Grundy v British Airways Plc

Mrs Grundy is a long-serving member of British Airways’ cabin crew (CC). She was initially employed full-time, but in 1987 she took employment as support cabin crew (SCC). This was a new class of contract, set up under a collective agreement known as the Burford Bridge Agreement, between British Airways (BA) and what was then the single staff union. It provided for those cabin crew who elected to become SCC to nominate between 15 and 20 days in each 28-day period on which they wished to work. They were paid a daily rate for those of the nominated days on which BA offered them work. The arrangement thus had benefits of flexibility for both parties, but particularly for women like Mrs Grundy who, in the course of time, had childcare responsibilities. Until 1994 this was the only way in which cabin crew could work part-time. From 1994 recruitment of SCC was halted and crew were offered the option of fixed percentage hours equating to a third, a half or three quarters of full-time work. When employment as SCC was abolished in 2002, Mrs Grundy opted for a 75% CC contract.

While full-time and post-1994 part-time cabin crew were on an incremental pay scale which gave them annual increases, support cabin crew had no such increments (and initially no pension, paid holiday or sick pay). As a result, by the time these proceedings under the Equal Pay Act 1970 were heard, Mrs Grundy’s pay was £13,589 as against the £17,499 paid to a man – Mr Wynne – who it was accepted was doing like work (also at 75% of full time) but had benefited as cabin crew from annual increments to which Mrs Grundy had not been entitled.

Hence the claim under the Equal Pay Act 1970. A concomitant claim under the Sex Discrimination Act 1975 was withdrawn at first instance. The Equal Pay Act as amended makes the following material provisions:

where the woman is employed on like work with a man in the same employment –

if (apart from the equality clause) any term of the woman’s contract is or becomes less favourable to the woman than a term of a similar kind in the contract under which that man is employed, that term of the woman’s contract shall be treated as so modified as not to be less favourable, and

if (apart from the equality clause) at any time the woman’s contract does not include a term corresponding to a term benefiting that man included in the contract under which he is employed, the woman’s contract shall be treated as including such a term

…… must be a material difference between the woman’s case and the man’s;

The effect of these provisions can be summarised as follows: every woman's contract of employment includes an equality clause which entitles her to terms no less favourable than those of a man who does like work for the same employer, unless she has less favourable terms which are genuinely due to a material difference, other than the difference of sex, between her case and the man's. The self-evident purpose is to invite a case-specific inquiry which may become general only at the point where less favourable contractual terms for like work have been established and the employer is seeking to establish reasons unrelated to gender for the difference.

Because it required radical adjustments to pay schemes, the Equal Pay Act 1970 did not come into effect until 29 December 1975. On the same date the principal provisions of the Sex Discrimination Act 1975 were also brought into effect, dealing with the non-contractual treatment of women and doing so by means of structured concepts of direct and indirect discrimination quite different from the mechanism of the Equal Pay Act. As the EAT in the present case pointed out, the two statutes are mutually exclusive. The Equal Pay Act nowhere calls in terms for a collective assessment of disparate impact: it requires only a comparison between the woman’s case and the man’s.

How then does it come about that this case has been argued at each instance entirely in terms of disparate impact and justification? The explanation is to be found in the decision of the House of Lords in Glasgow City Council v Marshall [2000] ICR 196. This followed the House’s decision in Strathclyde Regional Council v Wallace [1998] ICR 205, in which Lord Browne-Wilkinson reviewed the cases and concluded:

It is not necessary here to set out the facts of Marshall, save that they had produced a decision at first instance in the applicants’ favour by a literal application of s.1(2) and 1(3) of the Equal Pay Act. Lord Nicholls, in the single reasoned speech, held that this was not the right approach. In order to advance a defence that the difference in pay was not due to the difference in sex, the employer

At least three material points emerge from Lord Browne-Wilkinson’s and Lord Nicholls’ reasoning. First, sex discrimination enters the s.1(3) defence as an aspect of the onus resting on the employer: it has to be disproved, not proved. Secondly, if he can disprove discrimination, the argument is concluded in his favour; if not, he must go on to show objective justification. Thirdly, and importantly, Lord Nicholls holds:

The Watford employment tribunal (Mr Adamson, Mr Pepper and Mrs Scott) found in Mrs Grundy’s favour and directed that her pay, adjusted to 75%, be brought with retrospective effect to the top of the cabin crew pay scale. There is no issue about the appropriateness of this relief. In arriving at it, however, the tribunal first considered whether Mrs Grundy’s employment history, “with the failure of the Respondent to provide her with increments each year, was indirectly discriminatory on the ground of sex and unlawful”. They held the pay differential to be a “policy, criterion or practice of not paying increments to support cabin crew”, which “was to the detriment of a considerably larger proportion of women than men”. They went on to hold that it was not justified. The first of these findings must have been intended to reflect s.1(2)(b)(i) of the Sex Discrimination Act 1975 (as amended with effect from 12 October 2001), which, however, speaks of a “provision, criterion or practice”; but whichever of these elements the tribunal took to be at issue, what was in fact at issue was a contractual term, namely the provision for Mrs Grundy’s pay, which was less favourable than Mr Wynne’s notwithstanding that they were doing the same work. The second finding, on justification, reflected s.1(2)(b)(ii) of the Sex Discrimination Act.

On appeal to the EAT (Judge McMullen QC, Dr Fitzgerald and Ms Switzer), the same approach was adopted by the parties and (with an introductory explanation reflecting an understandable unease at the assimilation of the two statutes) by the appeal tribunal. The EAT declined to interfere with the ET’s decision on justification but overset it on the issue of disparate impact. They held that the ET had erred in law in focusing on the small, disadvantaged, SCC group rather than on the larger, advantaged, CC group. They went on to hold that only the latter was permissible in law and, since it was common ground that this produced a nugatory difference, substituted a finding that there was no disparate impact.

In this court Jane McNeill QC for Mrs Grundy accepts that the larger group displays no appreciable adverse impact, but submits (a) that there was nothing wrong in law with the ET’s focus on the smaller group and (b) that even if there was, it does not follow that the larger group was determinative, so that the most the EAT could properly have done was remit the case for rehearing. Christopher Jeans QC for BA argues that the EAT was right in relation to disparate impact but wrong in relation to justification, so that even if Mrs Grundy succeeds on the former issue, she loses on the latter.

The figures on which Ms McNeill relies are helpfully distilled in the following table, which takes three representation years (1994, 1998 and 2002) from the agreed annual statistics:

The table shows clearly enough that, while the ratio of women to men in CC was constant at about 2:1 throughout these years, the female:male ratio in SCC averaged almost 18:1 and at its lowest was 14:1. In other words, anything which impacted adversely on SCC was going to hurt a far larger proportion of women than if it were to impact on CC. But because of the relative size of the two groups, it was going to hurt far fewer women in absolute numbers: in 1994, 471 as against 6,273; in 1998, 99 as against 8,501; in 2002, 42 as against 8,592. The disadvantaged female:male ratio within the total cabin crew workforce moved accordingly in these years from above 9:1 to 7:1; but the advantaged ratio remained almost constant, at marginally (1:1.07) above and latterly at 1:1. Everything therefore depended on where the ET decided to focus its analysis.

The ET said:

The employment tribunal made an unimpeachable analysis of the figures summarised above and concluded that the ratio of the global percentage of advantaged women to that of advantaged men in 2002 was so small (99.53%:99.93%) as to be insignificant. Next, however, they compared the ratios affecting the disadvantaged group and found, in summary, that a comparison of the overall female:male ratio of about 2:1 with the female:male ratio in SCC of 14:1 showed a relative disadvantage of 86.67%. They concluded:

The issue is not the tribunal’s logic, which is faultless, but its premise. Contrary to what has been suggested, the tribunal in this passage do not ignore the larger group: they correctly analyse the situation of women within it and find no significant disadvantage. They then carry out a comparative exercise between the advantaged and the disadvantaged group and reach the conclusion which I have quoted. It is important to set out the terms (italicising the key phrases) in which they do it:

The EAT set out the tribunal’s findings and said this:

The EAT went on to hold – as the employment tribunal had also held - that the disparities within the larger group were not significant. They concluded:

Since I shall have to go through some of the case-law, it is no disrespect to the EAT to cite only their conclusion on it, which was, as they themselves make clear, the basis of their oversetting of the employment tribunal:

If this is the law, first-instance tribunals, not least the one which decided this case, as well as employers seeking to get their pay structures right and unions trying to ensure that they do so, must be in despair. If the principle is that the sole relevant group is the advantaged one, why look at “other proportions and other numbers” at all? If it is right to look at them, what legitimate bearing do they have?

To understand what has driven the EAT to this unsatisfactory position it is necessary to consider the majority decision of the House of Lords in Secretary of State for Trade and Industry v Rutherford (No.2) [2006] ICR 785, albeit that decision postdates the EAT’s. Another division of this court – see Chaudhary v BMA [2007] EWCA Civ 789 - has been considering Rutherford (No.2) concomitantly with us, and our judgment in the present case has been held back to take account of the outcome, to which I will come. But before doing so, it is important to note the differing contexts in which the assessment of disparate impact has arisen and can arise.

Both the Strathclyde and the Marshall cases, cited in paragraph 6 above, were equal pay cases. Neither of them, however, dealt with the constitution of the pool where a s.1(3) issue arose. Rutherford, which does deal with the constitution of a pool, does so in relation to the impact on men and women respectively of an upper age limit of 65 for redundancy and unfair dismissal rights in the light of article 141 of the EC Treaty, which requires member states to apply “the principle of equal pay for male and female workers for equal work or work of equal value”. It does not necessarily follow that such principles as can be derived from Rutherford about the constitution of the pool for the purposes of article 141 can simply be read across into the s.1(3) exercise; but the starting point is undoubtedly that the Equal Pay Act has to be read and applied so as to give effect, where required, to article 141, with the result that any principles of law governing the latter will govern the former too.

First, then, what are the principles to be derived from Rutherford? I respectfully share the difficulty of the other division of this court (Mummery, Smith and Maurice Kay LJJ) in finding a common ratio among the speeches in their Lordships’ House. I would respectfully express my sympathy with Carnwath LJ’s remarks on this question. Like the division which decided Chaudhary, I think it is safe to take the reporter’s headnote as representing the essence of the decision:

It is evident that, in the absence of any mechanism in article 141 for determining adverse impact, domestic courts applying that provision have to resort directly to an analysis of systemic adverse impact. Because there is no personal equation, the choice of pool is critical. But that is not the case in an Equal Pay Act claim. The Equal Pay Act sets out its own mechanism for determining whether the terms of a contract of employment breach the principle of equal pay for equal work – a mechanism which initially has nothing to do with systemic discrimination but depends entirely on a straightforward comparison between the woman’s contract and that of a man employed on like work: only two people are required. Where the comparison reveals a disparity, it falls to the employer to show, if he can, that there is a valid reason for it other than the sex of the particular employee, which ex hypothesi cannot be admitted as a valid reason. The harmonious construction of the legislation to which Lord Browne-Wilkinson’s speech in the Strathclyde case was directed means, as he indicated, that if the disparity turns out to be either directly or indirectly sexually discriminatory, the defence will fail unless the disparity can be independently justified. The reason for this lies in s.1(3) itself: a discriminatory contractual provision, absent independent justification, is due to the difference of sex.

But is the converse true: does proof that there is no systemic discrimination in the contractual disparity afford a complete defence regardless of justification? If the question were free of authority one might well have difficulty in seeing why it should. Not only does nothing in s.1(3) seem to suggest it; it appears inconsistent with the statutory scheme, which is to afford a remedy for individual pay discrimination subject only to a defence of justification which, as Lord Browne-Wilkinson explains, will fail by reason of the proviso in s.1(3) (“not the difference of sex”) if the justification itself depends on discrimination. It might have seemed that, in giving its chosen statutory effect to the open-textured requirement of the Treaty, Parliament had left no room for any resort to an argument that there is no systemic indirect discrimination by way of defence to a claim by a woman who is being paid less than a man for doing the same work. It is only in non-contractual relationships governed by the Sex Discrimination Act that Parliament has required affirmative proof of either direct or systemic discrimination. But we are bound by the proposition in Lord Nicholls’ speech in Marshall, explained in the course of the speech, that “if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity.” It appears to follow that an employer who is paying a woman less than he is paying a man to do the same job will have a good defence if his workforce is large enough for her case to be statistically insignificant, while a small employer in the same situation will fail.

I return therefore to the question presented by this appeal. I do so in the light of Lord Nicholls’ statement in Marshall that whether a pay disparity has a disparately adverse impact on women is primarily a question of fact. This is how the employment tribunal in the present case approached it. But, as Lord Nicholls’ use of the word “primarily” reminds us, like all questions of fact it is bounded by principles of logic, departure from which is an error of law. What are these principles?

In Rutherford the pool was held to be the entire national over-65 workforce. No universal principle of law dictated this. It was the pool which made most sense - indeed the only pool which made sense at all - in the light of the issue being canvassed. The consequence was that the claims had to fail, since everyone in the pool regardless of gender was shut out by the material condition. Such a pool will frequently be available, and with the same consequence; but no principle of law compels tribunals of fact to select it. Indeed, if there were such a principle, it is hard to see how indirect discrimination claims could ever succeed. The correct principle, in my judgment, is that the pool must be one which suitably tests the particular discrimination complained of: but this is not the same thing as the proposition that there is a single suitable pool for every case. In fact, one of the striking things about both the race and sex discrimination legislation is that, contrary to early expectations, three decades of litigation have failed to produce any universal formula for locating the correct pool, driving tribunals and courts alike to the conclusion that there is none. One need go no further than the detailed examination of the statistical issues in the speech of Lord Walker in Rutherford (No2) to see why.

Possibly the most helpful exegesis we have been shown is that of Cox J in the EAT decision in Armstrong v Ministry of Defence [2004] IRLR 672. Having explained why, in the EAT’s judgment, “the concept of indirect discrimination under the Equal Pay Act, when read together with European equal pay legislation and case law, is broader than that which applies under the Sex Discrimination Act 1975”, Cox J held (§46):

In Chaudhary this court, albeit obiter, has gone to the opposite extreme to Rutherford: it has held that the relevant pool for testing a bar imposed by the BMA on financially supporting race discrimination claims was not (as had been argued) the membership as a whole but only those members wanting to bring race discrimination claims. Since this excluded all members regardless of race, there could be no adverse racial impact. Here, too, the chosen pool – this time, however, a very small one – was such that the claim had to fail.

The dilemma for fact-finding tribunals is that they can neither select a pool to give a desired result, nor be bound always to take the widest or narrowest available pool, yet have no principle which tells them what is a legally correct or defensible pool. The EAT’s brave attempt in the present case to distil a principle simply enhances the uncertainty. But it is arguable that the single proper pool in Chaudhary was neither of the pools which were canvassed: it was members seeking support for legal claims. If within that pool there was a blanket refusal to support race discrimination claims, it might well have had a substantial adverse impact on ethnic minority members; but it would have been open to the BMA to justify this on the ground – for example - that experience showed the ratio of cost to success in race discrimination cases to be so poor that funds could legitimately be withheld from these cases (apart possibly from exceptionally strong ones) as a class.

Rutherford (No 2) seems to me to be a striking illustration of Lord Nicholls’ proposition that the assessment of disparate impact is a question of fact, limited like all questions of fact by the dictates of logic. In discrimination claims the key determinant of both elements is the issue which the claimant has elected to pose and which the tribunal is therefore required to evaluate by finding a pool in which the specificity of the allegation can be realistically tested. Provided it tests the allegation in a suitable pool, the tribunal cannot be said to have erred in law even if a different pool, with a different outcome, could equally legitimately have been chosen. We do not accept that Rutherford is authority for the routine selection of the widest possible pool; nor therefore that any question arises of “looking at” a smaller pool for some unspecified purpose short of determining the case.

A practical example is Price v Civil Service Commission [1978] ICR 27. The claimant, who had married young and brought up children before seeking employment, found herself excluded from the Civil Service by a rule that applicants had to be under 28 years old. The EAT rejected the Civil Service Commission’s argument that the pool for determining whether the rule discriminated indirectly against women was the entire national workforce (in which the proportion of women to men was about equal). It considered that there was much to be said for the view that the pool was those men and women who were qualified for civil service employment. That was a pool which made sense of the issue: was a significantly smaller proportion of women than of men able to comply with the requirement to be under 28 in order to be a candidate for a civil service job? To have taken the national workforce would have been to empty the issue of reality; to have taken only those who were 28 or over would have assumed the legitimacy of the very rule that was in issue. There was therefore a logical reason to take neither, and a sound reason to take a pool – potential applicants both over and under 28 - which enabled like to be compared with like, but excluding the disputed criterion.

I mention the comparison of like with like because it seems to me a relevant guide. Section 5(3) of the Sex discrimination Act 1975 requires comparisons made for, inter alia, indirect discrimination purposes to “be such that the relevant circumstances in the one case are the same, or not materially different, in the other”. This seems to me a useful indicator of how the pool should be chosen. It needs to include, but not be limited to, those affected by the term of which complaint is made, which can be expected to include both people who can and people who cannot comply with it. In the present case both of the contending pools have this character, but in critically different proportions.

Mr Jeans has drawn our attention to the reasoning of Wall J, as he then was, in Rutherford (No 2) in the EAT. Wall J pointed out that the disadvantaged group, as it was presented to the tribunal, was so small as to make any reliable conclusion on disparate impact impossible, while the wider pool (the advantaged group) clearly showed none and was therefore conclusive. Such an approach is not dictated by any legal principle: it is a practical way – sometimes the only practical way - of looking at the available evidence.

In my judgment the pool taken by the employment tribunal in the present case passes this test. It has to be kept in mind, as I said earlier in this judgment, that the test is being applied in a case like the present one not in order to see if a complaint of indirect discrimination is made out but in order to see whether a disparity in pay is explained by a material and non-discriminatory factor. The tribunal’s task, subject to what the exercise will logically bear, is to identify a cohort within which the defence can be objectively tested. The Watford tribunal did this, looking at both the advantaged and the disadvantaged groups but focusing on the latter, and found systemic discrimination with the result that the defence failed. Mr Jeans’ case is that the reverse process would – as Ms McNeill accepts – show no systemic discrimination; but unless he can demonstrate an error of law in the tribunal’s choice, he faces a finding of fact which, like many findings of fact, may be debatable but is legally impregnable. In my judgment no such error can be shown. Contrary to Mr Jeans’ unqualified submission, there is no principle of law which requires the fact-finding tribunal always to base its test of disparity on the advantaged cohort. British Airways must live with the finding of disparate impact.

This leaves the issue of justification, on which the EAT indicated that it would have upheld the employment tribunal, and on which Mr Jeans therefore cross-appeals contingently on Ms McNeill’s appeal on disparate impact succeeding. Argument was reserved on this issue, and must now be heard.

I agree that the appellants should succeed on this part of the case for the reasons given by Sedley LJ. In deference to the impressive submissions we have heard (set out in 150 paragraphs of closely-argued “skeleton” arguments, and supported by 35 European and domestic cases in the joint bundle), I feel I should add a few words to explain why in the end the issues raised seem to me relatively straightforward.

On the facts of this case, and cutting through the legal complications, there seem to me to be in summary three questions:

Was there a difference of pay between Mrs Grundy and Mr Wynne?

Was the difference substantial or considerable?

Was it justifiable?

The answer to the first question is easy. It comes from section 2(a)(i) of the Equal Pay Act 1970, which applies where a woman is employed on like work with a man, and the woman’s contract is less favourable. There is no dispute that in this case it is. She is paid £13,582 for the same job for which Mr Wynne is paid £17,499.

The second question is a little more difficult. As Sedley LJ has explained, its statutory derivation is not straightforward. Section 1(3) of the 1970 Act provides a defence where the employer proves that the variation is due to a material factor which is “not the difference of sex”. Those words, it has been held, have to be read so as to give effect to the principle of equal pay under article 141 of the EC Treaty. That in turn leads to Article 2(2) of the Burden of Proof Directive 97/80/EC, under which (subject to justification):

In the relevant year 2002 (when the SCC contracts were brought to an end, and Mrs Grundy became a part-time cabin crew member) there were 13,127 cabin crew in total. There were 45 in the disadvantaged SCC class: 42 women and 3 men. Although the numbers of SCC were relatively small, they were not insignificant, and the disparity is striking. Furthermore, it reflects a consistent pattern over the period from 1994 to 2002. Thus, in 1994 there were 495 disadvantaged staff out of a total of 9,915: 471 women and 24 men. The reduction in the relative numbers of SCC is unsurprising, since recruitment to the SCC stopped in 1994. The Tribunal found that this difference was substantial. At first blush that appears to be a pure conclusion of fact, which they were entitled to reach.

The EAT found an error of law. They thought that the Tribunal had been wrong to have “reversed the focus… from the advantaged to the disadvantaged group” (para 59). That approach was entirely understandable in the light of the then most recent guidance from the Court of Appeal in Rutherford (2). The EAT had earlier quoted the judgment of Mummery LJ in that case, where he had said:

Since the House of Lords judgments in Rutherford (2) it is clear at least that the guidance of the Court of Appeal can no longer be taken as authoritative on this point. There is plenty of room for argument about the precise ratio in the House. However, a common theme of the majority judgments, as I read them, is to emphasise the fact-sensitive nature of decisions in this field, and to lean against the application of general rules. (I agree in particular with Sedley LJ’s comments on that case at paragraph 31 of his judgment.) Even the minority judgment of Lord Walker emphasised the limitations of hypothetical statistical examples, of the kind used by Mummery LJ (see para 67). If there is no rule such as that relied on by the EAT, the only ground for questioning the Tribunal’s judgment of fact falls away.

Finally, I hope I will be forgiven for adding a comment about the form of the House of Lords judgments in Rutherford (2). This goes back to an issue I raised in Doherty v Birmingham City Council [2006] EWCA Civ 1739. In that case we were faced with the need to analyse six substantive House of Lords judgments in the leading case, four majority and two minority, to extract a test for local authority possession cases against gypsies. In giving the judgment of the court (with the agreement of Tuckey LJ and Neuberger LJ, as he then was), I observed that we would have been assisted by a single majority judgment, “or at least a single judgment on those issues where there appears to have been no material difference within the majority”; we expressed the hope that there might be a wider debate on this and other similar issues, in the process of transition to the new Supreme Court (para 65).

More recently, in OBG Ltd v Allan [2007] UKHL 21, Baroness Hale expressed a similar sentiment. Having referred to the majority’s agreement with Lord Hoffmann’s leading judgment in that case, she said:

The present case might, with respect, have benefited from that approach. A single majority judgment might have given clearer and more manageable guidance for tribunals working in this difficult area. I am happy, however, to concur in the conclusion reached by our colleagues in Chaudhary (and shared by Sedley LJ) that the ratio can for practical purposes be taken from the headnote summarising the reasoning of Baroness Hale.

I agree that the appeal should be allowed for the reasons given in both judgments, which reasons I should stress, I understand to be the same. I say that because I would add my support for the plea of Carnwath LJ in the last paragraphs of his judgment to the effect that where possible there should be a judgment or judgments at the appellate level which make clear precisely what an appeal has decided. That must be as true in the House of Lords as in the Court of Appeal. We should all be conscious that it would be better, and saving of considerable time and expense, not to leave it to others to puzzle out what we are deciding.