Cheshire & Wirral Partnership NHS v Abbott & Ors

LORD JUSTICE KEENE: This appeal arises out of claims brought by the respondents against their employer, the appellant, under the Equal Pay Act 1970 (“the 1970 Act”). The respondents succeeded before an Employment Tribunal sitting at Liverpool, which held in a decision dated 18 April 2005 that the appellant had not made out a “material factor” defence under section 1(3) of the 1970 Act. On an appeal to the Employment Appeal Tribunal (“EAT”) it was held that the tribunal below had correctly addressed the issues raised as to the appropriate comparator, but that it had not made it sufficiently clear that it had adopted the correct approach to the issue of objective justification of the difference in pay. To that extent the EAT allowed the appeal and remitted the matter on that latter aspect. However, the appellant now challenges the EAT’s decision on the first of those two issues.

The appellant is a health authority which operates, amongst other things, two hospitals in Birkenhead, the Victoria Central Hospital and the St Catherine’s Hospital. The respondents are 31 domestic staff employed at those hospitals, 28 of them being women and three being men. In the 1970s the Whitley Council negotiated an incentive bonus scheme on behalf of ancillary staff, which included domestic staff. It also, at that time, included porters, caterers, linen service staff and other groups. By the time of the present claims, the only ancillary staff getting the bonus were the porters and the caterers. Porters were paid a bonus of 20% or 30% depending on which hospital they worked at. Domestic staff and caterers received a bonus of up to 33%, depending on location. However, in about 1986 or 1987, the domestic staff were 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. That bonus did not increase after 1988 because the appellant thought it was inappropriate and it was seeking to convert the bonus into a performance-related payment, but this was resisted. The result was that the ancillary workers employed by the appellant in the health service continued to receive a bonus, albeit frozen at the 1988 level.

Then, on 1 October 2001, the domestic staff were transferred back to the appellant under the TUPE regulations. Prior to the transfer back, negotiations took place with the union which resulted in the domestic staff receiving improved terms and conditions compared to 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. But the appellant was not prepared to reinstate the bonus. The Employment Tribunal noted that, had the domestic staff insisted on being paid a bonus, the domestic service would have gone out to competitive tendering, and the domestic staff might not have been re-employed by the appellant because of financial considerations and budgetary requirements. They consequently did not get the bonus. Nonetheless, most porters and catering staff continued to receive bonus payments after that date, even though frozen at the 1988 rate. As I have indicated, the re-employed domestic staff did not.

As of the date of the originating applications in October 2003, the appellant in total employed 146 domestic staff, consisting of 131 females and 14 males. Of those, only one received the bonus. He was male. It employed 20 porters, all male, of whom 17 received the bonus. There were 17 catering staff, consisting of 13 females and 3 males. Of those, 13 received the bonus, those being 10 females and 3 males.

Subsequently, in June 2004, the caterers agreed to forego their bonus payments, and in October 2004 the porters agreed that the bonus should be replaced by a new system. Those subsequent events have no bearing upon the issue before us today. The originating applications asserted in common form that the claimants, now the respondents, did work of equal value to the work performed by the porters and that they should receive the bonus. At a directions hearing before the Employment Tribunal it was agreed by the parties that the question of whether the jobs were of equal value should not be addressed until the tribunal had determined whether the employer could establish a “material factor” defence under section 1(3) of the 1970 Act. That gave rise to the decision of 18 April 2005.

Section 1(1) of the 1970 Act provides that a woman’s employment contract shall be deemed to include an equality clause which is then defined by section 1(2). In essence, the latter provides for a right to equal terms and conditions of employment where the woman does like work with a man in the same employment or does work which has been rated as equivalent under a job evaluation study, or where her work is of equal value to that of a man. It is the third of those situations, covered by section 1(2)(c), which is relied on in the present proceedings. Section 1(3) of the Act reads as follows:

“An equality clause shall not operate in relation to a variation between the woman’s contract and the man’s contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor

(a)

in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the woman’s case and the man’s; and

(b)

in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference.”

Those statutory provisions, as is well known, have to be seen in the context of European law on this topic and in particular what is now Article 141 of the Treaty, formerly Article 119. That provides that:

“1.

Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.”

It defines “pay” so as to include, apart from basic wage or salary, “any other consideration whether in cash or in kind”. It clearly covers a bonus payment. As was said by Lord Browne-Wilkinson in Strathclyde Regional Council v Wallace [1998] 1 WLR 259, [1998] IRLR 146:

“The cases established 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”.

I note for the sake of completeness that though section 1(1) to section 1(3) of the 1970 Act are framed in terms of contracts of women employees and their potential claims, the provisions do also enable men to bring such a claim if they can meet the terms of those sub-sections: see section 1(13).

It has been made clear by the House of Lords in Glasgow City Council v Marshall [2000] 1 WLR 333, [2000] IRLR 272, that the equality clause provisions in the 1970 Act are intended to operate where the variations in pay or conditions involve sex discrimination. Lord Nicholls of Birkenhead put it this way at page 339, paragraph 19 in that case:

“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”.

In the proceeding paragraph, Lord Nicholls stated that:

“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 effect, therefore, if there is no evidence of sex discrimination, the employer does not have to establish an objective justification for the difference in pay. The 1970 Act is not concerned with whether differences in pay are fair or unfair, but with whether they involve sex discrimination. It therefore becomes very important to determine whether there is evidence of sex discrimination being involved in the pay difference.

It is in this context that the decision of the European Court of Justice in Enderby v Frenchay Health Authority [1994] 1 AER 495 becomes particularly relevant. That was a case dealing with what may be called indirect sex discrimination, in the sense that prima facie sex discrimination was inferred from the difference in pay between two groups of workers, one group predominantly woman and the other predominantly men. The case arose from a claim by a female speech therapist employed in the National Health Service that she suffered discrimination in pay by reason of being a member of an almost exclusively female profession whose pay was significantly lower than in comparable jobs in the National Health Service where men predominated. The European Court of Justice said this at paragraphs 16 to 19 of its judgment:

“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 when 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, the judgment in Danfoss case, 109/88 [1989] ECR 3199 at 3226 (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”.

The first of the issues identified by the parties before the tribunal in the present case concerned the legitimacy of using porters as the comparator group. The employer challenged this, contending that the proper comparison was between the domestics on the one hand and the porters and caterers on the other: see paragraph 25 of the decision. The tribunal held that it was open to the domestics to identify the porters as the comparator group, saying, “The tribunal accepts that the claimant has the right to choose the comparator.” It continued as follows in paragraph 27 of its decision, and I quote the whole of the remainder of that paragraph because it is fundamental to this appeal:

“The onus is on the claimant to establish a prima facie case of sex discrimination, which they can do by pointing to the significant statistical difference that show an appreciable difference in pay between two jobs. The claimant has discharged this onus and has established a prima facie case in sex discrimination. There is a significant statistical difference between the proportion of woman who carry out the job of domestics (89.7%) than the job of porters, who are 100% male, 85% of whom receive a bonus. 0% of the domestics receive a bonus. If we are wrong on this point, a comparison between the domestics, the porters and caterers has little impact on the figures. Taking into account the number of caterers, 80% of woman and men do not receive the bonus. Out of the figure of 80%, 87% are woman and 13% men. The main impact of including the caterers in the figures is that the number of males and females who receive the bonus increase. However, there is a clear disparity between the number of women who do not receive a bonus and the number of men who do. The tribunal did not consider that the statistics produced by the claimant were unsatisfactory and fell foul of the pitfalls identified in Enderby. The statistics covered sufficient number of individuals; there was nothing fortuitous about the comparator group and they were not short-term phenomena. The statistics are significant because they demonstrate a clear difference in pay and that women were predominantly treated differently, because a large majority of them did not receive a bonus. The tribunal does not accept the respondent’s arguments that the statistics are insignificant because the pool consists of a small number of people. This argument does not defeat the existence of a large proportion of women who do not receive the bonus.”

It can be seen that the tribunal dealt with this issue both on the basis that the porters were a proper comparator group for indirect discrimination purposes and, alternatively, on the basis of one looking at the totality of the domestics, porters and caterers. Pausing there, I am bound to say that I am puzzled by that reference to that last group. The employer’s argument was that the domestics should be compared with the pool consisting of the porters and the caterers: see paragraph 25. It was not that one should look at a tri-partite group.

Be that as it may, the appellant appealed to the EAT. The EAT rejected the appellant’s submission that the tribunal below had misdirected itself as to the comparator group. Its reasoning on this was brief,and it is unnecessary to set it out in this judgment. As I have already noted, it did however conclude that the tribunal’s reasoning on objective justification was open to question and it allowed the appeal to that limited extent.

The issues on the appeal to this court are relatively limited ones. The first issue, and the one which prompted Chadwick LJ to give permission to appeal, concerns the tribunal’s approach to identifying the comparator group. It is contended by the appellant that the tribunal fell into error, first of all, by confusing a claimant’s right to choose the individual with whom she seeks to compare herself, with choosing the group when seeking to establish indirect sex discrimination. Mr Grundy, who appears for the appellant, submits that when one comes to doing the comparison exercise, the tribunal must itself ensure that the exercise is a valid one. It is not some unfettered right of the claimant. He argues that in the present case, it was artificial and wrong in law to compare domestics and porters, while ignoring the mainly female caterers. One should compare, it is contended, the domestics on the one hand with the porters and caterers combined on the other, since both of the latter generally received a bonus. The employment tribunal never carried out that exercise. It is said by Mr Grundy that to look at the porters alone as the comparator group deliberately buttresses an argument of sex discrimination. It is, it is contended, open to this court to intervene on this aspect of the case because the identification of a comparator pool is a matter of mixed fact and law. Reliance is placed on the case generally known as the Royal Copenhagen case, Specialarbejderforbundet I Danmark v Dansk Industri, acting for Royal Copenhagen A/S [1995] IRLR 648.

Linked with this first argument are two further ones advanced by the appellant, first that the tribunal erred in using the numbers of domestics and porters at all their establishments. It should, it is said, have confined itself to the two hospitals where the claimants worked, and indeed should have looked at each of those two hospitals separately. This is because the size of the bonus paid to the porters and caterers differed, depending on which of the two hospitals they worked at. Secondly, and in any event, it is submitted that the number of those in the comparator group, even if properly composed of porters and caterers together, was too small to be statistically valid. The total in that group would be only 37 at all the appellant’s establishments and only 24 at the two hospitals in question. That, it is said, is too small for statistical purposes. Again Mr Grundy relies on the Royal Copenhagen case and on this court’s decision in Nelson v Carillion Services Limited [2003] EWCA Civ 544, [2003] IRLR 428.

Mr Grace, for the respondents, on the first issue emphasises that the burden rested on the complainants to identify a comparator group and indeed to establish prima facie indirect sex discrimination. That was why they identified the porters as being the appropriate group. Nonetheless, he accepts that the tribunal must itself decide whether such an identified group is appropriate. It is contended on behalf of the respondents that the tribunal, at paragraph 27 which I quoted earlier, applied the correct test. It is also contended that this court should not interfere. In any event, says Mr Grace, it would make no difference to the end result if the caterers were included with the porters in the comparator group. The identification of the porters is said to be justifiable and not arbitrary, and Mr Grace distinguishes the Royal Copenhagen case on the basis that there one group of hand painters were seeking to compare themselves not with other hand painters who existed, but with automatic machine operators.

It is well established that in cases such as these, the burden of proving sex discrimination lies initially on the person asserting that such discrimination exists (see the Nelson case, paragraph 22). In that sense it is for the employee to identify the comparator group and to produce the statistical evidence to show an appreciable difference in pay for jobs of equal value. The safeguard which prevents the employee from choosing an artificial or arbitrary group is the tribunal’s own obligation to ensure that that does not happen. That is why one finds in Enderby the requirement that the statistics have to be “valid” and “significant”, must cover enough individuals, and must not be purely fortuitous or short term phenomena (see paragraph 17). Consequently the employee is not entitled to identify an artificial comparator group so as to bolster his, or more usually her, claim of discrimination. So the employee does not enjoy a “right” to choose the comparator group as suggested by the tribunal here. On the other hand, it seems that the tribunal was satisfied that the use of the porters alone as the comparator group was appropriate. Although the tribunal’s reasons at paragraph 27 are not entirely free from ambiguity on this, it seems likely that when it stated that the statistics did not fall foul of any of the pitfalls identified in Enderby it was referring, not just to the alternative comparator group consisting of domestics, porters and caterers all lumped together, but also to the employee’s comparator group; that is to say, the domestics on the one hand and the porters on the other.

However, that conclusion as to the porters forming an appropriate comparator group was not a pure finding of fact. It is one which necessarily has to be arrived at within a legal framework. Moreover, I note that in the case of Allonby v Accrington and Rossendale College [2001] EWCA Civ 529, [2001] IRLR 364, Sedley LJ emphasised at paragraph 18 the importance of identifying the pool logically:

“I would prefer to characterise the identification of the pool as a matter neither of discretion nor of fact-finding but of logic. This was the approach adopted by this court in Barry v Midland Bank Plc [1999] ICR 319, 334 and endorsed by Lord Slynn of Hadley on further appeal [1999] ICR 859, 863. Logic may, on occasion, be capable of producing more than one outcome, especially if two or more conditions or requirements are in issue. But the choice of pool is not at large.”

As a matter of logic, I find it difficult to see why the employment tribunal in this case found it appropriate to confine itself to a comparator pool consisting solely of the porters, when there were other ancillary workers employed at these hospitals who also received the bonus; that is to say, the caterers. In principle, the comparison should be made between the disadvantaged group and the advantaged group – see Barry v Midland Bank Plc [1999] 1 WLR 1465 at 1469H and 1474F. As a matter of statistics, a more reliable result is likely to be forthcoming if one takes as large a group as possible, so long as that group shares the relevant characteristics and can be seen as doing work of equal value. It does not appear to have been suggested in the present case that the caterers did not qualify on those grounds.

Such an approach seems to me to be consistent with the approach of the European Court of Justice in the Royal Copenhagen case. I quite accept that that case concerned employees engaged in piecework, where it was particularly important to consider all the relevant workers in order to provide a valid average figure for pay. Hence the court there said at paragraph 34:

“The comparison must moreover cover a relatively large number of workers in order to ensure that the differences found are not due to purely fortuitous or short-term factors or to differences in the individual output of the workers concerned”.

But even in non-piecework cases, one should at least strive to include all the advantaged workers, where work is held or assumed to be of equal value, in the comparator pool. In any event, to limit the comparator pool to the all male porters amongst the hospital ancillary workers employed by the appellant who were receiving a bonus and to omit the caterers should at the very least be regarded as arbitrary and contrary to the approach laid down in Enderby. It would artificially bolster the case for the respondents by leaving out the other ancillary workers who received the advantage of the bonus.

Whether that makes any difference to the end result depends on the other two points raised by Mr Grundy. On the first of those, I for my part can see no reason for limiting the exercise to the two hospitals where the claimants worked. The bonus system which was at the heart of this case applied across all the appellant’s establishments. Whether it was operated in a sexually discriminatory way was best judged by looking at the domestics, and the porters and caterers. The fact that the bonus was of a different size depending on which establishment was looked at is nothing to the point. It was the existence of the bonus as such which was the complaint.

Nor do I accept the appellant’s argument that the number of people in the comparator group is too low for a meaningful exercise. One needs to be careful about concluding from the Royal Copenhagen case that large numbers of employees are required for a comparator group in every case. It was important in that case because, as I have said, it was concerned with piecework and with average pay received, which meant that the average figures of pay had to be based on a large group in order to be meaningful. That is less important when dealing with identified differences in pay or benefits, such as the existence of a bonus and the absence of a bonus. All that one then is concerned with is the gender balance within the claimant group and the comparator group. If one were to regard the 37 members of the comparator group in the present case as too small, simply for statistical reasons, one would be preventing employees in small firms with a limited number of employees from establishing indirect sex discrimination in equal pay cases through the approach upheld in Enderby. That cannot be right. As it is, the porters and caterers constitute the totality of the appellant’s ancillary workers who received the bonus. It is the only available comparative exercise, and in my judgment it is a valid one.

Thus the tribunal here did not use the appropriate comparator group in arriving at its decision. Does this mean that this issue has to go back to it to be re-determined? In my judgment, it does not. The appropriate comparator group of porters and caterers was still predominantly male, 24 men and 13 women, making it approximately 65% male. I note that in Enderby the comparator group of pharmacists was of a not very different composition, being 70% male – see page 504(e). I can see no prospect of an employment tribunal regarding the comparator group in this case as anything other than predominantly male and as such, meeting the criteria in Enderby. Indeed at one stage in the hearing, Mr Grundy conceded in answer to my Lord, Auld LJ, that a domestics group approximately 90% female and a comparator group 65% male would meet the Enderby test, although Mr Grundy subsequently queried this.

It seems to me to be clear that the domestics are almost exclusively female and, with one male exception, do not get a bonus, whilst the porters/caterers are predominantly male and do overwhelmingly get a bonus. That is sufficient to establish a prima facie case of indirect sex discrimination. Consequently, despite the error in the tribunal’s approach I conclude that it reached the right decision in this case. The answer would have been the same, had there been no such error as I have identified. I consequently would dismiss this appeal.

SIR CHRISTOPHER STAUGHTON: I agree.

LORD JUSTICE AULD: For the reasons given by my Lord, Keene LJ, I also agree that the appeal should be dismissed. It is therefore dismissed.