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Cite as: 2000 SCLR 889, [2000] WLR 333, (2000) 2 LGLR 679, [2000] BLGR 229, (2000) 97(7) LSG 39, [2000] IRLR 272, [2000] UKHL 5, [2000] ICR 196, 2000 SC (HL) 67, [2000] 1 All ER 641, 2000 SLT 429, [2000] 1 WLR 333

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Glasgow City Council and Others v. Marshall and Others (Scotland) [2000] UKHL 5; [2000] 1 WLR 333 (3rd February, 2000)

HOUSE OF LORDS

Lord Slynn of Hadley Lord Nicholls of Birkenhead Lord Mackay of Clashfern
Lord Hope of Craighead Lord Hutton

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

GLASGOW CITY COUNCIL AND OTHERS

(RESPONDENTS)

v.

MARSHALL AND OTHERS

(APPELLANTS)

(Scotland)

ON 3 FEBRUARY 2000

LORD SLYNN OF HADLEY

My Lords,

I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Nicholls of Birkenhead. For the reasons he gives, I, too, would dismiss the appeal. This is plainly in essence a claim that the pay is not fair: and not a claim that the pay is unequal because of discrimination between the sexes. As such it does not fall within the Equal Pay Act 1970.

LORD MACKAY OF CLASHFERN

My Lords,

I have had the advantage of reading in draft the speech which has been prepared by my noble and learned friend, Lord Nicholls of Birkenhead. I agree with it, and for the reasons which he has given I too would dismiss the appeal.

LORD NICHOLLS OF BIRKENHEAD

My Lords,

Section 1(3) of the Equal Pay Act 1970 provides a so-called 'material factor' or 'material difference' defence to an equal pay claim. This defence avails an employer if he proves that the difference in pay is genuinely due to a material factor which is not the difference of sex and that factor is a material difference between the woman's case and the man's case. This appeal raises, once more, the much-discussed question of the proper interpretation of this subsection.

The case concerns the pay of instructors and teachers in special schools. The applicants are eight instructors, seven women and one man, working in special schools within the former local government area of Strathclyde region. Their employer was Strathclyde Regional Council, the education authority for the region. That was the position when the applicants lodged their claims. After the local government reorganisation of 1996, the applicants were employed by the council's statutory successors.

The staff at special schools includes teachers as well as instructors. The teachers are paid much more than the instructors; they have teaching qualifications, and the instructors do not. Some instructors are qualified, but the minimum qualifications required of teachers are higher than those required of qualified instructors. In these proceedings the seven women instructors claimed that, although lacking formal teaching qualifications, they were employed on like work with male teachers working in the same special schools. Conversely, one male instructor claimed he was engaged on like work with female teachers. The applicants claimed that, accordingly, they were entitled to the same pay as their respective male and female teacher comparators.

The instructors' claims succeeded before an industrial tribunal. The hearing was protracted, occupying 52 days over a period of 15 months from September 1994 to November 1995. The tribunal investigated two issues: the 'like work' issue, and the section 1(3) defence. In a painstakingly careful and thorough decision given on 15 May 1996, the tribunal found in favour of the applicants on both issues. The tribunal heard extensive evidence on the like work issue. The tribunal held that in general no distinction was to be drawn between the work of each female applicant and her comparators. The circumstance that an instructor had no qualifications was not important. In the schools of the female applicants and their male comparators, there was no distinction of substance regarding the work required to be done, the work in fact done, or the skill and knowledge required to do it. For the same reason, the male applicant performed the same or broadly similar work to that of his female comparators. I shall come to the tribunal's decision on the section 1(3) defence at a later stage. A claim by a ninth instructor was dismissed. The tribunal found he was not engaged on like work.

The education authorities appealed against the tribunal's decision. The appeal was confined to the second of the two issues decided by the industrial tribunal, namely, the section 1(3) defence. The authorities did not challenge the tribunal's finding that the instructors and their teacher comparators performed like work. The Employment Appeal Tribunal, presided over by Lord Johnston, dismissed the appeal. The education authorities appealed further, to the Court of Session. Again, the sole issue was the section 1(3) defence. The Court of Session (the Lord President, Lord Prosser and Lord Cameron of Lochbroom) allowed the appeal.

Instructors and teachers

The disparity in pay of which the instructors complained had its genesis in the evolution of special schools. It is unnecessary to go further back than 1945. The Education (Scotland) Act 1945 imposed on education authorities a duty to make provision, at junior occupational centres, for 'trainable mental defectives' of school age. Stated broadly and in more modern language, these were children suffering from severe learning difficulties. Children with an even greater handicap, who were suffering from profound learning disabilities, were excluded from this provision. Initially they were the responsibility of health authorities. In 1968, by virtue of the Social Work (Scotland) Act 1968, this responsibility passed to the newly created social work departments of local authorities. Their duty was to provide day care centres for these children. The Education (Mentally Handicapped Children)(Scotland) Act 1974 deemed all children to be educable. Junior occupational centres and day care centres were renamed as schools, and they became the responsibility of education authorities. The daily care required by the children did not diminish. Nor did the devoted care given to them. But there was more emphasis on education than had been the case. Only teachers registered with the General Teaching Council for Scotland, and qualified accordingly, may teach in establishments designated as schools. So, from 1975 onwards the staff in special schools began to include teachers as well as instructors.

The remuneration paid to teachers in Scotland, including teachers in special schools, is fixed by a statutory procedure. One of the functions of the body known as the SJNC is to formulate a settlement of the remuneration payable to teaching staff employed by education authorities in Scotland. The full name of this body is the Scottish Joint Negotiating Committee for Teaching Staff in School Education. Education authorities are bound to give effect to such a pay settlement. The provisions of the settlement are deemed to be incorporated in teachers' contracts of employment: see sections 91 and 97A of the Education (Scotland) Act 1980, as amended.

Instructors, whether qualified or not, are paid according to their position on a scale known as the APT&C scale. This scale applies to administrative, professional, technical and clerical staff employed in local government throughout the United Kingdom. The value attributable to the spinal column points on this scale is negotiated annually by the National Joint Councils for Local Authorities' Services. This is a Whitley style council. The National Joint Councils only set the pay attached to particular spinal column points. It is for the local authority itself to accord a number of points on the spinal column to a particular job. In practice, instructors are employed with a salary placement on a point within the scale range which takes into account whether they are qualified or unqualified and whether they are employed at a school catering for pupils with profound learning disabilities or severe learning difficulties. The industrial tribunal stated that instructors had received the same spinal column points for 15 or so years, and that the historical basis for their position on the scale was not entirely clear. In contrast with local authorities' statutory obligation to pay teachers in accordance with the SJNC scale, the amount of remuneration payable by local authorities to instructors in special schools is not subject to any overriding statutory obligation. Alterations in the pay of instructors would impact on the pay of other groups of workers paid according to the APT&C scale. But there is no statutory impediment preventing authorities paying instructors in Scotland whatever remuneration they may decide.

The section 1(3) defence and the decision of the industrial tribunal

Given that instructors are engaged on like work with their teacher comparators, and given also that instructors are paid far less than the teachers, the onus was on the education authorities to establish a defence under section 1(3). The education authorities' case was founded on the different collective bargaining structures for APT&C staff and SJNC staff and the placing of the instructors and their comparators on their respective pay scales according to the posts to which they were appointed. The education authorities also referred to statistics showing the breakdown by sex of instructors and teachers, and relied on the absence of sex discrimination. The applicant instructors did not challenge the absence of sex discrimination.

The industrial tribunal held that the education authorities had failed to establish a section 1(3) defence. All they had done was to point to a historical basis for the disparity in pay. That was not sufficient. Nor was a factor which reflected inertia on the part of the employers. The employers did not suggest that the teacher comparators were overpaid. This meant that the applicant instructors were in the wrong place on the APT&C spinal column. But the education authorities had not undertaken any reassessment of the instructors' duties and responsibilities. It was nothing to the point that the APT&C conditions and the SJNC conditions were created and applied without reference to gender. Nor was it relevant that appointments to posts were made on merit and without reference to gender. The tribunal stated:

In short, the effect of the industrial tribunal's decision was that, even in a case where the absence of sex discrimination was demonstrated, some good and sufficient reason must exist for the variation in pay. If none was proved, the claim succeeded. The question for your Lordships' House is whether this was a proper interpretation of section 1(3).

The interpretation of section 1(3)

I turn to the relevant provisions in the statute. Section 1(1) provides that if the terms of the contract under which a woman is employed do not include an equality clause they shall be deemed to include one. So far as material for present purposes, section 1 continues:

Under subsection (4) a woman is to be regarded as employed on like work with men if her work and theirs is of the same or a broadly similar nature and the differences are not of practical importance. By virtue of subsection (13) the section applies equally to the converse case of men and their treatment relative to women.

I can well understand that an instructor in a special school, whether a woman or a man, may feel aggrieved that a teacher in the same school is being paid more for doing the same or broadly similar work. I have more difficulty in understanding how, in the absence of sex discrimination, this perceived unfairness is said to be caught and cured by a statute whose object, according to its preamble, is to prevent discrimination between men and women as regards terms and conditions of employment. The instructors' contention is that this conclusion follows from the clear wording of section 1. Further, they contend that this conclusion is not surprising. Proof that women are being paid less than men for like work is prima facie evidence of sex discrimination. Part of the purpose of the Equal Pay Act was to ensure that discrimination does not arise through accident or inertia. If an employer fails to rebut the presumption of sex discrimination because he is unable to show a proper reason for the disparity in pay, the case falls within the mischief the Act was intended to remedy. This conclusion may go further than the provision regarding equal pay for equal work in article 119 (now renumbered article 141) of the E. C. Treaty. But there is no reason why the equality of pay legislation in a member state should be confined in its scope to that of article 119.

I am unable to agree with the main thrust of this submission or with the approach adopted by the industrial tribunal. This approach would mean that in a case where there is no suggestion of sex discrimination, the equality clause would still operate. That would be difficult to reconcile with the gender-related elements of the statutory equality clause. The equality clause is concerned with variations in pay or conditions between a woman doing like work with a man and vice versa. But if the equality clause were to operate where no sex discrimination is involved, the statutory starting point of a gender-based comparison would become largely meaningless. On this interpretation of the Act, what matters is not sex discrimination. What matters is whether, within one establishment, there is a variation in pay or conditions between one employee doing like work with another employee. The sex of the employees would be neither here nor there, save that to get the claim off the ground the chosen comparator must be of the opposite sex. On this interpretation the Act could be called into operation whenever mixed groups of workers are paid differently but are engaged on work of equal value. In such a case the statutory equality clause would operate even when the pay differences are demonstratively free from any taint of sex discrimination. Indeed, a notable feature of the industrial tribunal's decision in the present case is that a male instructor succeeded as well as seven female instructors. It is a curious result in a sex discrimination case that, on the same facts, claims by women and a claim by a man all succeed.

I do not believe the Equal Pay Act 1970 was intended to have this effect. Nor does the statutory language compel this result. The scheme of the Act is that a rebuttable presumption of sex discrimination arises once the gender-based comparison shows that a woman, doing like work or work rated as equivalent or work of equal value to that of a man, is being paid or treated less favourably than the man. The variation between her contract and the man's contract is presumed to be due to the difference of sex. The burden passes to the employer to show that the explanation for the variation is not tainted with sex. In order to discharge this burden the employer must satisfy the tribunal on several matters. First, that the proffered explanation, or reason, is genuine, and not a sham or pretence. Second, that the less favourable treatment is due to this reason. The factor relied upon must be the cause of the disparity. In this regard, and in this sense, the factor must be a 'material' factor, that is, a significant and relevant factor. Third, that the reason is not 'the difference of sex'. This phrase is apt to embrace any form of sex discrimination, whether direct or indirect. Fourth, that the factor relied upon is or, in a case within section 1(2)(c), may be a 'material' difference, that is, a significant and relevant difference, between the woman's case and the man's case.

When section 1 is thus analysed, it is apparent that an employer who satisfies the third of these requirements is under no obligation to prove a 'good' reason for the pay disparity. In order to fulfil the third requirement he must prove the absence of sex discrimination, direct or indirect. If there is any evidence of sex discrimination, such as evidence that the difference in pay has a disparately adverse impact on women, the employer will be called upon to satisfy the tribunal that the difference in pay is objectively justifiable. But if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity.

Some of the confusion which has arisen on this point stems from an ambiguity in the expression 'material factor'. A material factor is to be contrasted with an immaterial factor. Following the observations of Lord Keith of Kinkel in Rainey v Greater Glasgow Health Board [1987] AC 224, 235, the accepted synonym for 'material' is 'significant and relevant'. This leaves open the question of what is the yardstick to be used in measuring materiality, or significance and relevance. One possibility is that the factor must be material in a causative sense. The factor relied on must have been the cause of the pay disparity. Another possibility is that the factor must be material in a justificatory sense. The factor must be one which justifies the pay disparity. As already indicated, I prefer the former of these two interpretations. It accords better with the purpose of the Act. The distinction may not greatly matter in practice when an employer is having to justify the disparity in pay. But the matter stands differently when sex discrimination is not under consideration. Then the distinction may be of crucial importance, as the present case exemplifies. The industrial tribunal, in the course of its self-direction on the applicable law, held that a purely historic explanation of the pay difference between sexes is insufficient. That is correct, when justification is in point. It is not correct when, as in the present case, the absence of sex discrimination was not in issue.

The analysis set out above does not lack supporting authority. A clear exposition is to be found in the judgment of Mummery J., giving the judgment of the Employment Appeal Tribunal, in Tyldesley v. T.M.L. Plastics Ltd. [1996] ICR 356, 361-362. However, a survey of the various decisions and dicta bearing on this point is now unnecessary, in the light of the recent decision of your Lordships' House in Strathclyde Regional Council v. Wallace [1998] S.C. 72. In fairness to the industrial tribunal in the present case it should be noted that the tribunal gave its decision many months before this decision of the House. In the Wallace case the very point now under consideration arose for decision. In a speech with which all their Lordships agreed, Lord Browne-Wilkinson enunciated the proper interpretation of section 1(3). He did so more fully than I have attempted above, but his conclusion was to the same effect. He concluded:

The present case

In the present case the education authorities identified the factor which caused the pay disparity: teachers and instructors were remunerated according to two different nationally negotiated pay scales. This was so, even though the education authorities themselves decided how many spinal column points on the APT&C scale should be attributed to instructors in special schools. As the Lord President observed, it would be wrong to conclude that the causal connection was broken simply because the education authorities could have chosen to pay the instructors more. No one questioned the genuineness of the explanation. Most importantly, no one suggested that the pay disparity was tainted with sex discrimination. Accordingly, the education authorities made good their defence under section 1(3).

Mr. Underhill Q.C., on behalf of the applicant instructors, did not invite the House to depart from its decision in the Wallace case. Instead, he sought to distinguish that case from the present one. The Wallace case concerned the disparity in pay between principal teachers and teachers who were doing the work of a principal but were not promoted as a result of financial constraints. Counsel submitted that in the present case, unlike the Wallace case, no specific reason was ever adduced by the education authorities for paying instructors less than teachers. This was an historic practice, of unexplained origin, which had been continued through inertia. Such a 'non-explanation' could not satisfy section 1(3).

My Lords, this beguiling submission invites your Lordships to fall into the same trap as the industrial tribunal. The tribunal rejected the education authorities' explanation for the pay disparity not because they disbelieved the explanation but because they applied a wrong test. This is apparent from the importance the tribunal attached to the education authorities' failure to address themselves to a reassessment of the duties and responsibilities of instructors in special schools. The gist of the tribunal's reasoning was that the authorities could, and should, have done something about the pay disparity and, because they had not done so, could not bring themselves within section 1(3). For the reasons stated above, I take the view that this was an erroneous approach to the application of the statute in the present case. There is here no ground on which to conclude that the reasoning in the Wallace case is inapplicable to the present case.

Sex discrimination

As a fall-back position Mr. Underhill submitted that in the present case, unlike the Wallace case, indirect sex discrimination is in point. Teaching is a mixed profession. But the job of instructor in a special school is regarded as 'women's work', and paid as such. Statistics produced at the hearing in the industrial tribunal showed that instructors in special schools are overwhelmingly women. In 1994 there were 145 instructors in special schools in Strathclyde region. Of these, 96 per cent. were women. The same was true of teachers in these schools. There were 119 teachers, of whom 97 per cent. were women. If these were the appropriate groups to compare when considering whether the pay differential between instructors and teachers in special schools has a disparate adverse impact on women, the sex discrimination claim must fail. Mr. Underhill accepted this. He submitted, however, that the appropriate group for comparison with the instructors comprised teachers in all schools in Strathclyde region, mainstream as well as special. In this group a significant percentage of the teachers, 28 per cent., were men.

I need not pursue these figures further. Whether a pay disparity has a disparate adverse impact on women is primarily a question of fact. In seeking to raise this issue in your Lordships' House Mr. Underhill was seeking to pursue an issue of fact not raised before the industrial tribunal. As matters now stand, your Lordships do not have the factual material necessary to decide this issue. If this issue were to be pursued, the proceedings would have to be remitted for further consideration to another industrial tribunal, on the footing that both sides should have liberty to produce further evidence on the issue. In other words, on this new issue the parties would, in effect, be starting afresh. I do not think it would be just to compel the education authorities to follow this course. The proceedings have now been considered by no fewer than four different tribunals or courts: an industrial tribunal, the employment appeal tribunal, the Court of Session and, now, this House. This issue has never previously been suggested. In all conscience, these proceedings have long passed the stage at which the applicants should be permitted to introduce fresh issues of fact.

I add this. A court is always loath to shut out an issue which has not been considered on its merits. A feature of the present proceedings is that these are lead cases. Many other instructors have made similar applications. The further applications have been suspended pending the outcome of the present proceedings. Should this new issue have any substance, no doubt it can be raised in one of these other applications. In practice the present applicants, found to be engaged on like work with the teachers, will benefit from any overall pay settlement which may ultimately be achieved in this protracted dispute.

The Vienna Area Health Fund case

For completeness I should mention that, in his turn, Mr. Truscott Q.C. sought to re-open the 'like work' issue. He drew attention to the recent decision of the European Court of Justice in Angestelltenbetriebsrat der Wiener Gebietskrankenkasse v. Wiener Gebietskrankenkasse (Case C-309/97). The court delivered its judgment on 11 May 1999. The reference to the European Court concerned proceedings between the staff committee of the Vienna Area Health Fund and the Vienna Area Health Fund itself regarding the pay of graduate psychologists employed as psychotherapists. Among the persons entitled to be employed as psychotherapists were doctors who had completed their medical training and graduate psychologists. The latter claimed they should be classified in the same category as the former for pay purposes. The court held that the term 'same work' in the context of article 119 did not apply where the same activities were performed over a considerable length of time by persons the basis of whose qualification to exercise their profession was different. This answer must, of course, be read in the context of the facts under consideration: see paragraphs 20 and 21 of the judgment.

Mr. Truscott developed an interesting argument based on this decision and the opinion of Advocate General Cosmas. I think the points he raised will be better explored in a case where the fact finding tribunal have these particular issues before them when making their findings on the 'like work' issue. Having regard to the conclusion I have reached on the other issues in the present appeal, it is unnecessary to express any views on these points and I prefer not to do so.

For the reasons I have given I would dismiss this appeal.

LORD HOPE OF CRAIGHEAD

My Lords,

I have had the advantage of reading in draft the speech which has been prepared by my noble and learned friend, Lord Nicholls of Birkenhead. I agree with it, and for the reasons which he has given I too would dismiss the appeal.

LORD HUTTON

My Lords,

I have had the advantage of reading in draft the speech which has been prepared by my noble and learned friend, Lord Nicholls of Birkenhead. I agree with it, and for the reasons which he has given I too would dismiss the appeal.