the causative chain stretching back to the historical difference in pay due to the protection afforded by TUPE to Mr Tate's terms and conditions of employment. Further, even if the Respondent mistakenly concluded that the Applicant was correctly graded, at a level lower than that of Mr Tate, in July 1999, such mistaken, if genuine belief, is itself capable of amounting to a material factor for the purposes of the section 1 (3) defence. See Plaskitt, approved in Wallace. It follows that in our judgment this Tribunal erred in law in finding that the Respondent had failed to put forward a genuine reason for variation in pay untainted by sex, based on the House of Lords authorities to which they were referred.

The Brunnhofer Question

30. That is not an end to the matter. Ms Moor submitted, by reference to the judgment of the Sixth Chamber of the ECJ in Brunnhofer v Bank der Österreichischen Postsparkasse AG [2001] IRLR 571, that the approach of the House of Lords in both Wallace and Marshall is wrong insofar as it does not require an employer to objectively justify the variation in pay, not only in a case of prima facie indirect sex discrimination, but also a case of direct sex discrimination.
31. This submission goes to the third stage in the test we have earlier set out by reference to the leading speeches in both Wallace and Marshall. It does not arise strictly at the first stage, the genuineness of the employer's reason for the difference in pay, on which this Tribunal rejected the Respondent's defence under section 1 (3).
32. However, if, as we indicated might happen if we upheld the Respondent's appeal, this case must be remitted to a fresh Tribunal for re-hearing on the section 1 (3) issue, the parties invited us to give guidance on the Brunnhofer question for the benefit of the fresh Tribunal on remission.
33. The point was not developed at length by Counsel in this case. In short, Miss Moore submitted that there is no tension between the House of Lords opinions in Wallace and Marshall and the views expressed by the ECJ in Brunnhofer; Ms Moor contended that Brunnhofer, being later in time, establishes that in a case of direct, as well as indirect sex discrimination, it is for the employer to objectively justify the difference in pay, applying the test in Bilka-Kaufhaus GmbH v Karin Weber von Hartz [1986] IRLR 317, paragraph 36 (see Brunnhofer, paragraph 67).
34. Coincidentally, what I have called the Brunnhofer question arose directly for determination before a differently-constituted division of the EAT on which I sat in Parliamentary Commissioner for Administration and The Health Service Commissioner v Fernandez (EAT/0137/03/SM) on 11 June 2003, one week after we had reserved our judgment in the present case. The point was fully argued by leading and junior Counsel on each side, the case going into a second day of hearing on 15 July. In these circumstances I thought it sensible to defer giving judgment in the present case before considering the full argument in Fernandez. Having now done so, in consultation with the respective members sitting in both cases, we have concluded, for the reasons more fully given in Fernandez, that Brunnhofer does not cause us to depart from the approach taken by the House of Lords in Wallace and Marshall. We refer to the majority judgment in Fernandez, to be handed down at or about the same time as this judgment, for our reasoning, whilst acknowledging the dissenting opinion of Mr Bleiman in that case.

Disposal

35. It follows that we shall allow this appeal and remit the case for re-hearing by a fresh Tribunal on the issue of the material factor defence in accordance with the guidance given by the House of Lords in Wallace and Marshall, given that the Applicant and Mr Tate were employed on like work as Mr Zuke's Tribunal found.