United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR N GRUNDY (of Counsel) Instructed by: Hill Dickinson Solicitors Pearl Assurance House of Lords 2 Derby Square Liverpool L2 9XL
For the Respondent	MR T GRACE (of Counsel) Instructed by: Messrs Walker Smith Way Solicitors 26 Nicholas Street Chester Cheshire CH1 2PQ


 


SUMMARY

Equal Pay Act

This case arises out of an obsolete bonus system. We dismissed the appeal against the decision on grounds that the comparators were inappropriate. Remitted case back to Employment Tribunal on the question of objection justification.


 


HIS HONOUR JUDGE PUGSLEY

1. This is a case in which we are told that there are no wide repercussions, as is sometimes the case, from the Decision of the Employment Tribunal on an equal pay/equal value case since it is accepted that changes have now taken place that have ended the anomaly that hitherto persisted in this work place.
2. In this case, a number of complainants, which included certain men, concerned an action against the Cheshire & Wirral Partnership NHS Trust in respect of two of their hospitals: St Catherine's Hospital and Victoria Central Hospital, Birkenhead.
3. We gratefully adopt the factual background from the Employment Tribunal decision. The Whitley Council, responsible for negotiating terms and conditions of employment, negotiated an incentive bonus scheme on behalf of ancillary staff which included domestic staff, porters and catering staff. Porters at Victoria Central Hospital were paid a bonus of 20% and at St Catherine's Hospital they were paid a bonus of 30%. Caterers and domestic staff received a bonus sometimes as high as 33%, depending on their location.
4. In or about 1986/1987 the domestic staff was transferred under the TUPE Regulations to outside contractors. They lost their bonus entitlement under the new terms and conditions of the new privatised service. Those staff remaining in the employment of the health service continued to receive a bonus. There is a misprint in the Decision. It is 1988, not 1998 as suggested in the decision when the bonus scheme was frozen because the employers thought it inappropriate and intended to introduce a new bonus scheme. In 1991, the Whitley Council recommended converting the frozen bonus scheme to a performance related payment scheme to come into force in December 1994. Between 1992 and 1994 negotiations for the removal of the bonus scheme which had been frozen took place, but were unsuccessful. The caterers and porters continued to receive a bonus frozen at the 1988 rate.
5. On 1 October 2001 the domestic staff was transferred back to the Respondent under the TUPE Regulations. Prior to the transfer back, negotiations took place with the union that resulted in the domestic staff receiving improved terms and conditions than those that they had been subject to when the work was carried out by an outside contractor. There was a small increase in the rate of pay, a health authority pension scheme and a substantial sickness benefit scheme. The employers were not prepared to reinstate the bonus and, indeed, the Tribunal found at paragraph 9 of the Decision:

"Had the domestic staff insisted on being paid a bonus, the domestic service would have gone out to competitive tendering, and the domestic staff may not have been re-employed by the respondent because of financial considerations and budgetary requirements".

So, when the domestic staff came back into the National Health Service, they were in this position. They did not receive a bonus, but some porters and catering staff continued to receive bonus payments frozen at the 1998 rate. The position is, the Tribunal found, that eventually the bonus system was replaced following a Government Paper: "Agenda for Change".

6. The Respondents employed 20 porters (all male) 17 of whom were receiving the bonus, frozen, with three not receiving it in October 2003. On the same or about the same time, there were some 146 domestics who were employed, consisting of 131 females and 14 males. One male domestic received the frozen bonus. The females did not receive any bonus at all. There were 17 catering staff, four males and 13 females. 13 employees received the frozen bonus (three males and 10 females) and four of the employees did not receive a bonus and that was a pool of one male and three females. The bonus was foregone by the caterers in June 2004 and in October 2004, the porters' bonus went.
7. The Tribunal set out, with care, the areas of law concerning the burden of proof and quoted the relevant authorities of Glasgow City Council v Marshall [2000] ICR 196 and the 2003 Code of Practice which we understand to be a restatement of an earlier code. The Tribunal carefully noted the submissions on behalf of the Claimants by Mr Grace and by Mr Grundy on behalf of the Respondents. It was Mr Grace, on behalf of the Claimants, who submitted that, assuming work was of equal value, the starting point was the need for the Respondent to establish a section 1(3) material factor offence by explaining the contractual variations. The onus was on the Claimant to establish a prima facie case and they did this, he said, by referring to the significant statistical differences in paying for two jobs of equal value. The figures produced show that 89.7% of domestic staff are women; there are no porters who are women. 85% of the porters received a bonus and none of the female domestics received a bonus. Mr Grace's case is that at paragraph 27 of its decision, the Employment Tribunal adopted a perfectly satisfactory approach which did not fall foul of the pitfalls identified in paragraph 70 of Enderby v Frenchay Health Authority & Secretary of State for Health [1993] IRLR 591 ECJ. There were sufficient individuals; there was nothing fortuitous in the differences in pay and there was no artificiality about the selection of groups.
8. The Appellants complain that the Tribunal failed to identify the issues and did not follow the three stages which the Appellants say they should, namely to identify the disadvantaged group i.e. who receive the old incentive bonus and who did not; to assess whether the groups cover enough individuals and are a sufficient representative group of workers so as to be of evidential significance and the choice of groups is not artificial or fortuitous; and to assess whether a disadvantaged group is predominantly of one sex and the advantaged group of the other sex. It said that there was a confusion between the Claimant's right to chose the individual with which she seeks to compare herself and a supposed right to choose a group to which the individual belongs for the purpose of the Enderby comparison; and that the Tribunal was confusing Enderby type indirect sex discrimination with barrier type indirect sex discrimination by comparing the proportions of women affected overall. He said that the Tribunal misled itself because it did not perceive that it was artificial to allow the Claimants to choose the comparator and merely allow the complainants to choose a group to buttress an argument for indirect sex discrimination.
9. We have been referred to the ECJ decision in Enderby v Frenchay Health Authority & Secretary of State for Health [1994] ICR 112 at paragraphs 16 and 17 and to the Royal Copenhagen [1995] IRLR 648 case in an equal pay case and the case of Nelson v Carrillion Services Limited [2003] EWCA CIV 544. In particular, the dictum of Simon Brown LJ at paragraphs 17 when he says:

"It was highly artificial to select so small a pool and it would be unlikely to have been sheer chance that the proportions between the sexes were as they were. It is to be said that, had the transfer group of six split four:two the other way, Mr Sinarda would then have been entitled to claim? And assume the Appellant's claim succeeded, how then would Mr Sinarda have stood?"

10. We have listened very carefully to Mr Grundy's arguments that the Tribunal allowed itself to be confused by allowing the inappropriate comparison between porters and caterers and that the Tribunal compared the proportion of women who were disadvantaged against the proportion of men rather than considering whether the disadvantaged group was predominantly female and the advantaged group predominantly male. First impressions do not always last. Everyone concerned with legal administration will know that the case that looks hopeless becomes, as times goes on, a winner and the case that looks to be a sure-fire winner dissolves into the dust not long after the first hurdle; but sometimes first impressions are confirmed. We make no secret of it, we did not find Mr Grundy's submissions, although well put and attractive though they were, matters which caused us any concern about this Tribunal's decision. There may be cases, one can envisage it, where small groupings are chosen; they may be artificially small because of reorganisation changes, there may be a capriciousness about the time when the choice is made; if we may borrow a phrase from one of the cases to which we have been referred, we may get a snapshot instead of a much bigger picture. But in this case, looking at this decision which we think is a careful, well drafted decision, we have no doubt at all that the Tribunal correctly addressed itself to the issues raised as to the appropriate comparator. They set out clear and cogent findings on this issue and we see no reason to disturb their finding on the first issue of the appeal because we consider that the Tribunal appropriately directed itself and we would therefore dismiss the first ground of the appeal which is, in our view, misplaced.
11. However, we do think there is considerable force of the Appellant's complaint about the argument of justification. Whilst we are satisfied that the Tribunal accurately, in our view, dealt with the fundamental issues of the choice of the comparator, we are concerned as to whether the Tribunal in paragraph 29 of the decision set out with sufficient particularity the reasonable necessity test of objective justification.
12. Mr Grace has very properly pointed out to us that one should not comb through a decision to see if one can find out, by some devious arguments in the entrails of the decision, whether there is a matter that could arguably have been better put. The reality, in nearly all cases, including decisions of this constituted Employment Appeal Tribunal, is that decisions with hindsight could almost certainly be improved. We accept the submission that we should not artificially comb through a decision, but our concern is this: when it came to directing itself, the Tribunal made no directions of law as to the test which should be applied
13. However, when we come to the conclusions about objective justification at paragraph 29, we say with a certain diffidence, because it is a very well drafted decision, that we are all concerned. The Tribunal sets the position out thus in paragraph 29:

"In response to question 3.3 above, namely, if the difference in pay between the two jobs of equal value amounts to a prima facia case of indirect discrimination, has the respondent shown that the difference is based on objectively justified factors unrelated to any discrimination on the grounds of sex? The objective justification put forward by the respondent is essentially that it could not bring the domestics back in-house and meet its budget for doing do If a bonus was to be paid in addition to the enhanced terms and conditions of employment. Once the respondent had decided to bring the domestics in-house and not proceed to competitive tendering, then they were obliged to adhere to the equal pay provisions. The fact that the porters were paid more because of a historically outdated bonus and the domestics were transferred under the Transfer of Undertakings Regulations does not negate the respondent's duty. The respondent argued that the domestics had negotiated fair terms and conditions of employment which were enhanced beyond those offered by the private company, and that the domestics accepted that they would not receive a bonus. Nonetheless, the domestics' right to equal pay remained an obligation of the respondent, which cannot be contracted out under a collective agreement. The respondent has not made out a material factor defence under section 1 (3) of the Equal Pay Act 1970".

14. The Tribunal has meticulously set out the rival submissions of Counsel at paragraphs 20-26. However, when the Tribunal came to set out its own conclusions at paragraph 29, it does not reveal exactly what test it is applying in considering the question of objective justification. In particular, the Tribunal does not make it clear whether it is accepting the submissions made that the test was "reasonably necessary". The Tribunal's language about "the domestics' right to equal pay remained on obligation, which cannot be contracted out under a collective agreement" puts the matter in rather more absolute terms than the reasonably necessary test set out in Cadman v Health & Safety Executive [2004] IRLR 971.
15. Tribunal decisions are not meant to be refined work of legal drafting or to have the same meticulous detail that would be appropriate in drafting an academic treatise. This is a careful and well drafted decision. However, as one of the members put it during the course of argument before us, there seems to be a jump from argument to conclusion in paragraph 29 of the Decision. The Tribunal appears to accept in its findings in paragraph 9 of its decision that the additional requirement of paying a bonus might have precluded the domestic staff being re-employed by the Respondents. There is no evaluating of the legitimacy of the Respondent's failure to reintroduce the bonus system in the light of budgetary constraints. There is no balancing of the discriminatory effect of a decision and the objective justification for that decision. There is some fare in Mr Grady's contention that the logic of the Tribunal's position is that there never can be objective justification for indirect sex discrimination in equal pay cases.
16. This decision is not fundamentally flawed in such a way as to preclude the original tribunal reconsidering the matter. We consider it wrong for us to substitute our view. The same Employment Tribunal should reconsider what was the test of objective justification which they were applying and in the light of that, carry out the balancing act which is required to consider the issue of objective justification. To that extent, the appeal is allowed.