Redcar & Cleveland Borough Council v Bainbridge & Ors ("Bainbridge 1")

This is the judgment of the court to which all members of the court have contributed.

These three consolidated appeals concern claims for equal pay and the scope of the defences. At present there are thousands of equal pay claims pending in employment tribunals, principally against local authority employers and NHS Trusts. Their outcome is likely to be affected by the rulings on these appeals. However, the effect of the rulings extends beyond public sector employment and is likely to affect the way in which employers, employees and trade unions approach equal pay in general and, in particular, job evaluation exercises and consequential changes to pay and grading structures.

The appeals are from three judgments of the Employment Appeal Tribunal (the EAT) on questions of law arising from the construction and application of the Equal Pay Act 1970 (the 1970 Act) in decisions of the employment tribunal (the ET).

We are concerned with claims made by the employees of two local authorities in the North East of England. These are Redcar and Cleveland Borough Council, to whom we will refer as “Redcar”, and Middlesbrough Borough Council, to whom we will refer as “Middlesbrough”.

For many years, the terms and conditions of local authority employees were governed by collective agreements, which were nationally negotiated and reviewed. They were known, in the case of manual workers, as “the White Book”; in the case of administrative, professional, technical and clerical workers (APT & C or white collar employees) as “the Purple Book”; and in the case of skilled craft workers as “the Red Book.” Of the three schemes, only the White Book was based on a job evaluation scheme (JES). The work of any White Book employee was rated as equivalent (RAE) to any other White Book employee on the same grade. It was intended and anticipated that the JES underlying the White Book scales would eliminate any possibility of sex discrimination in respect of pay.

The Purple Book and the Red Book comprised terms and conditions of employment, but the pay scales at Redcar and Middlesbrough were not based on a JES. Thus, any Purple Book employee of Redcar who wished, in an equal pay claim, to compare herself with a White Book or Red Book employee would have to show that her work was work of equal value. (We note that some local authorities have based their Purple Book gradings on JESs.)

In 1997, a national collective agreement was reached unifying the terms and bargaining structures applicable to the White Book manual workers and the Purple Book white collar workers into a “Single Status” agreement called “the Green Book”. It provided for all manual and APT & C jobs to be graded on the same scales. New job evaluation studies were to be conducted locally under procedures involving panels of employer and employee representatives and using specified factor guidance. Once the JESs were completed and the Green Book implemented, the work of any employee on a particular scale would be RAE to any other employee on that scale, regardless of the nature of their work.

The 1997 collective agreement expressly recognised the need to ensure that the new arrangements complied with equal pay legislation and a working group was set up ‘to examine bonus and associated issues with particular reference to equal pay’. It appears to be common ground that one of the fundamental purposes of the Single Status agreement was to remove the inequalities of pay which had crept into local government employment. Certainly, the working group identified within the existing arrangements some problems arising from the operation of equal pay law. For the future, under the Green Book, there was to be equality of pay for men and women doing equally rated work.

A great deal of work and negotiation had to take place before any individual local authority could be ready for transition to the Green Book. Redcar implemented the Green Book in April 2004 and Middlesbrough in April 2005.

Starting in the summer of 2003 and continuing, a large number of female employees of each local authority brought equal pay claims. Each authority received claims from manual and white collar employees. Each authority received claims in respect of alleged inequality before the transition to the Green Book and later received claims alleging inequality (arising in a different way) after the introduction of the Green Book.

In the Redcar case, the majority of the White Book claimants were care workers and catering workers. All were in Manual Grade 2 (MG2). They sought to compare themselves with male gardeners and refuse collectors (MG2) and male street cleaners (who were in the lower grade of MG1). All these men were earning more than the MG2 women. In broad outline, the factual position was that, although the MG2 women’s basic pay was the same as the men on MG2 (and higher than the men on MG1), the men were receiving either a bonus or an allowance which took their pay above that of the women who received no such bonuses or allowances. The differential was substantial: for example, the gardeners’ bonus scheme resulted in a pay uplift of 40%.

In respect of the early claims received from its White Book employees, Redcar decided to concede liability. However, in respect of claims received after 27 January 2004, it made no more concessions, but relied on the defence under section 1(3) of the 1970 Act. Its argument was to be that the White Book permitted different groups of workers to negotiate bonuses and allowances provided that these were genuinely based on a justifying factor, such as productivity or working conditions. The bonuses which gave rise to the pay differential between the MG2 men and women were said to be genuinely and justifiably based on a productivity scheme and the allowances were justified by economic or working conditions. The claimants’ position was to be that the bonuses and allowances, which the male comparators were receiving, were not justified. They were just pay supplements to which the men were automatically entitled; in effect, the men were on a higher rate of basic pay than the women.

Because Redcar’s position in respect of claims brought before and after 27 January 2004 was different, the ET divided the White Book claimants into two groups. Those who had lodged their claims before 27 January 2004 and for whom liability had been conceded were known as the First Multiple claimants. Those who had lodged their claims after that date, in respect of whom liability was denied, were known as the Second Multiple claimants.

Middlesbrough also received a large number of claims from employees covered by the White Book. These were mainly carers. They sought to compare themselves with various types of male employee, such as gardeners and street sweepers who were equally rated. There were also some Purple Book employees, such as community support workers, who alleged that they were doing work of equal value with male manual workers. Later, after the Middlesbrough Green Book scheme came into operation in April 2005, it received claims under that scheme.

The Redcar claims proceeded first. There were many hearings before the ET. There is no need at this stage to set out the detailed chronology of events. The first substantive decision was promulgated on 13 February 2004. This recorded Redcar’s concession in respect of the First Multiple claimants. However, their pay was not immediately adjusted because there were disputes as to quantum. A remedies hearing was held in December 2004 and their pay was then adjusted in respect of the period up to April 2004. An appeal was brought from those decisions to the EAT and to this court on certain aspects of the ET’s conclusions on remedies.

The hearing for the Second Multiple claimants began in April 2005. The decision was not promulgated until December 2005. Many (although not all) of the Second Multiple claimants established the right to equal pay with some of their male comparators. The ET held that the bonuses and allowances payable to gardeners and street sweepers, which had been genuine and justifiable when first introduced had, by 2000, become automatic pay uplifts for the men. It also upheld the claims of women who were comparing themselves with refuse collectors, but that decision was reversed by the EAT and we say no more about it.

In the same set of hearings, the ET also heard the claims of a large number of women who were aggrieved about a pay differential which had arisen under the Green Book. These claims were based on the allegation that men who were on the same Green Book scale as the women claimants were receiving more pay, because they were receiving ‘pay protection’ which the women were not receiving. We will explain the pay protection scheme and the nature of the women’s claims in greater detail later in this judgment. Suffice it to say at this stage that the ET decision promulgated in December 2005 also covered this issue and the claimants succeeded.

Redcar appealed to the EAT in respect of the successful Second Multiple claimants (White Book) and the Green Book claimants on the pay protection issue. The decision (reported as Redcar and Cleveland Borough Council v Bainbridge(No 1) [2007] IRLR 91) was handed down on 15 November 2006. Of relevance to the present appeals, it is necessary only to say that Redcar’s appeal in respect of the section 1(3) defence to the Second Multiple claimants’ claim in respect of gardeners and street sweepers was unsuccessful, as was the appeal on pay protection.

In a second decision dated 8 June 2006, the ET considered a number of additional issues which had arisen from the equal pay claims. The Redcar claimants had contended that, in respect of the period before 1 April 2004, they were entitled to bring claims based on work of equal value as well as their claims based on work which was RAE. Redcar had applied to strike out the equal value claims as res judicata.

Further, some claimants lodged claims after April 2004 in which they sought to claim back pay for six years by comparing themselves with a comparator with whom they were RAE under the Green Book scheme, even though that scheme had not come into effect until 1 April 2004. The ET held that they were not so entitled. Until that issue reached this court, it was generally referred to as the ‘backdating issue’. We think that is something of a misnomer and that it is preferable to refer to that issue as the ‘Retroactive Effect’.

Finally, some claimants sought an uplift to their compensation on the basis that Redcar had been in breach of its duty to attempt to resolve the claimants’ grievances in respect of their equal pay claims before action had been begun. The claimants sought to rely on section 30 of the Employment Act 2002. The ET held that section 30 did not apply in the current circumstances but, in the event that they were wrong about that, they decided that the appropriate uplift would be 5%. We will call that issue ‘Statutory Grievance Uplift’.

In a second decision, dated 23 March 2007, and reported as Redcar and Cleveland Borough Council v Bainbridge (No 2) [2007] IRLR 494, the EAT dealt with these three issues. On res judicata, the EAT upheld the ET and Redcar appeals to this court. On Retroactive Effect, the EAT upheld the ET’s decision and the claimants now appeal. On Statutory Grievance Uplift, the EAT held that section 30 did apply, but refused to order any uplift in the particular circumstances of the case. The claimants appeal that decision, seeking an uplift of 5%.

While the Redcar cases were being heard in the EAT, the Middlesbrough White Book, Purple Book and Green Book claims were progressing towards separate hearings before the ET. Middlesbrough had not made any concessions on liability and advanced a section 1(3) defence in respect of both White Book and Green Book claims. The White Book hearings took place in February and March 2005 (that is before Middlesbrough’s changeover day), but the decision was not promulgated until 25 May 2005, which was after changeover day. There was a further hearing in July 2005 and a further ET decision was promulgated on 12 September 2005. As with Redcar, the White Book claimants were successful. Middlesbrough did not appeal against that judgment rejecting its s.1(3) defence.

There was a further hearing in November 2006 at which two Purple Book claimants claimed equal pay with a Red Book comparator (Mr Fenny) and a White Book comparator (Mr James). The issue in those claims was whether the employer could rely on separate collective bargaining arrangements as the basis of its section 1(3) defence. At the same hearing, claims under the Green Book were determined. These involved the issue of pay protection. The decision was promulgated on 3 January 2007. The Purple Book claimants succeeded; the separate collective bargaining defence failed. The Green Book claimants also succeeded. The ET held that the pay disparity which resulted from their exclusion from the pay protection scheme was discriminatory and could not be justified.

Middlesbrough appealed to the EAT, which, on 17 July 2007, dismissed the appeal in respect of separate collective bargaining, but allowed the appeal in respect of pay protection. The decision is reported as Middlesbrough Borough Council v Surtees (No 1) [2007] ICR 1644. The claimants appealed to this Court on the pay protection issue and Middlesbrough appealed on the issue which we will call ‘Separate Collective Bargaining’.

The unsuccessful parties in both the Redcar and Middlesbrough cases appealed to this Court and a direction was made that the appeals should be heard together. Thus, in the Redcar appeal, Redcar is the appellant, but in the Middlesbrough case, it is the claimants who appeal on pay protection and Middlesbrough who cross-appeals on separate collective bargaining. In order to avoid confusion, we will refer to the parties as Redcar or Middlesbrough (together the Councils) and ‘the claimants’ regardless of the particular proceedings in which the equal pay claims are made or of the appeals in the different proceedings.

In this Court, the representation was the same as it had been in the EAT. Mr Robin Allen QC appeared for the claimants, Mr John Cavanagh QC appeared for Redcar and Mr Christopher Jeans QC for Middlesbrough.

On 13 December 2007, an application was made by the Commission for Equality & Human Rights (the Commission) to intervene in the appeal in order to make submissions on the interpretation and application of the concept of sex discrimination as it applies to pay, in particular on the orderly management of change in pay structures by means of pay protection. Written submissions were supplied and the Commission sought permission to appear by their counsel, Lord Lester QC and Mr Iain Steele.

The Councils did not object to the intervention, but the claimants did. Mr Allen contended that, because the Commission had at one stage supported the claimants in these appeals but were no longer doing so, they ought not to be involved at all. They had seen confidential material and had been privy to confidential discussions. They could not describe themselves as independent. However, it was apparent to us that Lord Lester’s submissions related entirely to legal issues. On some issues he supported the claimants and on others the Councils. At no stage did his submissions depend upon the facts of particular cases. We could not see how the claimants could have any real complaint about his appearance. Although Mr Allen could not concede the point, after some discussion, he did not press his objection, and we permitted Lord Lester to take part in the hearing. We are grateful for his contributions both written and oral.

Before explaining the factual background to these appeals, it is convenient to set out the main statutory provisions governing the right of employees to equal pay. We will also, at this preliminary stage, refer to the important and uncontroversial decisions of the European and domestic courts which explain the correct approach to an equal pay claim, with particular reference to the statutory defence provided by section 1(3) which is the focus of these appeals. For this summary, we have drawn extensively on the exposition set out by Elias J in the judgment of the EAT in Middlesbrough Borough Council v Surtees (supra) and on the skeleton argument of Lord Lester.

The principle governing the right to equal pay was introduced by Article 119 of the Treaty of Rome, but is now stated, in the same terms, in Article 141 of the EU Treaty. Article 141 provides:

“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.”

Article 141 is supplemented by Article 1 of the Equal Pay Directive (Council Directive 75/117) which provides that the principle of equal pay means:

“the elimination of all discrimination on grounds of sex with regard to all aspects and conditions of employment.”

Council Directive 97/80/EC of 15 December 1997 defined equal treatment and also made provision for the burden of proof which must operate in cases of alleged sex discrimination. Article 2 says that the principle of equal treatment means that there shall be no discrimination whatsoever based on sex, either directly or indirectly. It also defines indirect discrimination:

“ … indirect discrimination shall exist where an apparently neutral provision, criterion or practice disadvantages a substantially higher proportion of the members of one sex unless that provision, criterion or practice is appropriate and necessary and can be justified by objective factors unrelated to sex.”

Article 4 provides:

“1.

Member States shall take such measures as are necessary… to ensure that, when persons who consider themselves wronged because the principle of equal treatment has not been applied to them establish, before a court or other competent authority, facts from which it may be presumed that there has been direct or indirect discrimination, it shall be for the respondent to prove that there has been no breach of the principle of equal treatment.

2.

This Directive shall not prevent Member States from introducing rules of evidence which are more favourable to plaintiffs.”

The principle of equal pay was introduced into domestic law by the 1970 Act which came into effect in December 1975. The provisions with which we are mainly concerned are in section 1, which (as amended) provides:

“(1)

If the terms of a contract under which a woman is employed at an establishment in Great Britain do not include (directly or by reference to a collective agreement or otherwise) an equality clause they shall be deemed to include one.

(2)

An equality clause is a provision which relates to terms (whether concerned with pay or not) of a contract under which a woman is employed (the “woman’s contract”), and has the effect that-

(a)

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

(i)

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 the man is employed, that term of the woman’s contract shall be treated as so modified as not to be less favourable, and

(ii)

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.

(b)

where the woman is employed on work rated as equivalent with that of a man in the same employment-

(i)

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

(ii)

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 and determined by the rating of the work, the woman’s contract shall be treated as including such a term;

(c)

where a woman is employed on work which, not being work in relation to which paragraph (a) or (b) above applies, is, in terms of the demand made on her (for instance under such headings as effort, skill and decision) of equal value to that of a man in the same employment-

(i)

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

(ii)

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.”

Section 1(3) provides a defence where the difference in pay is explained by genuine material factors not tainted by the difference of sex (the GMF defence):

“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 a 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.”

It should be noted that Article 141 relates only to pay, although equal pay has been widely construed to include both contractual and non-contractual aspects of remuneration. The domestic legislation provides for equality of treatment of men and women over the whole field of employment, not merely remuneration. Contractual matters are covered by the 1970 Act, but a complaint of different treatment relating to a non-contractual matter must be brought under the Sex Discrimination Act 1975 (SDA 1975).

Under the SDA 1975 (as amended), indirect discrimination against a woman in the field of employment is established where (under section 1(2)(b)) the employer:

“… applies to her a provision, criterion or practice which he applies or would apply equally to a man, but –

(i)

which puts or would put women at a particular disadvantage when compared with men,

(ii)

which puts her at that disadvantage, and

(iii)

which he cannot show to be a proportionate means of achieving a legitimate aim.”

This means of demonstrating indirect discrimination is known as showing ‘disparate adverse impact’. On the face of it, the provision, criterion or practice applies in the same way to men and women. The employer may well not intend to discriminate against one sex or the other. But the contention of the claimant (usually a woman) is that the application of the provision, criterion or practice in fact has a disparate adverse impact on women. In a claim brought under section 1(2)(b) of the SDA 1975, the claimant usually has to produce statistical evidence of the disparate adverse effect of the practice upon women. If that is shown, there will be unlawful indirect discrimination, unless the employer can justify it by complying with (iii). The provision in (iii) is generally known as the requirement for ‘objective justification’. We will return to that provision later.

In the United Kingdom a woman who wishes to claim equal pay with a man for equal work may choose whether to rely directly on Article 141 (see Defrenne v Sabena [1976] ICR 547) or to rely on the 1970 Act. The 1970 Act was the domestic implementation of Article 119, now Article 141. If any conflict or inconsistency between the two were to arise, the English court would be under a duty, so far as possible, to construe the 1970 Act in accordance with community law: see Autologic plc v IRC [2006] 1 AC 118 at paragraphs 16 and 17.

Because Article 141 covers any pay discrimination on the ground of sex both direct and indirect, the 1970 Act must be construed as covering direct and indirect discrimination. This was not clear in 1970; the separate concepts of direct and indirect sex discrimination had not then been recognised. In any event, the body of the 1970 Act does not speak of ‘discrimination’; its method is to impose a requirement of equal treatment for men and women in the same employment in order to prevent discrimination as regards terms and conditions of employment between men and women. It may be - it is not clear - that, when passing the 1970 Act, Parliament had in mind only direct sex discrimination in the field of pay. Certainly, when the 1970 Act was brought into force by the SDA 1975, which introduced the concept of indirect discrimination, the provisions of the 1970 Act were not amended or clarified to take account of the possibility that a differential in pay might arise as the result of indirect, as well as direct, sex discrimination. However, it is now clear that the 1970 Act must be read so as to forbid both direct and indirect sex discrimination in the field of pay. It follows that, for the section 1(3) defence in the 1970 Act to succeed, the pay differential (which the claimant has demonstrated) must be due to a genuine material factor which is not ‘the difference of sex’ either directly or indirectly.

Although the SDA 1975 provides for only one means of demonstrating indirect discrimination (see section 1(2)(b)), in the field of equal pay the European Court of the Justice (ECJ) has said that there are other ways in which a court or tribunal might be satisfied that a pay differential is prima facie discriminatory. This was first explained in Enderby v Frenchay Health Authority (Case C-127/92) [1991] ICR 382 (EAT); [1994] ICR 112 (CA and ECJ). In that case, a female speech therapist brought proceedings against her employer and the Secretary of State for Health claiming equality of pay with two male comparators (a clinical psychologist and a pharmacist), who were paid more than her for doing work of equal value. The employer relied on the GMF defence in section 1(3) of the 1970 Act. At first instance, the tribunal dismissed her claim holding that the difference in pay had resulted from the operation of the different collective bargaining agreements governing the pay of the different professional groups. These agreements were not in any way tainted with sex discrimination. The section 1(3) defence succeeded.

In the EAT, the Secretary of State argued that, where a female claimant wished to rely on indirect discrimination in an equal pay claim, it was necessary (in compliance with section 1(1)(b) of the SDA 1975) for her to identify the barrier or requirement which was having a disparate adverse impact on women and which she could not comply with. If there was no barrier or requirement, there was no indirect discrimination. The claimant’s submission was that there was no need to identify a barrier or requirement which prevented her from joining the advantaged group and receiving the higher rate of pay. On the facts of the case there was a differential. The facts were that practically all the speech therapists were women and, at the relevant senior level, practically all the clinical psychologists and pharmacists were men. The claimant contended that those facts were in themselves sufficient to show a prima facie case of indirect discrimination. If that were accepted, the only way in which the employer could avoid liability was to justify the difference in pay objectively. The EAT rejected the claimant’s argument and dismissed the appeal.

However, the Court of Appeal was troubled by the claimant’s argument and referred the case to the ECJ. It wished to know whether a section 1(3) defence could succeed merely by the employer proving the absence of any barrier or requirement preventing the woman from becoming a member of the advantaged group and without having to prove some objective justification for the pay differential.

At the ECJ, Advocate General Lenz supported the claimant, and within paragraph 28 he said:

“In cases in which it is established that a group of women is being disadvantaged in comparison with a group of male workers (doing work which is the same or of equal value in the same plant or undertaking) no additional factor, whereby unequal treatment is applied, need be required.”

And later at paragraph 35:

“As I have already stated in my basic comments regarding the nature of indirect discrimination, attention should be directed less to the existence of a requirement or a hurdle by means of which women suffer a disadvantage, and more to the discriminatory result.”

The ECJ accepted the Advocate General’s opinion and upheld the claimant’s contention. After observing that this was not the usual sort of case in which an arrangement was held to be discriminatory against female workers, the Court said:

“16.

However, if the pay of speech therapists is significantly lower than that of pharmacists and the former are almost exclusively women while the latter are predominantly men, there is a prima facie case of sex discrimination, at least where the two jobs in question are of equal value and the statistics describing that situation are valid.

….

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.”

Thus the court held that there will be some situations in which prima facie indirect discrimination will be found, even though it is not possible to identify a requirement or barrier or provision, criterion or practice which is having a disparate adverse impact on women. So, in the context of an equal pay claim, the ways in which indirect discrimination can be proved are not limited to the method described in section 1(2)(b) of the SDA 1975. It is open to a court or tribunal to find indirect sex discrimination when the circumstances are such that they recognise it. This principle was followed and endorsed by the EAT (Cox J presiding) in Ministry of Defence v Armstrong [2004] IRLR 672. At paragraph 42, Cox J said that tribunals should not apply a formulaic approach to issues of sex discrimination; what matters is whether the tribunal is satisfied in any particular case that the evidence discloses a pay difference which is related to the difference of sex.

We mention in passing that in Enderby neither the Advocate General nor the Court said anything about which side would bear the burden of proving or disproving the factual background from which the inference of prima facie sex discrimination was to be drawn. In that case, the facts were there for all to see and it mattered not who had borne the evidential burden of bringing them before the court. However, the reference from the Court of Appeal (see paragraph 43 above) acknowledged that the burden of proof under the section 1(3) defence lay on the employer.

Whereas direct discrimination (discrimination against the woman because she is a woman) is always unlawful and can never be excused or justified, by contrast, indirect discrimination can be objectively justified and, if justified, is not unlawful: see Bilka-Kaufhaus Gmbh v Weber Von Hartz (Case 179/84) [1987] ICR 110. There, the employer, who employed both part time and full time workers, had a policy of excluding its part time workers from its occupational pension scheme. This policy had a disparate adverse impact on women and the ECJ held that it infringed the principle of equal pay in Article 119 of the EEC Treaty, unless the employer could show that the policy was based on objectively justified factors unrelated to any discrimination on the ground of sex.

For the purposes of the section 1(3) defence, the employer does not have to show objective justification for the pay practice or policy which results in a pay differential, if he can show that the reason for the policy is not the difference of sex, either directly or indirectly: see Strathclyde Regional Council v Wallace [1998] 1 WLR 259 (HL). In that case, some unpromoted female teachers employed by various councils sought pay parity with male principal teachers. They established that they were doing equal work and the tribunal rejected the employer’s section 1(3) defence because, it said, the employer had failed objectively to justify the pay differential. The employer’s appeal to the Court of Session succeeded on the ground that the section 1(3) defence was made out because the pay differential was not related in any way to sex. The reason for it was the employer’s system of promotion coupled with financial constraints. The House of Lords dismissed the appeal. Lord Browne-Wilkinson observed that the case should have been simple because there was no evidence at all that the difference in pay was caused by anything to do with sex. The tribunal had been under the mistaken impression that the employer had to justify objectively any pay difference, regardless of whether it was related to sex. It did not. At page 266 B-C Lord Browne-Wilkinson said:

“….in considering section 1(3) of the Equal Pay Act 1970, the only circumstances in which questions of “justification” can arise are those in which the employer is relying on a factor which is sexually discriminatory. There is no question of the employer having to “justify” (in the Bilka sense) all disparities of pay. Provided that there is no element of sexual discrimination, the employer establishes a subsection (3) defence by identifying the factors which he alleges have caused the disparity, proving that those factors are genuine and proving further that they were causally relevant to the disparity of pay complained of.”

The corollary of Lord Browne-Wilkinson’s statement as to what is necessary for the section 1(3) defence, in the absence in pay disparity of any element of sexual discrimination, is that objective justification is necessary where there is evidence of a sexual element in the employer’s reason for the pay disparity.

In Barry v Midland Bank [1999] ICR 859, at 870E, Lord Nicholls said:

“…the ground relied upon as justification must be of sufficient importance for a national court to regard this as overriding the disparate impact of the difference in treatment, either in whole or in part. The more serious the disparate impact on women, or men as the case may be, the more cogent must be the objective justification. There seem to be no particular criteria to which the national court should have regard when assessing the weight of the justification relied on.”

More recently, in Cadman v Health and Safety Executive [2006] ICR 1623 at 1647, the ECJ has stated the requirements of the principle as follows:

“ 32.The justification given must be based on a legitimate objective. The means chosen to achieve that objective must be appropriate and necessary for that purpose.”

We will refer to the test as so explained as the Barry/Cadman test.

In Rainey v Greater Glasgow Health Board [1987] 1 AC 224, which was a case brought under the 1970 Act, the House of Lords held that, so far as the requirements of objective justification were concerned, there was no material distinction to be drawn between the onus upon an employer under section 1(3) of the 1970 Act and that on the employer who seeks (under the SDA 1975) to justify a condition, criterion or practice which has an adverse disparate impact on women.

In Glasgow City Council v Marshall [2000] 1 WLR 333, the House of Lords set out the process by which an employment tribunal should decide an equal pay case in which the employer raises the section 1(3) defence. The facts of the case are not of significance, save that it should be noted that the ratio of the decision was that an employer is not required to justify objectively a pay differential if he can show that the reason for the differential is ‘not the reason of sex’. However, Lord Nicholls of Birkenhead, with whom all other members of the House agreed, took the opportunity to pronounce what is now the locus classicus of the right approach to the section 1(3) defence. At page 339 C-G, he said:

“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 on 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 justified. But if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity.”

Since Strathclyde v Wallace and Glasgow v Marshall, the Court of Appeal has twice considered the process by which an employer may establish a defence under section 1(3) of the 1970 Act. The first of these cases was Nelson v Carillion Services Ltd [2003] ICR 1256. Redcar relies on that case as authority for the proposition that, where the issue of indirect discrimination arises in an equal pay case, the burden of proving that the employer’s pay arrangements were indirectly discriminatory lies on the applicant. This results in the burden of proof switching back and forth. The argument goes as follows: the claimant shows that she is receiving less pay than a man for equal work; the employer raises the section 1(3) defence and the burden of proof passes to him; if he can show that the pay disparity was not directly discriminatory, the burden passes back to the claimant who must prove, if she can, that the pay disparity was indirectly discriminatory. This will usually be done by demonstrating disparate adverse impact or an Enderby-type group differential. If she fails in that, the section 1(3) defence succeeds and the claim fails. If the claimant succeeds in showing indirect discrimination, the burden switches back to the employer to show, if he can, that the discriminatory pay differential is objectively justified.

Mr Allen for the claimants submitted that Nelson was wrongly decided and mounted a strong argument in support of his submission. However, this court is bound by it, unless the circumstances fall within one of the limited exceptions to the usual rule of precedent identified in Young v Bristol Aeroplane Co Ltd [1944] I KB 718 at pages 725-6. None of these applies. No real argument was raised that Nelson was decided per incuriam; nor could it be as both Marshall and Enderby were discussed at some length. Whatever we think about Nelson, it is binding on us. However, we do not think that the case is of importance in the determination of these appeals. Nothing in these appeals turns on where the burden lies of demonstrating that the pay arrangements were indirectly discriminatory. Where the burden of proof lies can be of great importance in the process of decision making. That is no doubt why, in Marshall, Lord Nicholls went to such pains to set out his view of the position, even though the incidence of the burden of proof was not part of the ratio of his decision. However, the incidence of the burden of proof is not important in any case where the evidence (from whatever source) enables the tribunal to be (properly) satisfied that the pay differential was or was not caused by indirect sex discrimination. Burden of proof is only important where the evidence (from whatever source) fails to satisfy the tribunal. Then the result is determined against the party which bore the burden of proof on that issue. In the present appeals, as we will demonstrate in due course, the ET was satisfied that the pay differentials were indirectly discriminatory. Redcar and Middlesbrough do not contend that there was insufficient evidence to support those decisions; they contend that the ET’s reasoning was wrong. Thus, we are satisfied that these appeals are not affected by the decision in Nelson (supra).

The second case in which the Court of Appeal has considered the process of decision making in an equal pay case is Armstrong v Newcastle upon Tyne NHS Hospital Trust [2005] EWCA Civ 1608; [2006] IRLR 124 (CA). The precise ambit of that decision is not entirely clear, but it is accepted for present purposes that it is authority for the proposition that, merely because it has been shown that the pay arrangements have a disparate adverse effect on women, it does not necessarily follow that the employer will have to show objective justification. Even though there is evidence of disparate adverse impact, it is still open to the employer to satisfy the tribunal that the pay differential was not due to the difference of sex, directly or indirectly or was not tainted by sex. If he does so, there is no obligation to justify.

Mr Cavanagh and Mr Jeans submitted that this case was correctly decided. Mr Allen submitted that it was wrongly decided and was inconsistent with Enderby. He suggested that it was decided per incuriam because Enderby was not considered. He was supported by Lord Lester in this regard. Both submitted that the effect of Armstrong was to insert into the process of decision-making an additional stage, which ought not to be inserted, which made the process more complicated and gave the employer a further opportunity to avoid liability. Lord Lester sought to persuade us of the importance of putting right this erroneous development.

In its Middlesbrough decision, the EAT considered Armstrong in some detail and concluded that it was correctly decided, but that it would be of limited effect in practice. The EAT considered that, if a tribunal found that there had been disparate adverse impact (at least if the statistical evidence was convincing), it would usually be impossible in practical terms for the employer to show that the pay disparity was not related to the difference in sex. In particular, in an Enderby-type case, where the disadvantaged group comprised all or almost all women and the advantaged group were all or almost all men, it would be impossible in practical terms for the employer to show that the pay differential was not related to the difference of sex. Thus, although, in theory, it was right to say that an employer could still show that the pay differential was not due to the difference of sex, even in the face of evidence of disparate adverse impact, it would only be possible in a case where the statistical evidence was not very strong or convincing.

We are inclined to think that that analysis of the decision is correct. But in any event, we do not consider that this is the right case in which this Court should analyse the decision and decide whether it was correct and whether it is binding or was decided per incuriam. That is because we are satisfied that the case does not affect the determination of these appeals. We will demonstrate that that is so as we deal with the issues in the appeals. We mention in passing that, although the EAT in the Middlesbrough case analysed Armstrong in detail in its introductory section, once it turned to the issues which arose for determination in the appeal, it never mentioned the case again. Thus we consider that it is inappropriate to accede to Lord Lester’s request that we correct the wrong turning the law has made, if it has indeed made any such wrong turning.

This issue concerns the legality of virtually identical pay protection schemes introduced by Redcar and Middlesbrough at the time they implemented the Green Book pay scales.

The new JESs, which had taken place for Green Book purposes, resulted in every employee being given a new grade. They also resulted in the abolition of all the bonus schemes and allowances which had been encrusted on the old pay scales. Thus all employees assessed to be on the same scale were to be entitled to same rate of pay. The result of the JESs was that some employees of each authority received an increase in pay and some a decrease. It was clear that the employers could not impose a reduction in pay on any employee without his or her consent. Consent was to be obtained by collective bargaining. There is in each employee’s contract of employment a term which binds him or her to accept the result of collective bargaining by the appropriate trade unions. Before the Green Book schemes were implemented, each authority and the relevant unions had negotiated a deal whereby those employees who were to suffer a pay cut under the new evaluation and scales were to be given ‘pay protection’. Any reduction in pay was to be introduced gradually, so as to provide a ‘soft landing’. This deal was accepted by a majority of the employees of each authority in a ballot.

The pay protection schemes, which were to all intents and purposes identical within the two authorities, provided that the old rate of pay was to be preserved for the first year. In the second year, those who were within the pay protection scheme were to receive their new Green Book wage plus 75% of the difference between their old wage rate and their new Green Book wage rate. In the third year, those in the pay protection scheme were to receive their new Green Book rate plus 50% of the difference between their old higher rate and their new rate. Although for some workers, the scheme could cover a fourth year, for the workers with whom we are concerned it was limited to three.

Both Redcar and Middlesbrough operated the scheme in the same way. Anyone who suffered an actual drop in pay on the day of implementation was entitled to pay protection. The male gardeners and street cleaners (who had been the comparators in the claims under the White Book) suffered an actual drop in pay on implementation day because they lost their old bonuses and allowances. They received pay protection. The women carers who had been in White Book MG2 did not suffer an actual pay drop when they moved to their new Green Book scale. In fact, their pay increased so they were not entitled to pay protection.

As we have said, a large number of female Redcar employees brought equal pay claims in respect of the period post-April 2004. They could show that there was a pay disparity between them and men doing equally rated work. The disparity of pay arose because the men were in receipt of protected pay and the women were not. Their argument in respect of the post-changeover period was that, if, under the White Book, they had been paid what they ought to have been paid, they too would have suffered an actual wage loss at changeover day and they too would have been entitled to pay protection. It was only because their pay had not been corrected in accordance with the law before changeover that they were excluded from the pay protection scheme.

As at the date of changeover to the Green Book scheme, the White Book First Multiple claimants already knew that they had previously been discriminated against. That had been conceded. They were waiting only for the remedies hearing after which their pay for the period before changeover would be adjusted with retrospective effect.

The position of the Redcar Second Multiple claimants was unclear at the date of implementation. They were awaiting a hearing on liability on their claims for the pre-April 2004 period. No concession had been made and, although it was clear that there was indeed a pay differential between the MG2 women and their male comparators, Redcar was seeking to prove its section 1(3) defence. As we have said, that issue was not decided by the ET until December 2005. Then, the defence failed and the Second Multiple claimants established a right to equal pay with the MG2 men. The claims of the Redcar women in respect of their exclusion from pay protection post-April 2004 were heard at the same time as the Second Multiple claims in respect of the pre-April 2004 period. The hearing began in April 2005. By that time, the remedies hearing for the First Multiple claimants had taken place and they knew that, if they had not been discriminated against under the White Book, they would have suffered a drop in pay on changeover day and would have been entitled to pay protection. The Second Multiple claimants had still not yet proved their pre-changeover case on equal pay.

In respect of post-changeover claims, the women established that they were receiving less pay than their male comparators for equally rated work and that the differential arose because the men were receiving pay protection and the women were not. Redcar raised the section 1(3) defence. It contended that its reason for operating the scheme as it had was that it had wished to give those employees who suffered an actual pay drop at changeover a ‘soft landing’. It had had to introduce pay protection in order to secure the agreement of the unions to the pay reduction of some employees. The unions would not otherwise have agreed to the pay reductions. Without that agreement, the whole Green Book scheme (which was designed to eradicate pay discrimination for the future) would have foundered. This was a genuine material reason and it was not due to the difference of sex; it was quite unrelated to sex.

The claimants accepted without reservation that Redcar had had to introduce a pay protection scheme in order to secure agreement to the wage reductions which would occur under the Green Book JES. Their complaint was not about the existence of the pay protection scheme; rather it was about their exclusion from it. As explained above, their complaint was that, but for Redcar’s breach of their right to equal pay before changeover, they would have been on the same (higher) rate as the men, would have suffered a pay drop on 1 April 2004 and would have been included in the pay protection scheme. The women’s case was that their exclusion from pay protection resulted directly from Redcar’s pre-changeover (proven or conceded or alleged) unlawful sex discrimination.

Redcar contended further that the scheme, as operated, was neither directly nor indirectly discriminatory on the ground of sex. It pointed out that many of the employees who were within the pay protection scheme were women; in fact, more women than men were within it. Redcar also contended that, even if it had a disparate adverse impact on women employees, the pay protection scheme, as operated, could be objectively justified as necessary and proportionate on grounds unrelated to the difference of sex. The inclusion of the women who were already known to have been entitled to enhanced pay (the First Multiples) and anyone who might later be proved to have been so entitled would have made the scheme too expensive. Redcar would not have been able to afford the scheme on the terms agreed, but would have had to offer a less generous scheme which the unions would not have accepted.

However, the ET found that the documents recording the discussions (which had taken place in the presence of ACAS) revealed that there had been no discussion at all about the possibility of including women who would or might in future succeed in equal pay claims in respect of the pre-April 2004 period. Nor, as the ET found, was there any evidence that any attempt had been made to cost their inclusion. It appears that no thought had been given to the matter.

The ET, sitting at Thornaby, chaired by Mr J.J.L. Hargrove, upheld the women’s claim for equal pay for the period after 1 April 2004. Its reasoning was, first, to rule (in favour of Redcar) that examination of the limited available statistics relating to entitlement to pay protection did not demonstrate that there had been any indirect discrimination against women. Most of the employees receiving pay protection were women. However, it held (in favour of the claimants) that, when the position was examined more closely, it could be seen that that there were two reasons why employees could be granted pay protection. They could be included in the scheme because their basic pay had been reduced. Those employees were either all or mainly women. The other reason for inclusion was that the employee had lost a bonus or allowance. They were all men. They were the comparators doing work equally rated with the women claimants’ work. The comparators were a male group receiving pay protection which was protecting their old bonuses. The claimants were a female group doing equally rated work, but not receiving pay protection because they had not previously been receiving the higher rate of pay which they had been entitled to receive. The ET said that:

“The reality of the situation was that it was discriminatory pay that was being protected.”

Before making that observation, the ET had considered an early EAT authority, Snoxell and Davies v Vauxhall Motors [1977] IRLR 123. This case was also reported with Charles Early & Marriott (Witney) Ltd v Smith and Another [1977] ICR 700. During the hearing of this appeal, we used the latter report. The facts in Snoxell were that, before 1970, the employers had graded men and women on separate grades, simply on the ground of sex. Miss Snoxell and Mrs Davies were female machine part inspectors. They were paid less than male machine part inspectors doing the same work. In 1970, the employer reorganised the pay structure. For the future, male and female inspectors were to be paid at the same rate for which a new grade (H2) was created. The existing female inspectors went into that grade as did all newly appointed inspectors, whether male or female. The pay in grade H2 was lower than that at which the existing male inspectors were being paid. They were put into a special grade, X2, where they continued to receive the higher rate to which they had previously been entitled. It was said that they were ‘red-circled’. In today’s language, they were granted pay protection. It was intended that this pay differential should continue while those men remained employed. The pay differential was still effective in 1975 when the 1970 Act came into force. The two women claimed equal pay. The employer claimed reliance on the section 1(3) defence. The industrial tribunal upheld the employer’s defence, holding that the variation in pay between the men and women was genuinely due to a material difference other than sex.

The EAT, (Phillips J, then President of the EAT, presiding) allowed the appeal. The section 1(3) defence failed because the current differential in pay was ‘the difference of sex’ in that it was directly related to the past discrimination. The reason why the women had not been included in the red-circled grade was because they had previously been on a lower rate because they were women. Phillips J said at page 712 H:

“At the end of the day, then, the industrial tribunal must be satisfied that the employers’ answer has shown that the prima facie discrimination in the field of pay is genuinely due to a material difference (other than the difference of sex) between the woman’s case and the man’s case. At the extremes it is easy enough. Suppose the case of a single employee approaching retirement in a few months’ time, whose job has ceased to exist and who is temporarily transferred at his old wages to a lesser paid job. We would not expect a woman’s claim based on a comparison with him to succeed. Suppose the case of men and women doing the same work before the coming into force of the Equal Pay Act 1970, the women being paid less than the men. If the men were put into a special category, and red-circled, we should expect the women’s claim to succeed.

The difficulty is in the cases in between; and, in particular, in establishing the principle to be applied. For example: is it relevant to consider whether the red-circling is permanent or temporary, being phased out; whether the group of red-circled employees is a closed group; whether the red-circling has been the subject of negotiations with the representatives of the work people, and the views of the women taken into account; or whether the women are able equally with the men to transfer between grades? ”

It will be appreciated that Phillips J was speaking at time when the legislation was very new. He was asking a series of rhetorical questions by which he sought to reach his way towards a principled distinction between cases where the difference of pay was or was not discriminatory. He was not grappling with issues of indirect discrimination or justification, although some of the questions he was asking can today be seen to be relevant to objective justification. Phillips J did not answer his own rhetorical questions. He dealt with the main issue as a matter of causation, in a passage at page 717 E:

“Putting these arguments (of counsel) side by side, it can be seen that the solution depends upon whether, in analysing the history of the difference in treatment of Miss Snoxell and Mrs Davies on the one hand and the red-circled male inspectors on other, one stops at the moment of the formation of the circle or looks further back to see why Miss Snoxell and Mrs Davies were not within it. The arguments presented to us have, not surprisingly, considered questions of causation, and it has been said that the inability of Miss Snoxell and Mrs Davies to join the red circle was, or was not, the effective cause of the current variation in the terms of their contract of employment. It seems to us that this earlier discrimination can be said to be an effective cause of the current variation. But we would put the matter more broadly. The onus of proof under section 1(3) is on the employer and it is a heavy one. Intention and motive are irrelevant; and we would say that an employer can never establish in the terms of section 1(3) that the variation between the woman’s contract and the man’s contract is genuinely due to a material difference (other than the difference of sex) when it can be seen that past discrimination has contributed to the variation. To allow such an answer would, we think, be contrary to the spirit and intent of the Equal Pay Act 1970, construed and interpreted in the manner we have already explained. It is true that the original discrimination occurred before December 29, 1975 (the date when the 1970 Act came into force) and accordingly was not then unlawful; nonetheless it cannot have been the intention of the Act to permit the perpetuation of the effects of earlier discrimination.”

We draw attention to the fact that the past discrimination in Snoxell was obviously direct discrimination. No one raised the question of whether the current discrimination was indirect discrimination and whether it could be justified. In the light of modern case law, it can be seen that the statement at the heart of the reasoning in this passage is too wide. We refer to the passage where Phillips J says that an employer can never establish a section 1(3) defence where past discrimination has contributed to the current pay differential. Phillips J was not dealing with the possibility that, where the past sex discrimination was indirect and was the cause of the current pay disparity, it might be possible for the current disparity to be justified.

The ET in the Redcar case considered that the facts were very similar to those in Snoxell. At paragraph 25.5, the ET discussed the factors relied on by Redcar as constituting its GMF defence and justification of it. It accepted that Redcar had genuine reasons for introducing the pay protection scheme and that those reasons were not in themselves ‘tainted with sex discrimination’. However, it observed that, as in Snoxell, the reason for the difference between the women claimants’ contracts and the men’s was that the old discriminatory pay differential was being protected. If the women were entitled to succeed in respect of the period up to 31 March 2004, the ET could see no reason why they should not also succeed in the period after 1 April 2004.

That observation did not lead the ET directly to the conclusion that Redcar’s section 1(3) defence must inevitably fail. It discussed several factors which were plainly relevant to objective justification. Then, after a reference to other authorities which it did not find relevant, the ET briefly considered the case of Smith v Avdel Systems Ltd [1995] ICR 596 ECJ. The ET did not summarise the facts of that case or cite directly from it, but stated that it relied on paragraphs 15 to 17 and 26 of the judgment of the ECJ. It understood that case to be authority for two propositions relating to compliance with Article 141 (then Article 119). First, when it was established that there was a group which was disadvantaged as the result of sex discrimination, the only immediate way to deal with that was to bring the disadvantaged group up to the level of the advantaged group. Second, when steps were taken to achieve a long term solution to discrimination (which might well entail a reduction in the benefit of the advantaged class), achievement of equality could not be made progressive if to do so had the effect of maintaining discrimination, even if only temporarily.

The ET then expressed its conclusion, at the end of paragraph 26, as follows:

“For these reasons we do not consider that the GMF defence and justification has been established in the present case in relation to pay protection. We have done the critical evaluation. The respondent has not proved that the need to phase out discrimination justified the continuation of any form of enhanced payment to the men without also enhancing equivalently the pay of the women’s groups.”

It is clear that, in that passage, the ET had made its finding on objective justification. Quite how Smith v Avdel had influenced that decision is not clear, but it is clear that the ET had balanced the employers’ need to phase out discriminatory pay (the legitimate objective) against the sexually discriminatory effect of the method chosen (a pay protection scheme which excluded the women claimants).

Redcar appealed that decision to the EAT. Mr Cavanagh for Redcar argued that the ET had erred in following Snoxell and had wrongly treated Smith v Avdel as precluding any transitional arrangements such as had been effected here. He submitted that historic discrimination was irrelevant to the GMF defence being advanced in respect of the post-April 2004 period. There had been no discrimination on the ground of sex in the operation of the pay protection scheme. The operation of the scheme had had no adverse impact on women. Even if it did, the scheme could be objectively justified. The scheme was necessary for the purpose of persuading the unions to agree to the new Green Book grading and scales. The exclusion of the women was justified because they had not suffered an immediate loss of pay.

Mr Allen for the claimants supported the ET’s decision. Snoxell was correct and of direct relevance. The difference of pay here was rooted in historic unlawful sex discrimination. Smith v Avdel made it plain that any correction of past discrimination either had to be brought in immediately by the removal of the advantage enjoyed by the advantaged group or, if there were to be any transitional arrangements, the disadvantaged group was to be raised to the level of the advantaged group so that the advantages of both could then be reduced together. That case provided a short answer to the current problem. Transitional arrangements such as this pay protection scheme, which favoured the previously advantaged group, were unlawful.

The judgment (Elias J, President of the EAT presiding) was delivered on 15 November 2006. It dealt with several different issues, including Redcar’s appeal against the Second Multiple claimants’ success in respect of the pre-2004 period. That succeeded in respect of the refuse workers, but failed in respect of the gardeners and street cleaners. So, the basis on which the EAT approached post-April 2004 pay protection was that there had been historic pay discrimination against both the First and Second Multiple groups of women prior to April 2004.

The EAT accepted Mr Allen’s submission on Snoxell. At paragraph 158 it said:

“There is no doubt that the reason for the difference in treatment resulting from the operation of pay protection was the fact that protection is given only to those actually in receipt of higher pay at the time when the scheme was implemented. The reason why the successful women claimants were not given the same pay protection was not, therefore, specifically because of their sex. It was because the pay they were in fact receiving was not being reduced, and mitigating measures were not needed for them. That, however, does not of itself preclude the GMF being sex-tainted. In Snoxell only the male group had their pay protected. It was accepted that the employer was not seeking deliberately to protect the pay of that group because they were male, but that was the inevitable effect of the way in which pay protection was applied, and furthermore it would have been obvious at the time. It is true that there was no time limit on the pay protection arrangements in Snoxell but the reasoning of the EAT in that case suggests that they would have found the GMF to be sex-tainted even if there had been.

159.

Not without some hesitation, we have concluded that the position here falls within the principle enunciated in Snoxell. The tribunal was entitled to find that the GMF was sex tainted and could not be relied on. Sex discrimination was a direct and significant cause of the difference in treatment. In our view this can be seen most clearly perhaps with regard to those whose equal pay claims had been conceded prior to the protected pay being implemented. By fixing on whether the employee was actually in receipt of pay, rather than being entitled to it, the effect was to exclude that predominantly female group. There was an inextricable link, apparent to the employer at the time pay protection was implemented, between the sex of these workers and the reason why they were not in receipt of pay protection.

160.

It is true that since they were not actually receiving pay (we think the EAT must have meant increased or enhanced pay) the need for cushioning was not present. They would presumably have arranged their financial commitments on the basis of what they were actually receiving. But this in turn was only because their claims to equal pay, which the employer had already conceded were justified, had not been implemented. Mr Cavanagh accepted that, had they been in receipt of their lawful pay by the date of implementation, there would be no answer to their claim to pay protection. The council can surely not pray in aid its own failure to implement equality as a justification for defeating it. It would frustrate the fundamental principle of equality to deny them benefits which, as everyone accepted, they were legally entitled to receive. Had the employers corrected the inequality when they ought to have done, then there can be no doubt that these women would have been in exactly the same position as the comparators. They would have had the benefit of the pay protection.” (emphasis added)

Those last observations were plainly intended to refer to the First Multiple claimants whose pre-April 2004 claims had already been conceded before implementation of pay protection. The EAT then considered whether there was any difference in principle between the First and Second Multiple claimants. It observed that, although the Second Multiple claims had not been conceded, some of them had been made and there must have been a ‘realistic appreciation’ that more claims would be forthcoming. It observed also that no submissions had been advanced by Redcar to the effect that different considerations applied to the Second Multiple claimants. Accordingly, the EAT held that all the claimants were entitled to pay protection whether their claims were conceded before implementation or established afterwards.

The EAT said nothing expressly about justification. It may have been of the view that the reason for the pay disparity was so closely and obviously related to the historic discrimination that it was impossible to justify objectively. That may have been what they meant in the passage we have emphasised. We will return to that issue later. As to Mr Allen’s submission on Smith v Avdel, the EAT held that the principles there stated were not of general application; they applied only to pensions cases. Nothing more was said about that case.

Having reached its decision, the EAT went on, at paragraph 162, to express some concern about its effect. It is clear that the lay members, in particular, were anxious about the difficulty that local authorities faced when trying to ‘manage’ their way out of historic discrimination. However, the EAT said that it had to determine the legal rights of these particular claimants and could not interpret the law as its members might wish it to be. Then, at paragraph 163, it added a rider to its conclusion, to the effect that, just because it had rejected the section 1(3) defence in this case, it did not follow that pay protection could never be relied on in connection with historic discrimination. It postulated that the result might be different where the circumstances were different, as, for example, where the pay protection scheme had been brought in before any claims for historic discrimination were received. It expressed the view that:

“163.

…If the employer can show a ‘carefully crafted and costed scheme’ negotiated for the purpose of cushioning the effects of a drop in pay and without any reason to suppose when it is implemented that this would have discriminatory effects, then it may be that he could demonstrate objective justification. The argument would potentially be reinforced if the costs of retrospectively conferring these additional benefits on the women were significant. But that is not this case; it is an argument for another day.”

The EAT’s decision in the Redcar case was appealed to this court and we will deal with that appeal later in this judgment.

The position at Middlesbrough was that, starting in 2003, well before the date of the Green Book implementation (1 April 2005), equal pay claims were received from about 300 women (mainly carers), who alleged that, under the White Book, they were being discriminated against. Their claims were similar to those of the Redcar White Book claimants; they were being paid less than men in various manual grades because the men were receiving unjustifiable bonuses and allowances. Middlesbrough made no admissions and asserted a defence under section 1(3).

The first hearing of the White Book women’s claims based on various manual grades was in February and March 2005 (viz before changeover day), and the decision on certain preliminary issues was promulgated in May 2005. In the later decision of the ET on 12 September 2005 many of the claimants succeeded, on the same grounds as the Redcar claimants, namely that the bonuses and allowances had ceased to be justified and had become an automatic uplift in pay for the men of something approaching 40%. The GMF defence failed in relation to the comparators pursued by the claimants in the light of the May 2005 decision.

After April 2005, many claims were lodged in respect of the new Green Book arrangements, based on the same argument as had been advanced in the Redcar cases; the women claimants had been excluded from pay protection because their pay prior to changeover had been unlawfully low due to the discriminatory pay practices from which the men had previously benefited.

The claims based on pay protection were heard in Newcastle during November 2006 and the ET’s decision was promulgated on 3 January 2007. By the time of this hearing, the judgment of the EAT in the Redcar case was available. Save where the facts were distinguishable, it was binding on the ET.

The factual situation was very similar, although the evidence was not identical. The women claimants were able to show that they were being paid less then the male comparators who were doing equally rated work. The employer raised the section 1(3) defence. The pay differential was obviously due to the exclusion of the women claimants from the pay protection scheme. The arguments raised by Middlesbrough were very similar to those which had been advanced by Redcar but had failed.

The first main question for the ET was whether the reason for the pay differential was or was not ‘the difference of sex’. The ET considered whether the operation of the pay protection scheme had a disparate impact on female employees. The statistics showed that, in a predominantly female workforce, in January 2006, 1 in 2.5 of the male workforce was receiving protected pay compared with 1 in 4 of the women. By October 2006, 1 in 4 of the male workforce was on protected pay compared with 1 in 14 of the women. The ET observed that these figures showed that a smaller proportion of women than men received protected pay in January 2006 and a much smaller proportion in October 2006. However, the ET decided to disregard the October figures because it was not satisfied that the reasons for the changes between January and October had been properly explained. It concluded that the figures did not demonstrate that there was any ‘real evidence of disparate impact’ in the operation of the pay protection scheme. We note in passing that it appears that the ET placed the burden of proving this issue on the claimants, thereby giving rise to a potential argument as to the correctness of Nelson. However, in view of its next finding, this does not matter.

Next, the ET noted that those in receipt of pay protection fell into two groups. One group were women whose pay had fallen because their jobs had been re-evaluated to a grade carrying lower pay. The other group comprised men who had lost their bonuses and allowances. The group of female claimants did not receive pay protection; their pay had not fallen because they had not been properly paid before changeover. The position was the same as had pertained in the Redcar case. The ET decided that it must adopt the same reasoning, which had been upheld by the EAT. It cited the passage from the Redcar EAT’s judgment dealing the effect of historic discrimination, and concluded that the post-April 2005 pay differential was tainted by sex. It was therefore necessary for Middlesbrough to show objective justification. Smith v Avdel was not specifically cited to the ET, presumably because the EAT in Redcar had said that its application was confined to pensions cases. Apart from that, the ET adopted a similar approach to that of the Redcar ET and held that Middlesbrough had failed to show justification. The claims for equal pay in the post-changeover period therefore succeeded.

One might have expected that the EAT, presided over by Elias J, would have made short shrift of Middlesbrough’s appeal. After all, the ET had followed the Redcar EAT’s approach to the law and had adopted a similar approach to justification. But the EAT did not. The appeal reached the EAT in April 2007 and judgment was handed down on 17 July 2007. On the issue of pay protection, the EAT allowed the appeal.

The EAT observed that the ET had followed the reasoning of the Redcar EAT. The only significant factual difference between the Redcar and Middlesbrough cases was that, at changeover day, Redcar knew as a fact that some of the women employees had been discriminated against before changeover whereas Middlesbrough did not know that as a fact at their changeover date.

The EAT concluded that the ET had been entitled to hold that the reason why the women had been excluded from pay protection was related to sex. It therefore had to be justified and the appeal turned on whether the ET had been right on objective justification. The matter which had to be justified was not the introduction of a pay protection scheme but the exclusion of the women from it.

For reasons which we will examine in greater detail later in this judgment the EAT held that the ET’s approach to objective justification had been wrong. It substituted its own view, which was that Middlesbrough’s pay protection scheme was objectively justifiable, even though it had been tainted by sex. This was in contrast to its own decision in the Redcar case. The claimants’ appeal against that holding is one of the main issues in the appeal before us and we will defer consideration of the EAT’s reasoning until we consider the appeal from it.

Mr Cavanagh’s first submission in the Redcar appeal was that the ET had wrongly held that the employer’s reason for excluding the women from pay protection was directly discriminatory and that no question of justification therefore arose. We must say immediately that that submission is unsustainable. From the passages of the decision which we quoted above at paragraphs 72, 77 and 78, it is clear that the ET did not hold that the exclusion of the claimants was directly discriminatory. It held that their exclusion was tainted by sex. That was because the pay protection arrangement continued the historic unlawful sex discrimination based upon the men’s unjustifiable bonuses and allowances. There was no suggestion that that historic discrimination had been directly discriminatory. It had plainly been indirect and had been unlawful because the employer had failed to justify it. If the pre-April 2004 discrimination was not direct, it is hard to see how the post-April 2004 discrimination could be. Although the ET did not say in terms that, post-April 2004, it was talking about indirect discrimination, it did not need to: the point was so obvious. Moreover, the ET went on to consider factors relevant to the issue of justification by the employer of the discrimination which it had found. At paragraph 26 of its decision, it held that the employer could not justify the differential in pay. We have quoted the relevant passage at paragraph 79 above. The ET would not have needed to consider justification at all if it had just held that the pay protection scheme was directly discriminatory. Mr Cavanagh’s first submission must fail.

Mr Cavanagh’s second submission was that the ET and the EAT had been wrong to hold that the post-2004 pay difference (that due to pay protection) was ‘infected by sex’ and was therefore indirectly discriminatory. He submitted that the factual and legal position after April 2004 was completely different from the factual and legal position which had pertained before April 2004. In respect of the pre-April 2004 (White Book) situation, Redcar now accepted that it had unlawfully discriminated against the claimants in respect of their pay. But after the changeover date, everything was different. There was a new pay scheme, the Green Book, which was underpinned by a new JES. The women were comparing themselves with different comparators. The new reason for the new pay differential advanced by Redcar (namely a need to cushion the effect of a pay reduction) was a completely different reason from the old reason for the old differential. The ET should have focussed on the new circumstances and the new condition which was required for entitlement to pay protection. That was simply the suffering of a pay reduction on changeover day. The past and the so-called causal connection between the historic discrimination and the post-changeover situation were irrelevant.

Mr Cavanagh submitted that the ET and EAT had been wrong to place reliance on Snoxell. He did not submit that the case had been wrongly decided but said that it was a case involving historic direct discrimination and its effect should be limited to such cases. Here the historic discrimination was indirect and Snoxell had no application.

Lord Lester supported this submission. He too relied on the fact that Snoxell had been a case of historic direct discrimination. He submitted that, where the historic discrimination had been indirect (as here), no question of perpetuation or continuance of that indirect discrimination could rise. The new pay structure gave rise to a new differential which must be evaluated on its own merits.

We accept that Snoxell was a case of historic direct discrimination and that the present case is not therefore on all fours with it; the historic discrimination in the present case was indirect discrimination. However, the indirect discrimination in the present case was unjustified and therefore unlawful. We do not think that the distinction between historic direct discrimination and historic unlawful indirect discrimination is a material distinction. The importance of Snoxell is that it requires a tribunal, which is examining the reason for the pay disparity, to look at the underlying reasons and not to content itself with examining the immediate reason.

In Snoxell, the EAT looked behind the immediate and overt reason for the current pay disparity and took account of the underlying reasons why it had arisen. The immediate reason for the current pay disparity was that the applicants were in grade H2 and the comparators were in grade X2, which carried a higher rate. There were a lot of male inspectors in grade H2 along with the women, so paying the women the H2 rate was not on the face of it discriminatory. However, if one then asked why there were two grades for employees doing the same job, the answer was that it was because X2 had been created to preserve the men’s discriminatory historic pay differential. The EAT looked behind the immediate reason for the differential (the women are in a different grade) and asked why they were in a different grade. Then it could be seen that the reason for the pay differential was tainted by sex; it was based on historic discrimination. We consider that the EAT’s approach in that case was correct. A tribunal has to find what the reason was for the pay differential and, if necessary, should look at the underlying reason and not merely the immediate reason or criterion for inclusion/exclusion. We think it is right to examine the underlying or historical position where that will throw light on the reason why one person is receiving an advantage and another is excluded from it. Indeed to exclude the history, in a case where it is relevant, would be artificial.

We entirely accept Mr Cavanagh’s submission that the reason for the new post-changeover pay differential must be considered on its own merits; the employers were advancing a different section 1(3) defence from that which they had advanced in respect of the pre-changeover period. However, we do not think that the ET failed to focus on the new pay differential. The ET was concerned with why (post-changeover) the women were receiving less pay for work equally rated under the Green Book. The answer was because they were not included in the pay protection scheme and the male comparators were. The ET then followed Snoxell and looked at the underlying reason why the women were not included in the pay protection scheme.

Here, the overt or superficial reason for inclusion in the pay protection scheme was the suffering of a wage drop on changeover day. That was not, on the face of it, anything to do with sex. But, if one then looks at the underlying reasons why the men suffered a wage drop on changeover and the women did not, the questions and answers go as follows: Why did the men suffer a drop in pay? Because they lost their old bonuses. Why did the women not suffer a drop in pay on that day? Because they had been underpaid in the period preceding changeover. Why had they been underpaid in the preceding period? Because they were being unlawfully discriminated against in that period. They too had been entitled to the same pay as the men who had been on bonuses. Thus the reason for the new pay differential was causally related to the historic unlawful sex discrimination.

It seems to us that, however one looks at this case, whether by comparison with Snoxell or by free-standing analysis of the facts, one cannot avoid the conclusion that the new pay arrangements were tainted by sex. Put the other way round, the reason for the pay differential was indirectly ‘the difference of sex’. The same reasoning as was set out in the passage we cited from the judgment of Phillips J (see paragraphs 74 and 75 above) applies to the present circumstances. The EAT in Redcar v Bainbridge endorsed it (see paragraph 83 above). We think they were right to do so. This means that, in order to avoid a finding of unlawful sex discrimination, the employer had to justify its reason for excluding the women from pay protection on objective Barry/Cadman grounds.

At this stage, we wish to mention two matters. First, if the ET made a sustainable finding of fact (which it did) that the reason for the pay differential was indirectly ‘the difference of sex’, it matters not who had borne the burden of proving that fact. So the question as to whether Nelson was correctly decided does not arise. Second, the fact that the existence of sex taint was not proved by the production of statistics showing an adverse disparate impact on women does not affect the validity of the conclusion. As Enderby demonstrates and, as Cox J observed in MOD v Armstrong (see paragraph 46 above), statistical analysis is not the only way in which a sex taint may be recognised in a pay differential case.

We turn now to the question of justification. We said, at paragraph 78 above, that the ET considered various factual features of the case, then referred to Smith v Avdel and then stated its conclusion as follows:

“The respondent has not proved that the need to phase out discrimination justified the continuation of any form of enhanced payment to the men without also enhancing equivalently the pay of the women’s groups.”

The remaining issues for this court on this appeal are whether the ET’s approach to justification was correct in law and whether its conclusion was justifiable on the evidence. However, we must first mention the EAT’s handling of this issue, which is slightly puzzling. At one stage, in paragraph 131, the EAT seemed to say that it did not matter in the context of this case whether the discrimination in question was direct or indirect because, if the arrangements were tainted by sex, the section 1(3) defence would be bound to fail. If that is what the EAT thought, it would be wrong in our view. It is always important to distinguish between direct and indirect discrimination because direct discrimination can never be justified and indirect discrimination can be justified. Whether it is justified depends on the circumstances.

The EAT decision is not entirely clear because, in its discussion section, it did not clearly separate its consideration of whether the pay protection scheme was prima facie discriminatory from its consideration of justification. However, on close examination of the judgment, it seems to us that, at paragraph 160, the EAT must have been considering issues relating to justification. We cited it in paragraph 83 above, but we repeat it here for convenience. It said:

160.

It is true that since they (the claimants) were not actually receiving pay (we think the EAT must have meant increased or enhanced pay) the need for cushioning was not present. They would presumably have arranged their financial commitments on the basis of what they were actually receiving. But this in turn was only because their claims to equal pay, which the employer had already conceded were justified, had not been implemented. Mr Cavanagh accepted that, had they been in receipt of their lawful pay by the date of implementation, there would be no answer to their claim to pay protection. The council can surely not pray in aid its own failure to implement equality as a justification for defeating it. It would frustrate the fundamental principle of equality to deny them benefits which, as everyone accepted, they were legally entitled to receive. Had the employers corrected the inequality when they ought to have done, then there can be no doubt that these women would have been in exactly the same position as the comparators. They would have had the benefit of the pay protection.” (emphasis added)

That passage refers to the position in respect of the First Multiple claimants, in respect of whom Redcar had made its concession before changeover day. It seems to us that, once it had held that the arrangements were discriminatory (to which issue knowledge and motive are irrelevant), the EAT had turned to consider knowledge and motive, which are highly relevant to justification of discriminatory arrangements. The EAT considered that, where the employer is actually aware that the arrangements it has made are discriminatory, it will be difficult for the employer to justify them. The EAT went on to consider the position in respect of the Second Multiple claimants and said:

“161.

The argument does not have the same force for those whose claims were still in dispute, or had not been lodged, by the date of implementation, if only because the council did not know at that time that the criterion they were adopting would necessarily adversely affect this group. Having said that, there was plainly a possibility that it would. It may be said that the same is not true of those who had not by then made any claims at all, but again there must have been a realistic appreciation that further claims of that nature would be forthcoming. Furthermore, as we have said, no argument was addressed to the employment tribunal by either party that that was in principle a proper approach and the issue was only very briefly touched upon before us in oral argument by Mr Cavanagh. In the circumstances we think there is no basis in this case for distinguishing between the different categories of women. Accordingly we find that the claimants are entitled to the benefit of pay protection whenever their claims were initiated and whether their claims were conceded or became established after trial.”

It appears to us that the EAT’s reasoning, which is not as clearly set out as it might have been, was as follows. The ET had been entitled to hold that the exclusion of the women claimants from pay protection was discriminatory by analogy with Snoxell. The women’s exclusion was either indirectly discriminatory and required justification or the arrangements were such that the section 1(3) defence failed and no justification was required. We think that the latter alternative would have been wrong. Justification was, at least in theory, possible and had to be considered. It looks to us as though the EAT must have thought that the ET had misdirected itself because it had relied, in an unexplained way, on Smith v Avdel. The EAT had earlier said that that case was not relevant and its effect was confined only to pensions cases. If the ET had misdirected itself, the EAT was entitled to consider justification for itself and we think it did so at paragraphs 160 and 161 cited above. We are fortified in that view by the fact that, having reached its conclusion that the claims succeeded, it expressed concern at the result and observed that there might well be circumstances in which the exclusion of a group of women from a pay protection scheme would be justified. This was where the employer could show ‘a carefully crafted and costed scheme negotiated for the purpose of cushioning the effects of a drop in pay and without any reason to suppose when it is implemented that this would have discriminatory effects’. However, the EAT added, that was not this case. It is clear to us that the EAT had itself found that Redcar’s arrangements, which excluded the successful claimants from pay protection, could not be justified.

In the Middlesbrough decision, at paragraphs 97 and 98, the EAT returned to the question of justification in the Redcar case. It said that the question of justification had not arisen in the Redcar case because the employers knew when they implemented the pay protection scheme that they had not been paying at least some of the women the pay due to them in breach of equal pay law. They knew that, had they corrected the women’s pay as soon as they accepted they had been acting unlawfully, the women would have had the benefit of pay protection. For that reason, sex was “a direct and significant cause of the difference in treatment” (paragraph 159 of the ET decision). The EAT thought that in those circumstances the issue of justification did not arise. If it had, it was bound to fail because the employer was relying on its own failure to correct an inequality, which it knew existed, as justification for defeating the claim.

Here again we find two alternative analyses of the case. Either the arrangements were so obviously and directly discriminatory that justification did not arise or, if it did, it was bound to fail. Elias J will have written both judgments and must be taken to have known what the EAT in Redcar had thought. As we have said, we think the first of these two analyses was wrong and that justification was required. At paragraph 98 of its Middlesbrough judgment, the EAT reiterated the reasoning it gave in paragraph 160 of the Redcar judgment.

Our approach to the issue of justification will be to examine the ET’s approach and conclusion. If we conclude that the approach was correct in law and that the conclusion was open to it on the evidence, the appeal must be dismissed. Only if we consider either that the approach was wrong or that its conclusion was not open to it, will we need to adjudicate upon the EAT’s approach.

We start with the ET’s approach to the law. Mr Cavanagh did not submit that the general approach had been wrong and we are satisfied that the ET had in mind the correct legal test for proof of justification, as set out in Barry v Midland Bank and in Cadman which we quoted in paragraphs 51 and 52 above. The ET’s conclusion was that the need to phase out discrimination (which was the legitimate objective) did not justify the continuation of any form of enhanced payment to the men without also enhancing equivalently the pay of the women’s groups. That wording clearly reflects the application of the correct test.

We turn next to consideration of the various factual matters which the ET took into account. Mr Cavanagh submitted that the ET’s conclusion had been wrong and that there plainly was objective justification for Redcar’s arrangements. It was wrong to criticise Redcar for failing to raise the women’s wages as soon as it had conceded the First Multiple claimants’ claims or at any rate before changeover day. It had not been possible to do so as there was a dispute as to quantum and a dispute about the wet weather allowance in the refuse workers pay. So it was not possible for Redcar to adjust the claimants’ pay in time.

We accept of course that it was not possible before changeover day to work out what each First Multiple claimant was entitled to. However, it must have been clear that those women were entitled to a substantial increase which would inevitably mean that, if their pay was increased to whatever was the appropriate figure, it would drop on changeover day, so that they would be entitled to inclusion in pay protection.

Mr Cavanagh also submitted that the ET had failed to give proper consideration to Redcar’s reason for the pay protection scheme; it was to provide a soft landing for all those who suffered a pay drop on changeover day. As this did not apply to the claimants, who were going to receive an increase on changeover day, Redcar was justified in excluding them from the scheme.

We do not accept these criticisms of the ET. We consider that its reasoning was without fault. We will trace it through. At paragraph 25.5, the ET accepted Redcar’s contention that the male comparators had a contractual right to their enhanced pay (bonuses etc) and realistically, their contracts could only be varied by agreement. The only way agreement could be reached was by offering the men pay protection. If the employer had tried to reduce their pay peremptorily, there would have been industrial unrest and hardship to the men. Thus the ET accepted that the employer’s reasons for introducing the pay protection scheme amounted to a legitimate objective. So, the ET had taken into account the ‘soft landing’ reason for the pay protection scheme. Moreover, the ET held that the reasons were not, in themselves, tainted by sex. However, excluding the women from the scheme, when they too should have been in receipt of the same enhanced pay as the men was discriminatory.

The ET’s task was then to consider whether the means Redcar had adopted of achieving its legitimate objective (which means had entailed excluding the women) were appropriate and necessary to achieve that objective. Or, in the language of Lord Nicholls in Barry, whether the ground relied on for justification (the legitimate objective) was sufficiently important for the court to regard it as overriding the effect of the discriminatory treatment of the women. The ET considered various factors. It mentioned that in Snoxell the red-circling had been permanent but here the pay protection advantage was only temporary. That was a point in favour of the employer; the discrimination would only last for three years and was reducing. It observed that the class of those receiving pay protection was closed; no one was to be admitted after 1 April 2004. That was also a point in favour of the employer; the advantaged group was limited to existing employees. On the other hand, it noted that the pay protection scheme had been the subject of negotiation with the representatives of the comparators but there was no evidence that the views of the women had been taken into account. The ET was of the view that Redcar has simply not applied its mind to the discriminatory effect of the exclusion of the women claimants from pay protection. Even after the event, no evidence had been given as to why the women could not have been included in the scheme. No evidence had been given as to the likely cost of including the women claimants. The ET considered that the circumstances were not at all like those in Cross v British Airwaysplc [2005] IRLR 726 CA where cogent reasons, including economic costings, had been provided. The ET would have been willing to take the cost of including the women into account as relevant but they had been given no evidence. It should be noted that the ET did not specifically mention that the employer was aware at the time when it implemented the pay protection scheme that a number of claimants were alleging that they were entitled to the same pay as the men who were going to receive pay protection and that, in respect of at least some of those women, the employer had no defence to the claims. However, the ET was clearly aware of that factor and must be taken to have had it in mind when it commented, adversely, that the employer had not applied its mind to the discriminatory effect of excluding the women from the scheme.

Pausing there, we are firmly of the view that those factors were, in combination, an adequate and proper basis for the ET’s conclusion that the employer’s need to phase out discrimination did not justify the use of a pay protection scheme which excluded the women claimants who were either known to be successful or who might be proved to be successful. The effect of their exclusion would be to continue historic unlawful indirect discrimination.

However, before reaching its conclusion, the ET also considered Smith v Avdel. It set out the principles to be derived from certain paragraphs of the judgment in that case but did not explain how it had applied them in reaching its conclusion. It explained the principles as follows:

“These (paragraphs) indicate that the only proper way of complying with Article 119 is to grant to the persons in the disadvantaged class the same advantages as those enjoyed in the advantaged class once the finding has been made that discrimination in relation to pay exists and so long as measures of bringing about equal treatment have not been adopted. Secondly, once discrimination has been found to exist and the employer takes steps to achieve equality for the future by reducing the advantages of the favoured class, achievement of equality cannot be made progressive on a basis that still maintains discrimination, even if only temporarily.”

The facts of Smith v Avdel must be briefly explained. In Barber v Guardian Royal Exchange Assurance Group (Case C-262/88) [1990] ICR 616, the ECJ had ruled that, in a contracted-out pension scheme, it was contrary to Article 119 of the EEC Treaty to impose an age condition which differed according to sex. The ECJ decided, exceptionally, that pension providers were to be given a specific period in which to alter their rules so as to be compliant with article 119. That exceptional course was taken because of the particular difficulties which would be caused to the pensions industry if the usual rule applied, namely that the decision of the court was declaratory of what the law had been since the relevant provision had come into force. The date set for compliance was 17 May 1990.

For many years, the Avdel pension scheme had provided a retirement age of 60 for women and 65 for men; so the women had been advantaged. Pursuant to Barber, the trustees should have changed the rules and brought about equality by 17 May 1990 but they did not do so until 1 July 1991, when the rules were changed to provide a common retirement age of 65. As of that day, the women lost their advantage and were worse off than before.

The women brought a claim, contending that it was not lawful for their position to be made worse; the men’s position should have been brought up to match theirs. The ECJ held that it was lawful for the trustees to reduce the women’s benefits when altering the rules so as to achieve compliance with article 119.

The women also contended that, if they were to lose benefits as a result of the equalisation of retirement ages, the rules had to provide for the adverse effect on them to be mitigated by the introduction of transitional provisions which would cushion the blow. The Court rejected that, holding at paragraphs 25 to 27 that:

“25.

It is sufficient to say that equal treatment between men and women in relation to pay is a fundamental principle of Community Law and that, given the direct effect of article 119, its application by employers must be immediate and full.

26.

It follows that, once discrimination has been found to exist, and an employer takes steps to achieve equality for the future by reducing the advantages of the favoured class, achievement of equality cannot be made progressive on a basis that still maintains discrimination even if only temporarily.

27.

The answer … must therefore be that the step of raising the retirement age for women to that for men which an employer decides to take in order to remove discrimination in relation occupational pensions as regards benefits payable in respect of future periods of service cannot be accompanied by measures, even if only transitional, designed to limit the adverse consequence which such a step may have for women.”

We have cited all three paragraphs because we think that they make it plain that the EAT was wrong to say, in its Redcar decision, that Smith v Avdel applied only to pensions cases. It is clear that, in paragraphs 25 and 26, the ECJ was setting out a principle of general application and, at paragraph 27, was applying the general principle to a pensions case. We would add that examination of the judgment as a whole makes it plain that the Court was applying general principles of European discrimination law and was not confining itself to pensions cases. We are satisfied that the principles expounded in that case were intended to be of general application. We accept Mr Allen’s submission to that effect.

Mr Allen also submitted that Smith v Avdel provides a short and complete answer to both the Redcar and Middlesbrough appeals in that it is authority for the proposition that any transitional provision by which an employer seeks to remove sex discrimination other than by an immediate change to equality is unlawful.

Lord Lester submitted that the case does not provide such a short answer. That was because Smith v Avdel was concerned with direct discrimination which had been recognised and was being corrected. Once direct discrimination had been recognised, it had to be corrected immediately (or in a pensions case by 17 May 1990) and completely. Any continuation of direct discrimination could not be possibly be justified. However, Lord Lester submitted that the position was different where the discrimination in question was indirect. Indirect discrimination can sometimes be justified. Therefore there was no absolute bar to transitional arrangements in cases of indirect discrimination.

To a large extent, we accept Lord Lester’s submission. We accept that Smith v Avdel was a case of direct discrimination and that the present case is not; therefore the two are not on all fours. We accept that the hard and fast rule which the ECJ laid down for the correction of recognised direct discrimination (it must be full and immediate) does not apply to a case of indirect discrimination. That is because there is always a possibility that indirect discrimination can be objectively justified. So the strict rule as set out in Smith v Avdel, that all transitional arrangements in a move to eliminate discrimination are unlawful, does not apply in cases of indirect discrimination.

However, by analogy with Smith v Avdel, where the old indirect discrimination has been recognised and attempts are being made to correct it for the future, the employer will have great difficulty in justifying the continuation of any discriminatory element. That is because he must do his best to comply with the fundamental principle of equal pay, which applies to the eradication of indirect as well as direct discrimination. Where an employer is reorganising his pay structures and there is no reason to think that the old arrangements were directly or indirectly discriminatory, he will be entitled to bring in the new arrangements by transitional provisions. And, if it should later transpire that the old arrangements had been indirectly discriminatory and that the new arrangements are tainted by that historic discrimination, it will be easier for him to justify that discrimination by reference to his other reasons for wanting to reorganise the structures. There will, of course, be many gradations of knowledge between, on the one hand, knowing that the old arrangements were and the new ones will still be discriminatory and, on the other hand, having no reason to think that they might have been. In such intermediate positions, the employer’s knowledge of the circumstances will be relevant to the issue of justification.

We consider that this analysis is consistent with the principle laid down in paragraphs 25 and 26 of Smith v Avdel. So, the strict Smith v Avdel rule that transitional arrangements (which continue recognised past direct discrimination) are unlawful must give way to a more flexible principle that transitional arrangements which continue past indirect discrimination will not be unlawful if they can be justified. The employer’s state of knowledge about the discriminatory effect of his provisions and the extent to which he tries to minimise that effect will be relevant considerations where the tribunal is considering whether the employer’s discriminatory means are an appropriate and proportionate means of achieving his legitimate objective.

We think that the Redcar EAT was right when it said that there will be circumstances in which an employer will be able to justify a pay protection scheme which is in fact discriminatory if, when he implemented it, there was no reason to think that it would be discriminatory. But that, as the EAT said, is not this case.

We return to the ET’s approach to justification. As we have said, the ET did not explain how it applied Smith v Avdel and to that extent its decision is open to criticism. However, the facts of the Redcar case show that the employer knew that one of the important purposes of the Green Book scheme was the elimination of past discriminatory pay practices. It knew that it had been discriminating against at least some of the White Book women claimants. It knew that, under the new arrangements, the bonuses and allowances which had given rise to the past discrimination were being abolished and that that was why the men who had been receiving them were being given pay protection. The employer must or should have realised that the women, who had been discriminated against in the past, were going to be discriminated against under the new scheme by being excluded from pay protection. Yet, as the ET found, there was no evidence that they had applied their minds to this problem or had made any attempt to avoid or even reduce the discrimination. They had not even attempted to cost the inclusion of the women.

Thus it seems to us that, on the facts of the Redcar case, the ET was fully entitled to conclude that Redcar had not justified the discriminatory effect of excluding the women from pay protection. Although it is not clear how they applied Smith v Avdel, we do not think it can be said that either their approach or their conclusion was, in the event, wrong.

Turning to the way in which the EAT dealt with matters, it seems to us that, although it held that Smith v Avdel only applied to pensions cases, it reached its conclusion on justification by a similar route to the one we have expounded above by holding that, where, as here, the employer knew that he had been discriminating against the women and failed to consider whether it could exclude that discrimination after changeover, it was impossible for the employer to justify his arrangements. At paragraph 160 (already cited in paragraph 111 above, but repeated here for convenience), the EAT said:

“The council can surely not pray in aid its own failure to implement equality as a justification for defeating it. It would frustrate the fundamental principle of equality to deny them benefits which, as everyone accepted, they were legally entitled to receive. Had the employers corrected the
inequality when they ought to have done, then there can be no doubt that these women would have been in exactly the same situation as the comparators. They would have had the benefit of the pay protection.”

We note that when the EAT returned to the issue in the course of its Middlesbrough judgment, it explained that, where the employer knew that he had been discriminating against the women in the past and that, if he had corrected that when he should have done, the women would have suffered a drop in pay on changeover, it was impossible for him to justify giving the men pay protection and excluding the women from it.

For the reasons we have given, we are satisfied that the ET and the EAT were entitled to reject Redcar’s arguments on justification. Indeed, we would go further and say that their decisions were plainly correct. So was their overall conclusion that the women claimants who had been discriminated against before changeover were entitled to be included in the pay protection scheme after changeover. For those reasons Redcar’s appeal fails.

It will be recalled that, in the Middlesbrough case, the ET followed the reasoning of the EAT in Redcar on the issue of prima facie discrimination. The EAT said that the ET had been entitled to do so. The ET had also found in favour of the claimants on justification, but the EAT overturned that decision. Accordingly the main issue in this appeal is whether the EAT was entitled and was right to overturn the ET’s decision.

Mr Allen for the claimants also sought to persuade us that the ET had been wrong to hold that the statistics did not reveal adverse disparate effect, thus requiring the employer to justify its arrangements. The EAT dealt with this issue very briefly, observing that, although it thought that the claimants might be right, the point took them nowhere because they succeeded in any event on the issue of sex taint. The employer had been required to show justification in any event. So the EAT did not reach a firm conclusion on this issue. Mr Allen invited us to deal with it. However, there is no need for us to do so for reasons which will become apparent in the next few paragraphs of this judgment.

By a respondent’s notice, Middlesbrough sought to argue that the ET and the EAT had been wrong to hold that justification was necessary. The section 1(3) defence should have succeeded without the need for justification because the reason for the pay differential was not sex tainted or was not ‘the difference of sex’; so justification did not arise.

We can deal with that submission quite shortly in view of what we have already said in respect of the Redcar case. The only difference between the facts of the Redcar and Middlesbrough cases was that Middlesbrough had not conceded any equal pay claims before its changeover day as Redcar had; many claims had been brought before changeover but all had been fought and the tribunal’s decision was awaited. Redcar knew for certain that it had been discriminating in the past and Middlesbrough did not. However, that difference, which related to a question of knowledge, was irrelevant to the issue of whether the pay differential was tainted by sex. The test for that is entirely objective. Thus, the fact that Middlesbrough might have honestly believed that it had a complete defence to all the White Book claims makes no difference to the question of whether the post-changeover pay differential (exclusion from pay protection) was prima facie discriminatory. It seems to us that it clearly was for exactly the same reasons as applied in the Redcar case. The immediate reason for the differential was that the male comparators were receiving pay protection and the women claimants were not. The men were receiving it because they suffered a drop in pay on changeover day and the women did not. The underlying reason why the women did not suffer a drop in pay was because they had not previously been paid the wages they were entitled to; they had been discriminated against. If they had been paid their wage entitlement, they too would have suffered a drop in pay and would have been entitled to pay protection. Thus the current pay differential was rooted in past sex discrimination. For that reason, the contention in the respondent’s notice must fail. Middlesbrough has to justify its arrangements; accordingly there is no need for us to decide Mr Allen’s contention on whether the statistics demonstrated disparate adverse impact.

Mr Jeans had sought to argue that the Court of Appeal decision in Farthing v Ministry of Defence [1980] ICR 705 was binding upon us and was therefore determinative of the issue of whether the pay protection in the present case was prima facie discriminatory. In that case, the MOD sought to eradicate sex discrimination in pay before the 1970 Act came into force in 1975. Women drivers, who had previously been in pay band 6, (and were therefore advantaged) were put into band 4 with all male drivers. They objected and, by a negotiated agreement in 1977 (in which it was restated that the correct band for all drivers was band 4), the women who had been employed at changeover, were allowed to receive band 6 pay for as long as their employment continued. In effect, their old advantaged pay was protected. A group of men complained to an industrial tribunal that they were receiving less than these women for like work and, before the tribunal, the employer’s section 1(3) defence failed. The tribunal held that the reason for the difference was the difference of sex. The EAT upheld that decision and the MOD appealed. The Court of Appeal (Lord Denning MR, Waller and Dunn LJJ) allowed the appeal, holding that the employers had shown that the difference in pay was genuinely due to a material difference, other than the difference of sex. The Court said that the reason for the pay differential was not the difference of sex, but was because the employer had given the women a personal advantage as part of its attempt to eliminate the earlier sex discrimination.

In our view, this early decision on equal pay is clearly wrong and should be consigned to history. It cannot stand with the decision of the ECJ in Smith v Avdel. The Court sanctioned transitional provisions which continued (or reinstated) after the 1970 Act came into force a discriminatory advantage which had been enjoyed by the women before equal pay legislation was in force. As Smith v Avdel made plain, once discrimination has been recognised and steps taken to correct it, correction must be effected immediately and completely. Farthing was a case of direct discrimination and justification did not arise.

The only remaining issue in the Middlesbrough case is whether the EAT had been right to overturn the decision of the ET on justification. It will be necessary to examine the decisions of both the ET and the EAT.

Faced with the EAT’s approval of the Redcar ET’s decision on justification, Mr Jeans’ case for Middlesbrough in the ET had been to seek to distinguish the two cases on the facts. The ET rejected his submission. In particular, the ET held that it made no real difference that Redcar had conceded liability in some cases before Green Book implementation whereas Middlesbrough had fought them all. The ET observed that Middlesbrough had received a lot of pre-changeover claims and must have known that there would be more. At the time of bringing the pay protection scheme into operation, the hearing of the White Book claimants had taken place and Middlesbrough must have known that, even though it had defended the claims, there was a real risk that some of the women were going to succeed. It knew what had happened in the Redcar White book claims. The ET also noted that, as with the Redcar case, there was ‘little if any’ evidence that Middlesbrough had ever calculated the cost of providing protected pay for the known claimants who might win. The ET thought that it would not have been difficult to do so by identifying the possible claimant groups. But that had not been done at the time; moreover, Mr Jeans had not told the ET whether any such costing had been carried out subsequently.

Clearly referring back to the observations of the Redcar EAT about the circumstances in which it might be possible to justify a pay protection scheme such as this one, the ET found that this was not a ‘carefully crafted and costed scheme’. Nor could it be said that the employer had had no reason to suppose that it might be discriminatory when it was implemented. Although it accepted that a period of protection of previously discriminatory pay, limited in time in order to phase it out, would be a legitimate aim, it had not been shown that this scheme was an appropriate and proportionate means of achieving that objective, when the size of the disadvantaged group and the cost of including or excluding that group had not been calculated. The ET concluded:

“We do not accept that the respondent had no reason to suppose, when pay protection was implemented, that it would have discriminatory effects. Applying the Bilka test we consider that a period of protection of previously discriminatory pay limited in time in order to phase it out will have been in itself a legitimate aim. It may be that it was a reasonably necessary means of achieving the objective of phasing out pay (we think they must have meant unequal or discriminatory pay), but it has not been shown that it is an appropriate and proportionate means of achieving that objective when the size of the disadvantaged group and the cost of including or excluding that group had not been calculated. In short this defence was tainted by sex discrimination and to the extent that it was, it was not justified.”

In the EAT, Mr Jeans submitted that the ET had misunderstood the difficulties faced by Middlesbrough. It had not known that its old arrangements were discriminatory. It was fighting all the claims in good faith believing that it had a good section 1(3) defence. It could not possibly know how many women might succeed, if any, so as to work out the cost of including any successful women in the pay protection scheme.

The EAT was eventually to accept those submissions and to hold that the exclusion of the women claimants from pay protection was justified. We will have to examine the reasoning in some detail but, before we do so, it may be helpful to explain in broad outline the nature of Mr Allen’s attack in this court on the EAT’s decision. First, he submitted that the EAT had not been entitled to interfere with the ET’s conclusion. The ET had directed itself properly and was entitled to form the view it had on the basis of the evidence before it. The justification decision was essentially a matter for the ET, sitting as an industrial jury. Its decision could not be overturned save on the well-established grounds of perversity. They were not made out. We have already dealt with and rejected Mr Allen’s second submission which was that Smith v Avdel provided a short and simple route to the correct conclusion in this case.

So, the question for this court was whether the EAT had been entitled to overturn the ET’s decision. It was common ground that the EAT could do so only on grounds analogous to perversity. The final decision on justification is essentially one of judgment and evaluation for the ET and should not be overturned unless there has been an error of approach or the conclusion is plainly wrong. The findings of fact which underlie the evaluation are matters for the ET and can be overturned only on conventional perversity grounds.

We turn to the EAT’s decision. After summarising the ET’s approach and conclusion and referring to the submissions of the parties, the EAT correctly reminded itself that it was not the pay protection scheme itself which had to be justified but the exclusion of the women claimants from it. The EAT posed the question for determination in this way:

“87 …whether it infringes the principle of equal pay to fail to apply the scheme retrospectively to those persons, predominantly female, who it was later found were entitled to receive equal pay but did not receive it even before the protected pay scheme came into force.”

Beginning at paragraph 97 of its judgment, the EAT stated that there was a significant difference between the Middlesbrough situation and that which had pertained in the Redcar case. In Redcar, at the time pay protection was implemented, the employer knew that it had been in breach of the equality clause in respect of at least some of the women; it knew because the point had been conceded. Redcar had acknowledged that, if it had corrected the inequality as soon as it had made the concession, those women would have had the benefit of pay protection.

At paragraph 98, the EAT expressed the view that, in those circumstances, no question of justification arose. The EAT continued:

“…Even if it did, it was bound to fail since the Council were in effect relying on their own failure to correct an inequality which they knew existed as the justification for defeating the claim. Although the reason for not including the claimants was that they were not in receipt of the higher pay when the scheme was introduced, that was only because the employers had failed to make that payment knowing they were entitled to it. The case was analogous to Snoxell which involved the continuation of direct sex discrimination. The other claimants in that case effectively succeeded on the back of the women whose equal pay claims had been conceded.”

As we have already said, it seems to us that the EAT was saying that the discrimination in the Redcar case had been close or analogous to direct discrimination. That, it seems, was why the EAT thought that justification was either not necessary or, if necessary, bound to fail. As we have said, we do not think that it was correct to say that, merely because the employer knew that it had been discriminating in the past, it became impossible to justify the continuation of some discrimination after the reorganisation. We think it would still be possible (although more difficult) for an employer to justify where he was aware of the past discrimination. He could do so by demonstrating that he had done all he could to minimise the effect of the continuing discrimination but he was unable to eliminate it immediately.

At paragraph 99, the EAT drew the contrast, as it saw the facts, between the Redcar case and the Middlesbrough case. It said:

“99.

In this case the scheme when implemented was not, to the actual knowledge of the Council, exacerbating existing discrimination. The Council was not structuring an arrangement in a way which it knew would perpetuate such discrimination. Payments were made to those in receipt of the higher pay – and these included all those who to the Council’s knowledge were entitled to the higher pay - when the scheme was introduced. That was not direct discrimination nor anything analogous to it.

100.

However, we have no doubt that the Tribunal was entitled to find that the Council must have realised that some of the outstanding claims at least were likely to succeed. ….. Since the claimants were overwhelmingly female, the decision to limit the benefits to those who to the knowledge of the Council were in receipt of the higher pay when the scheme was introduced required objective justification”.

That was how the EAT arrived at the stage of holding that the post-changeover Middlesbrough arrangements were prima facie discriminatory and required justification. That was so, notwithstanding the fact that Middlesbrough did not know (in the way that Redcar had known) that their arrangements were discriminatory. In so far as that passage suggests that an employer’s knowledge that he is discriminating is relevant to the question of whether he is discriminating, we think the EAT was wrong. Whether an employer’s arrangements discriminate against women either directly or indirectly is a question of fact and it is to be determined objectively. Whether or not the employer knew or realised that he was discriminating is irrelevant, as is the question of whether he intended to discriminate. Questions of knowledge, motive and intention are relevant, indeed important, at the stage of justification but quite irrelevant at the stage of deciding whether the arrangement was or was not prima facie discriminatory. However, we have already said that, for reasons which relate back directly to the reasoning in the Redcar case, the EAT was right to hold that the Middlesbrough arrangements were prima facie discriminatory and required justification.

Before leaving this passage and coming, at last, to the section of its judgment where the EAT dealt with justification, we wish to draw attention to the way in which the EAT drew a distinction between an employer who has actual knowledge that his arrangements are or will be discriminatory and one who only suspects that that will be so. Although we accept that the distinction is not without significance, we do not think too much should turn on such a distinction. As we said earlier, there will be gradations of knowledge ranging from actual knowledge at one end of the scale to complete and genuine ignorance at the other. However, we think it would be most unattractive if an employer who turned a blind eye to the potential discriminatory effect of his arrangements were to be in a better position on justification than one who investigated the position thoroughly and realised that the arrangements were indeed discriminatory. Such a distinction would put a premium on a failure to monitor pay arrangements and properly to investigate an allegation of pay discrimination when first made.

At paragraph 102, the EAT approached its review of the ET’s decision thus:

“An important preliminary question, which lies at the heart of this issue, is whether it can, as a matter of law, ever be proportionate to deny a woman a benefit she would have had if she had received her equal pay at the appropriate time. Is the employer necessarily prevented from relying on his own failure to provide equal pay when he ought to have done?”

That was a general question, apparently a question of principle. In view of its previous decision in Redcar, one might have expected the EAT to answer it in the affirmative and to refer back to what it had said in Redcar about the type of circumstances in which an employer would be able to justify implementing a pay protection scheme such as this. We have in mind the passage at paragraph 163 of the EAT’s decision where it said that justification might be possible if the employer showed a ‘carefully crafted and costed scheme negotiated …. without any reason to suppose that, when implemented, it would have discriminatory effects.” However, instead of referring back in that way, the EAT gave an affirmative answer to its general question apparently based upon the facts of this particular case, as the EAT saw them. At paragraph 103, it said:

“The Council is not knowingly and deliberately dragging its heels in failing to implement pay rises which it knows are due to the women. Moreover, the claimant is not being denied the appropriate pay she ought to have received for the job. That is achieved by granting back pay and it is not suggested that there could be any justification for denying her that. She is being denied a payment which was contingent on the employee receiving the higher pay at the material time, which she was not doing. …. That adversely impacted on these women but we see no reason in principle why such adverse impact should not be capable in an appropriate case of constituting a justification for the difference in treatment. Accordingly, in our view, the withholding of protected pay does not inevitably involve a failure to give full effect to Article 141, …. that provision itself recognises that some forms of sex tainted discrimination can be justified.”

We are concerned that that passage contains a non-sequitur. The first four sentences of that passage comprise a summary of the way in which the EAT saw the facts of this case. But it could not follow ‘accordingly’ that the withholding of protected pay does not inevitably involve a failure to give effect to Article 141. The two are unrelated. We have no difficulty with the proposition that there may be circumstances in which an employer could justify denying a woman a benefit (pay protection) that she would have had if he had paid her equal pay when he ought to have done. We think the way the EAT in Redcar described the kind of circumstances in which justification could be made out was probably as good a way as any of putting it. We also note in passing that the EAT’s description of the facts as it saw them went beyond and was not wholly consistent with the ET’s findings of fact. The ET had not made any finding of fact as to whether the employer was knowingly or deliberately dragging its heels in failing to implement pay rises which it knew were due to the women. Indeed, we doubt that careful examination of the facts could justify the EAT in making such a finding itself.

At paragraph 104, the EAT said that it found the arguments on justification very finely balanced. It had to consider whether the employers’ reasons for excluding the women from pay protection were a proportionate means of attaining a legitimate objective (the Barry/Cadman test). First, it considered whether the difference in treatment constituted the pursuit of a legitimate aim. The EAT observed that it was ‘a legitimate objective to protect the salary stream and to distinguish between two employees on that basis’. The ET had thought the same. The EAT also considered that it was legitimate to have as an objective the introduction of a job evaluation scheme which would eliminate discriminatory pay for the future. If the scheme would be undermined by extending it to these women, that was a highly relevant consideration, potentially constituting justification. As we understand it, Mr Allen does not quarrel with that and, in any event, we think the EAT was right on that point.

The EAT then turned to consider whether the means adopted were proportionate to the legitimate aim. Here it differed in its view from that of the ET. It accepted Middlesbrough’s submission that it was impossible to know precisely what the discriminatory effect would be of not including these female employees in the pay protection scheme. It was, said the EAT, impossible and would usually be impossible to predict in advance the potential liability in equal pay claims. The employer would not know how many claims there would be; nor would he be able to predict the prospects of success. So, assessment of the likely discriminatory effect of a decision to exclude the successful ones from pay protection would be speculative. The EAT accepted Middlesbrough’s submission that, if the Council had attempted to estimate the cost of including the women who could be expected to establish their claims, it would have been likely to make a conservative estimate and might well therefore have offered too little to the staff who were known to be about to suffer a pay drop. The effect might have been that the offer would not have been sufficiently attractive to secure agreement and the scheme might have failed completely.

We pause at that stage to observe that the ET had not accepted those same submissions when Middlesbrough had made them below. The ET’s view was that it would have been possible to make an estimate of the number of women who would bring claims and what the effect would be on the cost of implementing a pay protection scheme which included the successful women. Yet Middlesbrough had made no attempt to do so. We note that the ET had heard the evidence from Middlesbrough’s witnesses. The EAT would not be entitled to jettison the ET’s findings of fact unless they were unsupported by evidence or plainly wrong.

At paragraph 107, the EAT identified what it considered to be the errors in the ET’s approach and concluded that its decision could not stand. It said:

“The Tribunal placed considerable emphasis on the (Council’s) failure to carry out that exercise (advance estimation of the cost of including successful women claimants) but without identifying this intrinsic difficulty. Moreover, in its consideration of the justification of the arrangement, whilst it recognised the cushioning effect, it did not place any emphasis upon it at all when analysing whether the payments were justified. For these reasons we would accept that its decision cannot stand.”

Pausing there, as to the first complaint, that the ET failed to identify the intrinsic difficulty, that is not so. It discussed this difficulty but did not think it was as great as Middlesbrough claimed or indeed as great as the EAT thought. The ET had noted that a substantial number of claims had already been received before changeover and pay protection. Middlesbrough knew that similar claims had been made against Redcar and had by that time been successfully argued, not merely conceded. The ET had inferred that Middlesbrough must have been aware of that and, if they had given any thought to the matter, would have realised that they were likely to lose some claims on a similar basis.

The second reason given by the EAT was the ET’s apparent failure to place sufficient emphasis on the cushioning purpose of the pay protection, namely that it was only needed by those who had actually suffered a pay reduction. In fact, the ET had noted that and had said, as did the EAT, that a desire to cushion those who had suffered a pay reduction was a legitimate aim. We must say that it is not immediately apparent to us how it could be said that the ET had not placed sufficient emphasis on this point.

In our view, the EAT was not entitled to hold that the ET’s decision could not stand. The EAT had not identified any error of legal approach; it had not identified any relevant factor left out of account or any irrelevant factor taken into account. It had not identified any finding of fact which was unsupported by evidence. Still less had it said that the decision was plainly wrong. Indeed, it could hardly do so, having admitted that it found the arguments on justification finely balanced. All the EAT had done was to identify one finding of fact which it did not agree with and one factor to which it considered the ET had given insufficient weight. But the EAT was not entitled to set aside the ET’s decision on such a basis.

A decision on justification is essentially a question of judgment for the ET, in its capacity as an industrial jury. The judgment must be based on the underlying findings of fact. But a finding of fact by the ET cannot be set aside because the EAT would not have made that finding. The EAT can only do so if there was no evidence to support the finding or it was plainly wrong. Here the EAT has set aside the finding of fact that it would have been quite possible for Middlesbrough to make an estimate of the number of women claimants likely to establish a right to equal pay for the pre-changeover period. The EAT set it aside because it accepted Middlesbrough’s submission that such an estimate would have been much more difficult than the ET thought. It has not said that there was no evidence to support it or that no reasonable tribunal could have reached such a conclusion.

Nor was the EAT entitled to set aside the ET’s exercise of judgment on the ground that the ET had placed insufficient emphasis on Middlesbrough’s main contention on justification, namely the importance of its cushioning effect for those who would otherwise suffer a sudden drop in pay. The ET did not ignore that factor and the EAT is not entitled to say that the ET’s judgment was wrong merely because it would have placed greater emphasis on that factor than the ET did.

In short, in our view, the EAT was not entitled to interfere in the ET’s decision. That in itself is enough to dispose of this appeal. However, because the EAT went on provide its own views on justification, we must make some observations on them. At paragraph 108, the EAT said:

“We consider given that the purpose of the scheme was to cushion employees from the potentially disastrous effects of a sudden drop in pay, the Council was entitled to take the view that it should limit the benefit to those actually in that group and to exclude all others even if some of them ought to have been in the group. Unless the pay was actually being received, there was nothing to protect. We think that is itself sufficient justification, but it is reinforced by the fact that the need to reach a protected pay arrangement, with the agreement of the unions was crucial to the making of the job evaluation scheme. Any assessment of future costing would inevitably be highly speculative and would undermine the ability to obtain agreement for the scheme.”

We would accept that, if the EAT had been the tribunal of first instance, it would have been entitled to decide the issue of justification in that way. However, it was not and that passage must be treated with reserve. We note that the reasoning in that passage would have been equally applicable to the Redcar case and it would be unsatisfactory if the EAT were to promulgate two quite different decisions in two cases which were factually very similar without providing a rational basis for distinguishing them. Indeed, far from providing any basis for distinguishing justification in the Redcar case from that in the Middlesbrough case, the EAT went on to express the view that, in cases of this kind (viz cases where pay protection was introduced to cushion the blow of a pay reduction which had been necessary in order to remove past pay discrimination) the exclusion of the women claimants would always be justified. It said:

“109.

…it seems to us that in substance the matters we have identified will be true of all schemes of this nature. In truth the answer is not likely to be fact sensitive, at least not where large employers are involved. In every case the justification based on the need to cushion the reduction in pay actually received will apply. So, to a greater or lesser extent, will the risk of a large but unknown number of potential claims which would scupper the ability to reach agreement.”

We are concerned about this final statement which appears, in this kind of case, to take away from tribunals the task of deciding whether the employer’s arrangements can be objectively justified notwithstanding the fact that they are prima facie indirectly discriminatory. The EAT seems to think that the same answer will apply in every case where, following pay reorganisation, pay protection is given to the employees who have been the advantaged group under the old arrangements and is denied to the gender group who have been discriminated against in the past. We do not think it can be right to take that essential evaluation away from tribunals. Moreover, we cannot accept that the answer will always be as the EAT thinks.

It is apparent that the EAT in the Middlesbrough case was sympathetic to the position of an employer who, on finding that he has been or might have been discriminating against women seeks to reorganise his pay structure so as to avoid discrimination in the future. The EAT recognises that employers (or at least public employers such as these local authorities) will have a limited budget and many calls upon their resources. The argument accepted by the EAT in the Middlesbrough case is that in such circumstances, the employer will always be entitled to say that it must continue to discriminate against the women for another three or four years (albeit to a reducing extent) because it cannot afford to bring them into line with the men at the time of reorganisation. We find that a very surprising and undesirable general conclusion. We accept that a large public employer might be able to demonstrate that the constraints on its finances were so pressing that it could not do other than it did and that it was justified in putting the need to cushion the men’s pay reduction ahead of the need to bring the women up to parity with the men. But we do not accept that that result should be a foregone conclusion. The employer must be put to proof that what he had done was objectively justified in the individual case.

A significant part of Mr Jeans’ submission to this Court was concerned with the difficulties faced by local authorities with large workforces. His submissions began from the premise that the authorities were not in any way to blame where the pay of women employees had fallen behind the men’s in a discriminatory way. It was unrealistic to expect the authorities to be able to prevent such inequalities arising. So, in cases of this kind, he submitted, that was where they were starting from. “We are where we are”. Authorities such as Middlesbrough were having a very difficult time because large numbers of equal pay claims were cascading down upon them. At times, in the submissions of both Mr Cavanagh and Mr Jeans, it appeared that the authorities’ stance was that they were under a duty to get rid of sex discrimination in pay only when claims were made and the inequality of pay had been demonstrated to them. In short, they only had to ensure equal pay in response to a successful claim. The EAT appears to have been sympathetic to those submissions. But, as Mr Allen pointed out, equal pay legislation came into force in 1975 and, at that time, employers had been given 5 years in which to reorganise their pay structures so as to get rid of sex discrimination in pay. Mr Allen submitted, and we accept, that an employer’s duty since then has been to ensure that there was no sliding back into discrimination. Employers have been and are under a continuing duty to avoid sex discrimination in pay, regardless of whether their female employees seek to assert their rights by litigation.

If the general rule suggested by the EAT were to apply, employers would be able to allow their pay structures to fall out of compliance with the law and then, when forced to do something about it as the result of claims being brought, would be able to assert that they could legitimately take a further three to four years to bring their pay structures into compliance. We do not think that such a situation is consistent with the provisions of the 1970 Act which have now been in force for over 30 years. We consider that it will be possible for an employer to justify the continuance of indirect sex discrimination through the discriminatory application of a pay protection scheme but not as a matter of course and only where the employer satisfies the test of justification as set out in Barry/Cadman.

For the reasons we have given, the claimants’ appeal on pay protection in the Middlesbrough case succeeds and Redcar’s appeal fails.

This section relates to the circumstances in which the pay of the claimants and the comparators was the subject of separate collective bargaining arrangements or structures.

In the case of many employers and, in particular, in the case of public authorities the terms and conditions (including pay and bonus arrangements) of different groups of employees, such as manual and clerical workers, have been historically determined by collective bargaining with different trade unions, both nationally and locally. The terms enjoyed by each section of the workforce will reflect the different priorities of each section and the various trade-offs and compromises which have been negotiated by the respective unions over the years. Separate negotiations produce different terms as between the separate groups relating to the length of the working week, the intervals at which wages are paid, the level of pension contributions, the separate pay scales and bonus schemes and so on.

The fact that different jobs have been the subject of separate collective bargaining can be a defence to an equal pay claim in that the reason for the difference in pay for those jobs has been separate collective bargaining, not the difference of sex of the employees. The question is whether this fact constitutes a defence under section 1(3) of the 1970 Act in this case. It is a distinct aspect of the GMF defence to an equal pay claim. It is an important defence for large employers like Middlesbrough and other public authorities, which have separate bargaining groups with separate bargaining histories. The differences may be unfair, but may have nothing to do with discrimination on the prohibited ground of sex. A difference in pay which is explained by the process of non-discriminatory separate collective bargaining could therefore provide a complete answer to an equal pay claim under the 1970 Act and/or Article 141 of the Treaty. The court was referred to Reed Publishing v Everhurst & Boozer[1988] ICR 391 and to the ruling of the Court of Justice in S.I.D v. Dansk Industrie (“Royal Copenhagen”)[1996] ICR 51.

The point was dealt with in the judgments of the ET (3 January 2007) and the EAT (17 July 2007) in the case of Middlesbrough v. Surtees.

The defence involves Middlesbrough showing that the different separate collective negotiating arrangements, and not the difference of sex, led to the difference in pay. This also involves showing that the separate collective negotiating arrangements were not themselves discriminatory on the ground of sex or, as it is sometimes less elegantly put, not “sex-tainted.”

Middlesbrough has not advanced any objective justification for the difference in pay. If it fails on this issue, there was unlawful sex discrimination in the form of unequal pay.

The Purple Book claimants are two community support workers, Miss F Morrison and Miss C Bone. They are APT & C workers and were not paid bonuses. Their work group was predominantly female. They relied on two comparators in their equal value claims. Pending the independent expert’s report, the ET made an assumption of equal value for the purposes of deciding this issue.

The first comparator was Mr James. He was a gardener. His pay under White Book arrangements included a bonus, which had become part of basic pay. While his basic pay was fixed by national negotiations, his bonus was fixed locally, as the national agreement prescribed. In an earlier ET decision, bonuses such as his were held to be, in effect, part of his basic pay, as the bonus scheme no longer provided any legitimate productivity benefits. His work group was predominantly male. After 1997 the Green Book preserved bonus payments pending the introduction of the job evaluation scheme.

Middlesbrough’s case on Mr James was that, even if the bonus could no longer be justified on the basis that it reflected a genuine productivity arrangement, it had a separate defence that the variation in pay was the result of the different and separate collective negotiation arrangements, which had historically fixed the pay of the different pay groups of manual and APT & C workers. This, it was contended, was a genuine explanation for the difference in pay. It had nothing to do with the difference of sex. It provided a complete answer to the equal pay claims.

The second comparator was Mr Fenny, a Red Book comparator. He was an auto-mechanic. His pay under the Red Book included a guaranteed minimum bonus, which was locally negotiated, though expressed as a percentage of the nationally agreed rate. In time, the bonus was simply paid as a fixed element of pay. The monitoring and assessment in the original bonus scheme had come to an end. The claimants contended that their work was of equal value to Mr Fenny’s, but their pay was unequal, as they did not receive the bonus payment.

There were at all material times separate national and local negotiations for the Red and Purple Books. Middlesbrough contended that, even if the bonus was not a genuine productivity payment, it could rely on the separate collective bargaining arrangements for Purple Book workers and Red Book workers. They led to broadly equivalent terms and conditions when taken across the board. They were not tainted by sex discrimination.

There was this difference between the two comparators. In the case of Mr James, the White Book comparator, it was conceded that the proportion of women covered by the White Book pay arrangements was broadly similar to the proportion of women covered by the Purple Book (APT & C) bargaining negotiation arrangements. However, in the case of Mr Fenny, the Red Book comparator, the craft negotiations dealt almost exclusively with men, whilst the Purple Book staff were very largely women. There was plainly a statistically disparate impact on women on the Enderbyapproach, though it was still open to Middlesbrough to show that that the difference in pay was not sex-tainted.

In short, the difference in pay related to bonus payments, which were made to manual and craft workers (predominantly male-White Book and Red Book), but not to clerical workers (predominantly female-Purple Book). That difference is said by Middlesbrough to be due, not to the difference of sex, but to the historic fact of separate bargaining through different negotiating bodies resulting in different national collective agreements. The material factors which explained the difference in the pay of the comparators were, it was argued, attributable to those separate bargaining arrangements.

Middlesbrough lost the issue in the ET. The ET dealt separately with the White Book and Red Book comparators.

In the case of the comparator Mr James, the ET stated, in a briefly expressed passage, that the separate collective bargaining was tainted by sex.

“9.5(ii) In the case of Mr James we consider that there is clear evidence that the reason for any difference in pay is tainted by sex and is not explicable in terms of separate collective bargaining. His basic pay is negotiated under the same national collective bargaining arrangements as the claimants’ pay.”

In the case of the comparator, Mr Fenny, the ET also rejected the submission that the difference in pay resulted from non-discriminatory collective bargaining.

“9.5(iii) In the case of Mr Fenny there is clear evidence of an overwhelmingly male workforce covered by the NJC and, probably in consequence of that, exclusively male representation in the negotiating body. The disadvantaged group not in receipt of any bonus at all was predominantly female and we do not consider that the supposed advantages accruing to the Purple Book employees arising from their separately negotiated terms were equal in value to the terms enjoyed by Mr Fenny’s work group. The existence of separate work groups facilitates discrimination and could perpetuate it, or lead to its reintroduction at a later date. At this stage we have to act on the presumption or assumption of equality of value.”

It is agreed by the parties that the ET was wrong to rely on the fact of exclusively male representation in the negotiating body.

Although the EAT made some criticisms of the ET decision, it dismissed Middlesbrough’s appeal in the case of both Mr James and Mr Fenny as comparators.

In the case of Mr James as comparator, the EAT concluded that, although the ET’s reasoning on this point was “extremely brief”, there was no error of law in the substance of its conclusion that the difference in pay could not be explained by non-discriminatory processes.

“130.

In short, in our view once the Tribunal had found that the bonus differential could not be demonstrated to be free of sex discrimination, the separate collective bargaining argument was doomed to fail. It would explain the fact that the bonuses were paid to one group and not in the other, but the fixing of the comparator’s pay could not then be free of sex discrimination, and the fact that the claimants’ pay was separately negotiated could not alter that fact.”

It did not appear to be in dispute that, in an appropriate case, the fact that pay is determined by different collective bargaining arrangements could constitute a genuine reason, other than sex, which explained the difference in pay. Such a case could occur, for instance, where two different groups are of similar proportions by gender, but one of the groups earns less than the other. The position would be otherwise where there is a marked difference in the sex balance between the different groups, as shown, for example by Enderby. That imbalance would be evidence from which the ET could infer that the process was sex-tainted, unless the employer provided a different explanation. The fact of separate collective bargaining would not, of itself, be likely to disprove the possibility of sex discrimination.

The groups in the case of Mr James were not marked by sex imbalance, so that the arrangements were capable of providing a non-sex explanation for the difference in pay. In the case of Mr Fenny as comparator, the EAT observed that the reasoning of the ET was “not altogether satisfactory.” Nevertheless the EAT concluded that Middlesbrough failed for very much the same reason as in the case of Mr James.

“143.

….The payment of the bonus was directed at male only groups. The fact that there were different negotiating groups does not preclude a legitimate inference that the payment of a bonus to craft workers, which had become crystallised into part of their basic pay, was connected with their sex and therefore required justification. Since none was put forward, the claim was bound to fail.”

Mr Jeans appearing for Middlesbrough contended that the bargaining history explained the difference in pay; that it was not suggested that the bargaining arrangements were themselves discriminatory in any way; that there was no discrimination with respect to access to any of the job groups; that the differences in pay reflected the priorities of the different groups of workers; that the ET had not explained or given reasons why it concluded that the difference in pay was tainted by sex; and that there was no evidence to justify that conclusion. The EAT agreed with Mr Jeans that the ET was wrong to say that Middlesbrough’s defence was negated because the national bargaining applied to both groups and the bonuses are now negotiated locally. But it rejected most of the other criticisms of the ET’s conclusion.

The problem for Middlesbrough, as the EAT saw it, was that it was conceded that there had been discrimination in the operation of the bonus payments by reference to workers covered by the White Book following the earlier decision. Predominantly male groups had been in receipt of a bonus which was not payable to female groups. Middlesbrough had not made out the case that the difference in pay was the consequence of non-discriminatory bargaining.

Thus, the fact of separate collective bargaining would not of itself be likely to disprove the possibility of discrimination, where there was a marked difference in the sex composition of the two different groups as in Enderby. That must be evidence from which the ET could conclude that the process was sex-tainted. It was for Middleborough to demonstrate otherwise.

The EAT concluded that Middlesbrough had failed to do that. Predominantly male groups had been in receipt of bonuses, which were not payable to female groups. The difference in pay was the consequence of discrimination, not of collective bargaining. The bonus differential was not free of discrimination.

Mr Jeans made many criticisms of the decisions in the ET and the EAT. He contended that they raised questions of law, which had been wrongly answered and which justified this court overturning their rulings on this point.

Mr Jeans emphasised that, in an equal pay case, while the comparison under section 1(2) of the 1970 Act was to be made between the individual terms, such as pay and bonus payments in relation to which the claim was made (Hayward v. Cammell Laird (No 2)[1988] ICR 464), it was important for the GMF defence in section 1(3) to look at the separate bargaining history of the terms of employment. There might be found in it a non-discriminatory explanation for the difference between, for example, the pay of clerical workers and of manual workers and the presence or absence of bonus arrangements. The bargaining may, for instance, have provided some benefits for the claimants, which were not enjoyed by the comparators.

He submitted that it was contrary to principle to conclude, as the EAT had done, that this defence was not available in respect of the bonus arrangements for manual workers because, at an earlier stage, it had been ruled in relation to some manual White Book workers that the bonuses were not explained or justified by productivity factors and that they were therefore tainted by sex. The EAT had wrongly held that the fact that certain White Book workers had succeeded in equal pay claims, using White Book colleagues as comparators, precluded Middlesbrough’s reliance, in claims made by Purple Book workers using White Book workers as comparators, on the fact that Purple Book terms are separately negotiated. He stressed that the situations of the White Book and Purple Book workers are different. Bonuses were not in contemplation in clerical jobs, whereas the White Book contains an exhortation to consider such schemes, which broadly reflect the differences between the nature of manual and clerical jobs. Mr Jeans made a similar point about the separate negotiations in the case of Purple Book workers and Red Book workers, pointing out that the Red Book also envisages bonus arrangements.

Mr Jeans made detailed criticisms of the ET’s reasoning in rejecting the separate collective bargaining defence in relation to the two comparators. In the case of Mr James the ET had not adequately explained its conclusion that the reason for any difference in pay was “tainted by sex.” There was no disparate adverse impact on analysis of the statistics. Bonus payments for Purple Book claimants were never in contemplation under collective bargaining arrangements. As for manual workers, the bonus payments were a legacy of the White Book and were preserved in the Green Book.

In the case of Mr Fenny Mr Jeans contended that the reasoning of the ET contained misdirections throughout. It was inadequate and insupportable. It was rightly accepted by the claimants that it was a misdirection to treat male representation in the negotiating body as evidence of sex-taint. No Enderby analysis had been undertaken by the ET. It had made a sweeping statement about the “supposed advantages” accruing to Purple Book employees from their separately negotiated terms, but had not conducted the necessary analysis of the value of the benefits for all job groups in each Book.

Mr Allen for the claimants responded that the gender disparities in the work groups of the claimants (mainly female) and of the comparators (mainly male) whose pay was the subject of separate collective bargaining leads “inevitably” to the inference of a collective bargaining tainted by sex. That puts it too high. We do, however, agree with Mr Allen that, although Middlesbrough’s submissions do not group its numerous criticisms of the ET decision under the head of perversity, the essential question on this appeal is whether the ET arrived at a perverse and inadequately reasoned conclusion in making an inference that the separate collective bargaining was tainted by sex and therefore not available as a material justifying factor under section 1(3).

If it was not perverse for the ET to draw that inference in this case, the appeal must fail. Perversity, as is well known, is a very high hurdle to surmount on an appeal limited to questions of law. The appeal failed in the EAT and should fail here, as there was sufficient material before the ET to entitle it to make the inference it did. In our judgment, the critical facts are that (a) predominantly male work groups had been paid bonuses; (b) predominantly female work groups had not been paid bonuses; and (c) there had been an earlier finding as between White Book female claimants and White Book male claimants that the men’s bonus arrangements were not explained or justified by productivity considerations. Whilst we do not agree with Mr Allen that the gender disparity between the claimants work groups and the comparators work groups inevitably leads to an inference of sex taint, any more than does the earlier finding in relation to bonus payments, those factors were material available to the ET, from which it was entitled to infer that there was a sex-taint in the separate collective bargaining history as between the groups and therefore in the difference in pay.

Middlesbrough’s appeal on this issue fails. It has failed to show that the decision of the ET on this point was perverse or otherwise flawed by error of law. Mr Jeans described this issue as one of “fundamental importance” and accordingly made very forceful detailed criticisms of the decisions of the ET and the EAT. We are not persuaded that the issue raises a question of law for decision by this court. The findings of an ET on the reasons for the existence of unequal pay in a particular case are essentially questions of fact for the ET. So long as the resolution of the factual issue is not flawed by error of law, this court has no jurisdiction to interfere with the ET’s decisions.

As has been explained in many past cases, perversity raises a question of law, but it requires the appellant to demonstrate an overwhelming case for saying that the decision of the ET is not supported by any evidence, or is contrary to uncontradicted evidence, or is for some other reason obviously wrong. For the reasons given above Mr Jeans has not come any where near to meeting that high threshold.

This section of the judgment relates to a novel question, which has been argued at length on both sides. What impact (if any) do the defences of res judicata, merger and election have on the claimants’ legal entitlement to pursue equal value pay claims against Redcar under the 1970 Act for the same past period (in these cases the period prior to 1 April 2004), in respect of which they have already obtained a final judgment from the ET against Redcar on RAE pay claims?

Redcar raised the question on a strike-out application in Bainbridge (No 2). The application was made under Rule 18(7) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 on the basis that, if these defences were available to Redcar, further equal pay claims by the claimants against Redcar for the same past period had no reasonable prospect of success. The point was first pleaded in an amended generic notice of appearance, dated 15 June 2005, where it was said first, that the First Multiple claimants, who had already succeeded in their claims based on work RAE with White Book men and had received back pay and interest as ordered by the ET for those claims, were barred from pursuing an equal value claim in respect of the same (pre-April 2004) period. Redcar would argue that res judicata and election would prevent them seeking to recover greater sums by means of an equal value claim. The second point pleaded related to former Purple Book claimants who had failed to establish a claim to equal pay for the pre-changeover period relying on their new grading under the Green Book JES. (This was the backdating or retroactive effect point.) Redcar pleaded that, having failed in that first claim, they could not pursue a second claim based on equal value in respect of that period. At the commencement of the hearing of the strike out application, in October 2006, Redcar was permitted to extend the scope of the defences to all White Book claimants, whenever they lodged their claims.

Section 1(1) of the 1970 Act (see paragraph 35 above) deems an equality clause to be included in every contract under which a woman is employed, if it does not include one. It relates to any term of a contract under which a woman is employed. It has the effect of treating the express terms of the woman’s contract to be so modified as not to be less favourable than a term of a similar kind in the contract under which a man is employed. Where there is no express term, it creates a new term by treating the contract as including such a term. In the case of pay, for example, the effect is to require a comparison to be made between the claimants’ pay and the pay of a selected person of the opposite sex (the comparator). The content of the modified term, or of the new term, has to be determined in relation to a selected comparator so as to put into the woman’s contract the same term as that in the comparator’s contract.

Sections 1 and 2 of the 1970 Act allow equal pay claims to be put in three different ways: a like work claim (i.e. where the claimant was carrying out like work with a comparator of the opposite sex); a work rated as equivalent claim (i.e. where the claimant was carrying out work rated as equivalent with that of a comparator of the opposite sex - RAE); and a work of equal value claim (i.e. where the claimant was carrying out work of equal value to the work of a comparator of the opposite sex). RAE and equal value are the two ways of putting the claim that are relevant to this part of the appeal, being the claims advanced by the claimants in their originating application for pay in the period prior to 1 April 2004.

The competing arguments focus on the cause of action for equal pay. Is the cause of action for equal pay for a particular pay period based on equal value the same as, or different from, the cause of action for equal pay claim for the same pay period based on RAE? A claimant in an equal pay case must, of course, establish a cause of action in order to succeed in a claim for arrears of pay or for a declaration of right. As Diplock LJ explained in Letang v. Cooper [1965] 1 QB 232 at 242G, a cause of action is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.” See also Republic of India v. India Steamship Co, The Indian Grace[1993] AC 410 at 419F per Lord Goff. The same applies to obtaining a remedy from an employment tribunal in an equal pay case. The critical question is whether the three different ways of putting an equal pay claim for a particular pay period, using different comparators and relying on different evidence, are distinct causes of action or the same cause of action.

If they are distinct causes of action, there is no scope for the application of res judicata, save possibly in its extended form in some circumstances, and the doctrine of merger would not apply. If they are the same cause of action, res judicata and merger would normally afford a complete defence to an attempt to establish and obtain judgment for that same cause of action in a fresh action.

In any event it will be necessary to consider how ETs can ensure, by the exercise of their very wide case management powers, that their procedures are used efficiently and fairly to achieve finality in equal pay litigation and to avoid the unnecessary costs, duplication of effort and waste of valuable time and resources caused by a multiplicity of actions.

The doctrines of res judicata and merger are rooted in the need for finality in litigation, both in the public interest and in the interests of the litigants themselves. Whether he has won a case or lost a case, a litigant is not normally entitled to re-activate the same case against the same party in another action. Subject to a right of appeal, a litigant is entitled to one go at his claim, but no more.

There is no dispute about the need in the ETs for finality, for the avoidance of a multiplicity of proceedings and for the prevention of abuse of legal procedure by re-opening cases or issues upon which there has been a final adjudication. The general principles of the various rules against re-litigation are not confined to the ordinary courts that developed them.

Although they have the same overall aim, there are differences between the doctrines of res judicata and merger. In general, res judicata is a form of estoppel which prevents a party to a case, in which a final judgment has been obtained, from pursuing to judgment another case against the same party for the same cause of action. It applies mostly in cases where, after the litigant’s claim has failed and judgment has been given against him, he tries to re-activate the same claim by re-litigating it in a fresh action against the successful party. As Lord Goff said in the Indian Grace (see above)at p. 19, “the same cause of action cannot be litigated twice.” Res judicata also applies in an extended form to cases between the same parties where the fresh proceedings are for a different cause of action, but involve issues that were decided in the earlier proceedings or points which could and should have been, but were not, raised in previous proceedings: Henderson v. Henderson(1843) 3 Hare 100. As Lord Nicholls said in Tang Man Sit v. Capacious Investments Limited[1996] AC 514 at p.522C, “In the interests of fairness and finality a plaintiff is required to bring forward his whole case against a defendant in one action.”

Merger is a defence where the litigant has won his case and obtained a final judgment on a particular cause of action. In general, he is not entitled to bring another case against the same party seeking a greater remedy for the same cause of action, because it has “merged in the judgment” and been extinguished. This defence is capable of operating harshly, as instanced in the recent decision of this court on claims for unfair and wrongful dismissal in the ET arising out of the same set of facts and resulting in a final judgment, which was followed by the claimant’s unsuccessful attempt in High Court proceedings to obtain an award of damages for wrongful dismissal in addition to the award made by the ET up to the limit of its jurisdiction: Fraser v. HLMAD[2006] IRLR 687.

The essence of Redcar’s case, which failed in the ET and in the EAT, is that a later claim for arrears of pay in the period prior to 1 April 2004 based on equal value is the same cause of action as an earlier RAE claim for arrears of pay for that same period and for which a final judgment has been obtained in the ET. Both claims, Redcar submit, are for breach of the contractual terms relating to pay in the claimants’ contracts of employment, as modified or included by the equality clause. The claims which the ET has jurisdiction to hear under section 2(1) are “in respect of the contravention of a term modified or included by virtue of an equality clause” rather than claims for breach of the equality clause itself. They are not separate statutory causes of action for equal pay. They are monetary claims in contract for debt or damages.

The argument was skilfully developed by Mr Cavanagh QC along the following lines. At any one time, there can only be one entitlement to an amount of pay under the contract for a particular period. There cannot be a simultaneous contractual entitlement to a different amount of pay for the same period. There can only be one cause of action for breach of the contractual entitlement to receive pay at the correct contractual level. Once the claimants have obtained final judgment on their claims, they cannot pursue proceedings for another judgment against the same employer for the same pay period.

Redcar submitted that, in these cases, the claimants’ cause of action was for arrears of pay and for a declaration. The ET held that the White Book claimants had been underpaid during the relevant period. The amount of the underpayment was the difference between (a) the amount already paid by Redcar for the relevant period and (b) the amount that ought to have been paid under the pay term, treated as modified or included by the equality clause and calculated by reference to the pay of the comparator. The First Multiple claimants have been paid that amount in satisfaction of the ET’s judgment. Having obtained an order from the ET to that effect, those claimants were not entitled to go back to the ET and ask for more pay for the same period. In other words, the operation of the equality clause upon the express contractual term for pay can lead to only one outcome. The cause of action for that outcome merged in the judgment for the amount, was extinguished and could not be revived.

Redcar accepts that the equal value claims involve different facts and, in most cases, different comparators, from the RAE claims, but contends that this does not make them different causes of action and so does not deprive it of res judicata and merger defences. There must be finality in disputes about pay, as in other disputes.

Redcar insists that there is no injustice in the application of the finality principle to the claimants’ equal pay claims in these cases. Properly analysed there is only one relevant promise in the pay term included in the employment contract, as modified by the inserted equality clause. That is the promise to pay. Redcar is alleged to have broken it in the period up to 1 April 2004. The claimants’ equal value claims, which they now wish to pursue, rely on the same breach of that single promise to pay as was relied on by them in their RAE claims for that period. The fact that claims for which judgment was obtained were based on RAE, whereas the claims which they wish to pursue for a second judgment are based on equal value does not alter the position. The equal value claims and the RAE claims are only different ways of putting the same cause of action for equal pay based on breach of the modified contractual term relating to pay.

A fuller account of the litigation background is essential to an understanding of the tribunal decisions under appeal and the rival submissions on whether they are flawed by error of law.

At a separate pre-hearing review held on 2 and 3 October 2006, the ET dismissed Redcar’s application to strike out additional or alternative equal pay claims by the claimants against Redcar. The application was made on the ground that their claims had been determined by settlement or by determination of the ET and that the claimants were therefore prevented from pursuing equal pay claims against the same party in respect of the same element of pay for the same pay period. The ET’s reasons for its decision rejecting the strike-out application were sent to the parties on 25 October 2006.

Redcar’s appeal on this point failed in the EAT for reasons given in its judgment on 23 March 2007.

The important procedural point is that, within one and the same originating application, the claimants made several different equal pay claims against Redcar in respect of the period prior to 1 April 2004. As we have explained earlier, the significance of that date is that, following on from a job evaluation exercise, it marked the introduction of a new pay and grading system by Redcar. The claimants’ application included both RAE claims and equal value claims. The application identified a number of male comparators. Apart from the many White Book claimants who were seeking to establish RAE claims on comparison with White Book comparators, some former Purple Book claimants were seeking to establish retrospective RAE claims on comparison with Green Book male comparators and equal value claims on comparisons with those Red Book male comparators. In some cases there was more than one comparison with a particular category of male worker.

As we have explained earlier, Redcar made a concession in relation to claims by the First Multiple claimants, who had presented claims before 27 January 2004 and claimed that they were not being paid the same as others RAE under the White Book scheme. On the basis of the concession, the First Multiple claimants obtained judgment against Redcar on 13 February 2004 for equal pay claims rated as equivalent. They relied on particular male comparators in relation to their pay prior to 1 April 2004. On 8 December 2004, the ET made an order for payment of specified sums by way of arrears of pay for the First Multiple claimants in relation to the period prior to 1 April 2004. The orders for payment were satisfied. We have not been pressed with any argument that acceptance of the payment of itself barred the claimants’ further pursuit of the rest of their claims, procedural directions in connection with which were made both before and after the payment.

The great majority of White Book claimants (the Second Multiple claimants) presented their claims on or after 27 January 2004. A generic originating application for the Second Multiple claimants was served on Redcar on 25 October 2004. Many of the RAE claims were successfully pursued to judgment for the period prior to 1 April 2004. The claims were quantified. An order for payment was made on 19 January 2007 but, as we understand it, no payments have been made because the liability judgment has remained under appeal until now.

There were other claims, known as the Green Book backdating claims (as to which see the section of the judgment headed RETROACTIVE EFFECT). All those claims have failed at the ET and the EAT and, as will be seen later in this judgment, still fail. However, the arguments have proceeded in this court on the basis that the same considerations apply in all cases.

The essential point, in brief, is that the claimants (both White Book and non-White Book claimants) brought RAE claims for the pay period prior to 1 April 2004. They say that they are now legally entitled to proceed with equal value pay claims against Redcar in respect of the same period as has been litigated to final judgment on a RAE basis. The equal value claims rely on different male comparators (Red Book) from those relied on in the RAE claims that have been determined by the ET. The equal value claims have not yet been heard, because, although some progress had been made by case management orders, they were stayed by the ET on 26 April 2006 pending its ruling on the availability of the res judicata and merger defences and the application of the principle of election.

Redcar failed in the ET and in the EAT. As noted by the EAT and accepted by Redcar, this is not the usual type of case in which res judicata issues arise. This is not a case of successive sets of proceedings between the same parties. The claimants wish to pursue a claim in the existing proceedings, saying that the case has not concluded, as the ET has dealt with only part of it. It is not even the kind of case to which the extended principle in Henderson v. Hendersonusually applies, requiring all related issues to be tried together and holding it to be a potential abuse of process to litigate in subsequent proceedings points that ought to have been raised for decision first time round.

The dispute is principally about the application of well settled principles of res judicata and merger to the particular and unusual facts of these cases. We shall refer first to the way in which the tribunals applied the principles and then deal with Redcar’s contention that the ET erred in law on this issue in refusing to strike out the claimants’ equal value pay claims and that the EAT erred in not overturning the ET’s decision.

The ET dismissed the strike-out application. It noted, in its judgment sent to the parties on 25 October 2005, that all the claims in question were presented to the ET in one claim form. It concluded that the claimants’ submissions were broadly correct. The ET compared the minimum set of facts for a cause of action for equal pay by reference to the 1970 Act. It identified the facts established by the White Book claimants in the claim for equal pay in the first RAE proceedings. It then compared them with the set of facts relied on by the claimants in the later equal value proceedings and found that there were different elements as regards the selected comparator, the reliance on equal value rather than RAE and the Red Book comparators’ higher pay.

The ET concluded that sections 1(2)-(a), (b) and (c) of the 1970 Act contained different causes of action relying, as they must, on different comparators. The ET did not, however, have to go as far as to say that a cause of action relying on one comparator is always a different cause of action from one under the same subsection relying upon a second comparator.

As for the doctrine of election, the ET accepted broadly the claimants’ submissions that the remedies sought by them, “although of the same subject matter, were not inconsistent, but cumulative” (paragraph 9.) It referred to the following example raised in argument:

“Having succeeded in reliance upon the first comparator in achieving an equality clause entitling the claimant to an increase to £120 per week, there is nothing inconsistent in her seeking to obtain an equality clause entitling her to an increase to £150 per week in respect of a second comparator. If, however, the claimant had, having obtained judgment on liability in respect of both comparators at the same time and, with knowledge of the facts relating to the pay of both comparators, elected to pursue a remedy in respect of the first comparator only, then the principle of election might, arguably, apply, but those are not the facts here.”

The ET repeated that the claimants had brought all their claims in one action. They were not seeking cumulatively more than they would be entitled to in respect of either comparator. It had always been anticipated that the equal value claims would be pursued second and no indication was given by Redcar at the time of the stage one hearing that the claimants were to be put to an election.

On the central questions - what cause of action had been tried by the ET and were the claimants attempting to re-litigate that same cause of action in the ET? - the EAT divided. The President and one of the lay members concluded that the res judicata and merger doctrines did not apply to this case:

“124.

We divided on this issue. Like the Tribunal, the majority (the President and Mrs McArthur) prefer the arguments of Mr Allen on this point. It is not, in our judgment, a situation where the same breach of contract is pleaded in each case. The principle of res judicata is a procedural one; it is really a rule of evidence as the quote from the speech of Lord Guest shows. It is also rooted in public policy and in particular that it would be oppressive to allow the further action to be taken. If one looks at the case from that broad standpoint, it would in our view be unjust to impose what would effectively be a lottery on claimants, forcing them to take a chance on which case to advance. Do they choose the most favourable potential claim even if there is the greatest risk of losing, or the least favourable because perhaps it has the greatest chance of winning? We do not think that the purpose of the doctrine is to place claimants in such an invidious position.

125.

In our view these separate claims are distinct causes of action. It is not accurate to say that each breach of the equality clause is the same breach of contract. It is a breach of the same term but committed in different ways. Conquer v Boot shows that you cannot seek to dissect what is in substance a single promise into a series of separate obligations and treat them all distinctly. The analysis in fact is closely linked with the principle in Henderson v Henderson. All aspects of the single promise must be considered together. It would be an abuse to run the litigation in any other way. But the promise to pay the same as man A is not the same as the promise to pay the same as man B. The second claim is not simply a re-framing of the original cause of action, as in Conquer v Boot.

126.

Adopting the approach of Talbot J in the Conquer case, in our view the evidence in the two cases would be quite different, the breach may occur at a different time- for example, man B may be employed much later than man A- and the limitation periods would not necessarily be the same. This is one contractual term, but it potentially contains a number of contractual promises, and the employer is obliged to honour each.”

The dissenting lay member disagreed on the ground that a factual difference in two situations, however small, did not constitute different causes of action. An employer was not under a legal obligation to pay two different rates of pay as the legally established equal pay rate. The employer must pay the legally correct rate, which must be a single rate and one that is ascertained in the course of the litigation. There is no room for further modifications for the same period of time. There may be different breaches of the obligation, but they were all breaches of the same contractual term. There were also policy considerations. The position would be intolerable if there was a possibility of a number of claims advanced by a number of claimants each making comparisons with a wide range of comparators. This could not have been what Parliament intended.

The EAT also rejected Redcar’s contention that the claimants were precluded by the doctrine of election from seeking different sums of money in relation to the same period of service with respect to different comparators. Redcar pointed out that a claimant might seek to pursue a White Book RAE claim, a Green Book retroactive RAE claim and a Red Book equal value claim. It submitted that the claimants had to choose between them. The claimants could plead inconsistent alternatives, but had to elect for different remedies and, having elected for the remedy of RAE pay, they are barred from seeking an inconsistent remedy of equal value pay.

The EAT rejected the election point for similar reasons to those on which it rejected res judicata and merger. It drew a distinction between rights and remedies. Election applied to the latter, as for example having to elect between damages or an account of profits for infringement of a property right. Redcar sought to apply the principle of election to rights. This approach would require the claimants to choose which of their comparators they would pursue to judgment. The EAT was concerned that the claimants should have to make an informed choice and not have to take an unacceptable gamble on which way to put their case.

It is convenient to deal with the last point first. The election issue arises if Redcar is wrong on the question whether the Red Book and White Book equal value claims are the same cause of action as the White Book and Green Book backdated RAE claims. The point can be disposed of very shortly and in a way that throws some light on the more substantial arguments advanced by Redcar on res judicata and merger.

In our judgment, the ET and the EAT rightly rejected the application of the principle of election to this litigation. As Lord Nicholls explained in Capacious Investments at 521B-C, the principle governs election between remedies. It applies where more than one remedy is available for the same wrong and where they are alternative and inconsistent rather than cumulative. One remedy may be based on the loss suffered by the victim. Another remedy may be based on the gain made by the wrongdoer. In such a case the claimant must make a choice between them because the two remedies are inconsistent with one another. The choice normally has to be made when judgment is given holding that liability has been established for infringement of a right or for breach of a duty and the question of remedies arises. For example, a claimant in a case for infringement of a property right or for breach of a fiduciary duty is put to his election between the remedy of damages for the loss suffered or of an account of the profits made by the wrongdoer from the infringement of the right or for breach of the duty.

We agree with the EAT that the claimants are not required by the principle of election between inconsistent remedies to choose between a RAE claim and an equal value pay claim. This is not a case of alternative and inconsistent remedies for a breach of contract. Equal pay is not properly characterised as a remedy at all. It is itself a substantive right for the infringement of which remedies are available in the form of awards of arrears of pay and declaratory relief by the ET in those cases in which contravention of the right has been established in one or more of the ways allowed by the 1970 Act. We do not accept Mr Cavanagh’s analysis that this is in essence a matter of obtaining remedies, involving a choice in relation to a particular level of pay and then making a claim to a further remedy for a different level of pay, which should be precluded by an irrevocable election between inconsistent remedies or outcomes relating to the same employment and the same period.

Further, it is a case of statute - the 1970 Act - enacting a right to equal pay with three different legal formulations of the content of that general right. There is nothing explicit or implicit in the legislation which requires a claimant to make an irrevocable choice as to one of the three different ways of putting an equal pay claim. The claimants have the right to put their claim in all three of the different ways formulated in the 1970 Act.

The way in which the claimants pursue their claims in legal proceedings in the ET to seek a remedy for contravention of the right is, of course, subject to restrictions imposed by procedural law in the interests of justice. We have mentioned earlier and will refer again below to the ET’s case management powers.

It is, of course, common ground that, even if the claimants are entitled, as we think they are, to pursue more than one way of putting their equal pay claims, there is no question of double recovery of arrears of pay. The amount of the arrears of pay recovered as a result of successfully putting the equal pay claim in one way will reduce the amount recoverable as a result of successfully putting the claim in a different way. The sum recovered by a claimant at the successful conclusion of the hearing of the first part of her claim (in this case the RAE claim) is properly to be regarded, not as satisfaction of the judgment on the claim as a whole but simply as payment for that part of the claim. The second (or even third) parts of the claim remain to be tried and, if the claimant is successful in one or both, may be entitled to a ‘top up’ payment for the excess she recovers under the second or third part of her claim. Whatever the outcome of the later parts of her claim, she cannot be deprived of what she has recovered under the first part, the RAE claim.

These general points on the availability to the claimants of different ways of putting their claims to equal pay pursuant to the 1970 Act is the setting for consideration of the other defences of res judicata and merger.

The availability of these defences depends on the circumstances in which they have been invoked by Redcar, in particular the nature of the claims made against it by the claimants. We make the following general points.

First, the claimants’ right to equal pay is the creation of statute. No cause of action would exist but for the intervention of statute. It is true that the 1970 Act uses the technique of deemed statutory modification of a contractual term or of deemed inclusion of a term in the contract of employment. A claim for equal pay is not, however, a claim for breach of the equality clause deemed to be included in the contract. Nor is the claimants’ cause of action for breach of contract simpliciter. It is for “contravention of the term of the contract” which is treated as having been modified or included pursuant to the 1970 Act. The cause of action is thus governed by the provisions of the 1970 Act which impact on the contract. It does not derive from the terms of the contract itself, as agreed upon by the parties. The contract agreed upon by the parties contains a promise to pay. The parties did not agree upon a promise for equal pay. The source of the equal pay obligation is statutory. It is not what the parties themselves have agreed. Thus, contrary to Redcar’s submission, the contractual entitlement of the claimants in respect of a particular period is to pay, not to equal pay. Without the statutory provisions there would be no right to equal pay and therefore no claim for arrears of pay accruing as the result of underpayment calculated by reference to the comparison required by the 1970 Act.

In our judgment, these equal pay claims are not like the case of a claim for breach of a single contractual promise as in Conquer v Boot [1928] 2 KB 336 cited by Mr Cavanagh. Although the equal pay claim is for contravention of the term of the contract, the content of the term is determined by the terms of the statute and not by agreement of the parties. The cause of action is asserted pursuant to statute. Within and by virtue of the statute there is more than one cause of action. There are three different legal bases for an equal pay claim.

Secondly, there is nothing mutually inconsistent in the nature of the three different legal bases for the claim for equal pay; nor is there anything in the substantive statutory provisions in the 1970 Act explicitly or implicitly confining a claimant to only one way of putting her claim. It follows that the claimants are entitled to put forward all their equal pay claims cumulatively. The different heads of claim may have different outcomes as a result of different ingredients leading to the selection of different comparators and to different evidence being adduced.

Thirdly, there is nothing in the doctrines of res judicata and merger or in any other general principle of law which requires the claimants to make, at the outset of proceedings, an irrevocable choice between the different and cumulative ways of establishing contravention of the term of the modified contract by evidence and as a matter of law.

Finally, a key procedural point. The situation that has arisen in this case, and will arise in most equal pay cases, presents ETs with the need to make case management decisions rather than with an occasion for parties to invoke common law doctrines as complete answers to an equal pay claim. The ETs have the widest possible case management powers for dealing with a case justly, in ways which are proportionate to the complexity and importance of the issues and for ensuring that the case is dealt with expeditiously and fairly and so as to save expense.

Equal pay cases are amongst the most challenging to come before employment tribunals. Mr Cavanagh raised the spectre of the claimants’ ability to bring claim after claim without end, if (a) the law was that each time a different set of facts was alleged there was a different cause of action and (b) there was nothing to prevent that from happening by application of the principles of res judicata and election.

There are two answers to that. The first is that, in our judgment, it is not permissible to allege a new cause of action in respect of a particular pay period in another action under the same head for the same pay period simply by selecting a different comparator. For a new cause of action for the same period it would be necessary to bring the equal pay claim under a different head, which would normally involve different comparators as well. Even if that were not the case, there is the second answer which lies in firm and fair management of equal pay cases from an early stage. We appreciate that, like most advice from on high, this is easier said than done, especially at a time when the limited resources of the ETs are stretched to breaking point by the avalanche of equal pay cases against public authorities.

Nevertheless, we would stress the desirability of the ETs (a) clarifying with the parties the ways in which the equal pay claim is being put, (b) identifying the comparators relevant to the different claims and (c) directing whether the claims should all be heard together and, if not, in what order they should be heard. In deciding what directions to give, ETs should bear in mind the need to avoid duplication of evidence and legal argument, and to cut down the number and length of the hearings in a way that will not unfairly prejudice the rights and interests of the parties.

It will also be advisable for ETs to point out that, although directions regulating the conduct of the claims made in the proceedings do not prevent them from being advanced in different ways, the end result may be that, after judgment has been given on the claim which has been advanced in one set of proceedings, no further equal pay claim can be made against the same employer for the same period in subsequent proceedings. In order to prevent or limit successive sets of proceedings, the claimants ought to be required to bring forward the entirety of their equal pay claims for a particular period in the same set of proceedings. It is within the case management powers of the ET to require claimants to identify in their proceedings all the different ways in which they intend to put their case and the issues that arise on the claims, explaining to them that, if they have decided in one set of proceedings not to advance their claim in a particular way in respect of the relevant period, they will not normally be entitled do so later in a new set of proceedings.

It is important that, when choices are made which may lead to a point of no return, they are informed choices. There are available to the parties the ET’s powers to order disclosure and further particulars so that claimants can take an informed view on the strengths and weaknesses of the respective ways in which their equal pay claims can be put.

We dismiss Redcar’s appeal on the res judicata, merger and election issue. There was no error of law in the decision of the ET refusing to strike out the claimants’ equal value claims for the same pay period covered by the judgment on their RAE claims. Although the White Book RAE claim, the Green Book backdating claim, the Red Book equal value claim and the White Book equal value claim are all claims relating to pay in relation to the period prior to 1 April 2004, the later equal value claims are based on a different cause of action from the earlier RAE claims and are not precluded by the doctrines of res judicata, merger and election invoked by Redcar.

We would add that we do not find it necessary to examine or express a view on the submissions of Mr Allen that Redcar’s submissions on the res judicata issue would, if correct, involve a breach of Article 141 of the EC Treaty and of the principle of equivalence as a result of those employed on equal work being denied their directly effective EC right to equal pay. The point does not arise, as we have decided that the claimants are entitled to pursue their equal value cases.

In its decision in Redcar v Bainbridge (No 2) handed down on 8 June 2006, the ET unanimously held that the claimants were not entitled to pursue a claim under section 1(2)(b) of the 1970 Act in reliance on the Green Book JES (which came into operation in Redcar on 1 April 2004) in respect of any pay period prior to that date. The EAT upheld that decision. The claimants, who wish to claim in respect of periods going back six years from the implementation of the 2004 JES (despite it being accepted by them that the JES had not existed before 1 April 2004) appeal. We have called this part of their appeal “Retroactive Effect”. The ET heard no oral evidence on this issue. Whilst the point may be a relatively short one and does not have the encrustation of authority of some of the other issues, it is one which has a considerable effect in monetary terms on both sides of the argument.

The claimants’ argument begins with a reminder of the terms of Article 141. A JES falling within section 1(2)(b) of the 1970 Act is but one way in which the legislature has chosen to give force to the Article; there can be proof of “like work with a man” under section 1(2)(a), “work of equal value” as found under section 1(2)(c) (added by amendment) or “work rated as equivalent” under an appropriate JES under section 1(2)(b). The RAE option is commonly described as “employer-led” and so it is, but so to describe the option overlooks the fact that any JES is likely, certainly in relation to a large public authority, to have involved, as it did in the Redcar case, more than one union and extensive and detailed negotiations over months, if not years.

The three separate options, as Mr Allen rightly emphasises, are not expressed as mutually exclusive in section 1(2) of the 1970 Act; in any one equal pay claim a claimant may advance any one or more of the forms of claim. If, says Mr Allen, a claimant who succeeds in her application under a like work or equal value claim can recover, as it is accepted that she can, for up to six years prior to the date of her instituting a successful claim – section 2(5) and 2ZB – then there is no logic in a successful RAE claim being denied corresponding retroactive effect and being treated as the “odd one out” amongst the three forms of claim. To construe the Act otherwise, say the claimants, is to deny women the very equality which Article 141 obliges Member States to confer as a fundamental right. To confer so important a right in such a way that, in a JES case, it can only be remedied prospectively from the date of the equality of rating within the scheme taking effect is to fail, say the claimants, to respect the great force of the Article. Further, say the claimants, by giving retroactive relief to RAE claims, one gives relief that would otherwise be likely to be available to claimants only by way of the expensive and time-consuming processes needed for a successful claim under the “equal value” route. One would thus speed up and make less expensive those processes, remove them from the tribunals and put them instead into the more suitable JES domain of unions’ and employers’ negotiations. To confer retroactive effect, would reduce numerous separate equal value or like work claims by separate employees, as they could instead be joined together under RAE claims which can conveniently embrace many claimants by way of multiple claims. Surely, say the claimants, that is an end which the legislature is likely to have wished to achieve. Moreover, when a claimant and his or her comparator are RAE, then it has to be taken, say the claimants, that the jobs have been of equal value as, they say, section 1(2)(b) and section 1(5) were plainly intended as a means of securing compliance with Article 141 (and its predecessor).

None of the claimants’ arguments convinced the ET. The tribunal was referred in detail to the terms of section 1(2), 1(5), 2(1), 2(5) and 2ZB. It noted that no authority had been produced in which a claimant had been found entitled to rely upon a JES so as to recover with respect to a period before it came into force. The tribunal referred to O’Brien v Sim Chem Limited [1980] ICR 573 HL and to Arnold v Beecham Group [1982] ICR 744 EAT, which suggested to the tribunal that a JES could not be enforced until it had been completed and that it could not be enforced retrospectively. It took the case Dibro Limited v Hore [1990] ICR 370, relied upon by the claimants, to have nothing relevant to say on the subject of retroactivity nor, it held, did Sorbie v Trust House Forte Hotels Limited [1977] ICR 55.

When it turned to the legislation, the ET found that the tenses used pointed away from retroactive force. Section 1(2)(b) spoke of when the woman “is” employed on work rated as equivalent; section 1(2)(b)(i) spoke of the case where a term of the woman’s contract determined by the rating “is or becomes” less favourable to the woman. Nowhere is there an alternative such as “or has been”. The tribunal noted also that the claimants concerned were not left without a remedy in respect of periods before 1 April 2004 if they truly had an RAE case with respect to such earlier period; if, having been themselves within the earlier White Book, they could find, with respect to a period before 1 April 2004, some male comparator rated as equal with them under the White Book but who had been receiving better pay or more favourable terms, then they would, of course, be able to raise RAE claims with respect to that earlier period. Equally, if they could not find any such comparator by relying upon equal rating, they were free, if they could mount a case on the facts, to claim that, before 1 April 2004, they were doing work which was like work to, or of equal value to, their more favourably treated comparators. All in all, the ET held the arguments against retroactive effect to be overwhelming.

The claimants’ argument before the EAT took much the same course as it had before the ET. A finding that work had been RAE was, argued the claimants, conclusive proof that the jobs were of equal value and hence that the retrospective effect given to equal value and like work cases should equally be available to RAE cases. However, in argument, the case came up of whether a woman whose work had been rated as equivalent with a selected comparator under the Green Book could recover in respect of a period before 1 April 2004 when, during that earlier period, both she and her comparator had been rated under the White Book but had not been then rated as equivalent. The claimants had conceded that such a claim could not be mounted as an RAE claim for the earlier period. Redcar pointed to the highly unsatisfactory consequences if such a concession were not made; persons RAE under a later scheme would be able later to insist on their being retrospectively treated as equal during a earlier period during which, under the earlier non-discriminatory JES, they had in fact been rated as unequal. The claimants also accepted that Sim Chem (supra) established that JES rulings do not come into force until the JES is agreed but they argued that that did not preclude them being given retrospective effect once they had been agreed.

Redcar had raised policy arguments against retrospective effect; it would, surely, discourage employers from embarking on JES, which were generally desirable as a means of achieving equality between men and women, if they were thereupon to find themselves liable for claims going back some 6 years. Whilst the EAT recognised the policy arguments to be powerful, it was its view of the statutory language that proved conclusive. The EAT said:

“36.

It does seem to us, however, that the language of the provision brooks no argument. It is simply wrong to say that somebody in the period prior to the job evaluation study coming into effect has had their job rated as equivalent under a job evaluation study. Plainly they did not. Whereas it can be said that someone who is found to have been employed on like work or work of equal value was so employed at earlier periods (on the assumption that the jobs had not changed), it is an impossible construction to say that someone whose job was rated as equivalent with her comparator under a job evaluation scheme from a particular date, was so rated prior to that date. All that can be said is that if precisely the same job evaluation study had been carried out earlier, they would have been so rated.”

As for the argument that equality of rating under a JES was conclusive proof also of equal value, the EAT rejected the claimants’ reliance upon Dibro v Hore (supra); all it established was that the fact that jobs had been RAE was admissible evidence that the jobs were of equal value, not that it was conclusive on the point. The EAT explained why that was so; when the respective point scores of various jobs emerge from negotiations and evaluations in the course of preparation for a JES, the employer can then, depending on his policy, divide the jobs into broad bands or brackets covering wide differences in scores or into narrow bands covering differences of very few points. It will often be convenient to have broad bands in order to achieve a simplified pay structure; Mr Cavanagh told us that Redcar had bands 50 points wide. But, if the employer does use broad bands, the likelihood is that he will be covering, within any given band, jobs which, having attained different scores, would, had equal value been the issue, have found themselves unequal. The EAT pointed out that, if the claimants’ argument was right, it would encourage employers to adopt very narrow grade bands in order to limit the potential effect of retroactive claims. The employer, held the EAT, must be allowed to contend that, whereas he had been willing to treat the two jobs as RAE as from a particular date for the purposes of his job evaluation scheme, he had not thereby accepted that they either then were, or earlier had been, of equal value.

The EAT gained some support for its view from the decision of the EAT (Knox J presiding) in Springboard Sunderland Trusts v Robson[1982] IRLR 261. Grade 4 in the employers’ JES in that case embraced employees who had scored from 410 to 449 points in the evaluation. The claimant employee had scored 410 points, yet she was denied Grade 4. She asserted inequality under section 2(1)(b) as compared with a Grade 4 man who had scored 428. The employers had attempted to say that the two jobs, different in several respects, had not been rated as equivalent under a JES because of the marked difference in their respective scores. However, by a majority, the Industrial Tribunal held that the two jobs had been RAE within the particular broad band approach that had been used and hence the claimant succeeded. The EAT upheld the decision. If the grade boundaries had been differently fixed, the jobs would not necessarily have been treated as equivalent but, under the boundaries chosen, the jobs were RAE, both falling within the scores appropriate to the Grade 4. The case suggests that an RAE is not necessarily a determination that the jobs have equal value, still less that they would be or had been found to have equal value under the system of judicial determination of equal value under section 1(2)(c) of the 1970 Act.

Accordingly in the present case the EAT upheld the ET; the language of the legislation apart, the EAT held:

“32.

It is simply impossible to say with regard to someone whose job has been rated as equivalent in a job evaluation study as from 1 April 2004 that they were employed on work rated equivalent under that job evaluation study before that date.”

Before us the claimants expressly accepted that, in moving from one JES to another, the width of job bands may change so that jobs rated differently or equally before may come to be respectively RAE or become differently rated after. That is true, of course, both as to the claimants’ jobs and the jobs of comparators. They sought to argue that the contest came down to a conflict between the language of the legislation and, as Mr Allen put it, “logic”.

As for the statutory language, it appears to us, for the reasons given both by the ET and the EAT, that, relative to the date when the equality of rating takes effect, it looks to the present and to the future but not to the past. In section 1(2)(b) the references are to “where the woman is employed”, to a term of contract which “is or becomes less favourable to the woman”, to the term under which the man “is employed” and to the woman’s contract being such that it “shall be treated as so modified”. The corresponding present tenses used in section 1(2)(b)(ii) all speak of the present and conspicuously make no reference to what “has been”.

Turning to section 1(5) of the Act, it provides as follows:

“A woman is to be regarded as employed on work rated as equivalent with that of any men if, but only if, her job and their job have been given an equal value, in terms of the demand made on a worker under various headings (for instance effort, skill, decision), on a study undertaken with a view to evaluating in those terms the jobs to be done by all or any of the employees in an undertaking or group of undertakings, or would have been given an equal value but for the evaluation being made on a system setting different values for men and women on the same demand under any heading.”

The fact that jobs (which, as Dibro (supra) illustrates, can be quite different from one another in terms of points scored) have been given an equal value in terms of grading under the study, evaluations and negotiations which will have formed part of the background to any JES leads to the conclusion that the jobs are then “to be regarded as” RAE. But there is nothing in subsection (5) that works to require them to be regarded as having “equal value” for the purposes of section 1(2)(c) or, indeed, any purpose other than the purposes of the JES itself. In many cases the equality of rating will no doubt assist in proving equivalence for some purpose outside those of the scheme which establishes it, but it certainly does not conclusively determine that jobs rated as equivalent for the purposes of a given JES must be taken to be of equal value for the purposes of section 1(2)(c).

As for the “logic” of retroactive effect, it is, in our view, to overlook that schemes have no force whatsoever before they are agreed and to overlook also that bands and brackets can and do change from one JES to another; it is also to regard the treatment of RAE cases as different from the treatment afforded to “like work” or “equal value” cases under section 1(2)(a) and 1(2)(c) respectively. In fact, each of the three cases is treated identically. Under whichever heading a claimant has applied, she is, if successful, entitled to recover in respect of such parts of the past period of up to six years before she instituted her claim in relation to which the type of equality which she has successfully asserted is either proved or conceded to have existed. Thus if, in year 10, she institutes a claim, later upheld in year 12, which is based upon “like work” being proved as between her job and that of her comparator under section 1(2)(a) as at year 10, she will be able, looking to the 6 years prior to the institution of her claim, to recover for the inequality over such parts of years 4 to 10 and also of years 11 and 12 during which she can demonstrate that the condition which she has asserted – “like work” – obtained. So also, correspondingly, as to a claim raised under section 1(2)(c) – equal value – but so also, again, if, in year 10, she is able correspondingly to establish, as to periods even prior to the institution of her claims, that the assertion upon which she has relied - that she and her comparator were RAE under one and the same JES – was made good.

All three cases are treated identically and, so far as concerns logic, it would be illogical to treat as RAE jobs as to which either there was no previous rating at all or in respect of which (given that bands and boundaries can and do change) the identity of rating existed only under a different scheme. Contrary to the claimants’ argument, there is no “odd one out”; all are treated the same.

Mr Cavanagh also presses home the consequences of the claimants’ concession, as in paragraph 272above, as to the effect of an antecedent JES. If, as the claimants were constrained to accept, the later JES has no retrospective effect in relation to a period covered by an earlier undiscriminatory JES, what was it that existed to give the later JES effect as to any other period to which its particular equivalency of rating did not apply?

We accept the claimants’ argument that there is nothing about Sim Chem (supra) that determines the retroactivity issue; it regulates only the date as from which a JES begins to have effect.

Although, both in the ET and the EAT, their respective decisions touched upon there being different categories of claimants, we have no need to set the categories out as the reasoning we have accepted as correct applies without distinction between them. However, we add that nothing we say here is intended to preclude recovery by a claimant where her claim, not otherwise barred, is in respect of a period before 1 April 2004 and is based on an equality of rating between her and her comparator under some scheme (necessarily not the later Green Book JES) which was in effect in that prior period.

We detect no error of law in the decision of the EAT. Thus, for the reasons we have given, this part of the claimants’ appeal fails.

The full title of the Employment Act 2002 includes, amongst its stated purposes: “To make provision for the use of statutory procedures in relation to employment disputes”. Statutory procedures are written into contracts of employment by section 30 of the 2002 Act. To encourage observance of the specified procedures and to discourage departure from them, the Act includes provisions in section 31 giving a power to ETs to diminish awards to such employees, and to increase awards against such employers, who, in each case, have failed to adhere to them.

The relevant part of section 31 provides as follows:

“(3)

If, in the case of proceedings to which this section applies, it appears to the employment tribunal that—

(a)

the claim to which the proceedings relate concerns a matter to which one of the statutory procedures applies,

(b)

the statutory procedure was not completed before the proceedings were begun, and

(c)

the non-completion of the statutory procedure was wholly or mainly attributable to failure by the employer to comply with a requirement of the procedure,

it must, subject to subsection (4), increase any award which it makes to the employee by 10 per cent and may, if it considers it just and equitable in all the circumstances to do so, increase it by a further amount, but not so as to make a total increase of more than 50 per cent.”

So far there is a duty (“it must”) to award an increase of at least 10% but that is qualified by the next subsection which, so far as material, provides:

“(4)

The duty under subsection … (3) to make … [an] increase of 10 per cent does not apply if there are exceptional circumstances which would make … [an] increase of that percentage unjust or inequitable, in which case the tribunal may make no … increase or … [an] increase of such lesser percentage as it considers just and equitable in all the circumstances.”

It is common ground that the proceedings with which we are concerned were proceedings to which section 31(3) applied. It is now also common ground that the claims to which the proceedings before us relate concern matters to which one of the statutory procedures applies. That last observation has not always been the case; the ET in its decision of 8 June 2006 held that no relevant statutory procedure was applicable to the claimants’ cases. Its order thus awarded no uplift. However, that part of its decision was overturned by the EAT and there is no appeal against that latter conclusion. Despite its view that no statutory procedure was applicable, the ET had prudently dealt with the position as it would have been had that decision been wrong. The claimants at the ET had pressed for an increase in the award in their favour in excess of the 10% provided for in section 31(3), but the tribunal, relying on section 31(4), indicated that, if its conclusion as to applicability were found to be wrong, it would have restricted the uplift to 5%.

On appeal the EAT, as we have noted, ruled that the statutory procedure had applied to the claimants’ cases and, moreover, that Redcar, strictly speaking, had not (duly) complied with it. However, in outline and in the particular circumstances to which it drew attention, the EAT held, were it necessary to do so, that the ET’s conclusion as to a 5% uplift had been perverse and it allowed Redcar’s cross-appeal that no uplift was appropriate.

In what follows we leave out of account any uplift with respect to claims for equal pay relating to periods which had come to an end prior to the Employment Act 2002 (Dispute Resolution) Regulations 2004 having come into effect on 1 October 2004. The EAT had held that, irrespective of the arguments which we shall next deal with, there could not, in any event, be an uplift with respect to claims of that class and there has been no appeal against that conclusion.

We also leave out of account the three cases in which the employee concerned was invited to a meeting. As will become apparent, it was Redcar’s failure to invite the others with specified grievances to meetings which required the ET and the EAT to look carefully at the statutory procedures and their applicability.

Before us, Redcar, as we have mentioned, does not now contest the EAT’s conclusion that a statutory procedure did, indeed, apply but it seeks to uphold the EAT’s decision, relying on section 31(4), that there should be no uplift. The claimants resist the EAT’s reduction to zero of the 5% uplift ordered by the ET and press for that 5% to be restored. They do not now press for more than 5%. The arguments require us to look in more detail at the appropriate regulations and then to turn to the unusual circumstances which both the ET and the EAT had or had not had in mind.

A standard procedure for grievance cases is set out in Part 2 of Schedule 2 of the Employment Act 2002 as follows:

“Step 1: statement of grievance

6The employee must set out the grievance in writing and send the statement or a copy of it to the employer.”

That was done, albeit in very general common form terms. Some 750 grievances were received by Redcar by 8 February 2005. In some 20 to 30 cases the form sent contained no identifying address, job or employee reference number. The grievances, which all included equal pay as a grievance but included other subjects as well, were sent together with a covering letter from the solicitor, Mr Cross, who was acting for the complainant in each case. We will need to refer later to the terms upon which Mr Cross was so acting. The statutory procedure continues:

“Step 2: meeting

7(1)The employer must invite the employee to attend a meeting to discuss the grievance.

(2)

The meeting must not take place unless—

(a)

the employee has informed the employer what the basis for the grievance was when he made the statement under paragraph 6, and

(b)

the employer has had a reasonable opportunity to consider his response to that information.

(3)

The employee must take all reasonable steps to attend the meeting.

(4)

After the meeting, the employer must inform the employee of his decision as to his response to the grievance and notify him of the right to appeal against the decision if he is not satisfied with it.”

Provision is made in paragraph 14 such that the employee has a right, if he so requests, to be accompanied at the meeting but there is no right for him to be accompanied by his solicitor – see Employment Relations Act 1999 section 10(1)(2) and (3).

The standard procedure is made applicable by the Employment Act 2002 (Dispute Resolution) Regulations 2004, Regulation 6(1) and (2) which came into force on 1 October 2004. Regulation 11 provides, inter alia, for the case where it had not been practicable either to commence the statutory procedure or to comply with a subsequent requirement of it within a reasonable period. In such a case the parties “shall be treated as having complied with the procedure” – Regulation 11(2) and 11(3)(c).

Leaving aside the three exceptional cases where there was a meeting, Redcar responded to the grievances by letters which it began to send out in early January 2005. The ET quoted extensively from that answering letter as follows:

“Thank you for your grievance and covering letter from your solicitor. You are one of several hundred people who have lodged grievances of effectively identical issues.

The Council’s grievance procedure is entirely internal and consequently your solicitor cannot play any part in the proceedings. The Council has written directly to your solicitor informing him of this.

As you will have been told by your solicitor all the matters you have raised are the subject of current litigation between the Council and some of its workforce. Consequently the Council is not in a position to reach any decision on the matters you have raised until the outcome of the litigation is known. Your entitlement to a grievance meeting under Part II chapter 1 of Schedule 2 of the Employment Act 2002 does not arise until the Council has had a reasonable opportunity to consider its response to the information you have provided. Such an opportunity will not arise until the issues and litigation have been decided.

Therefore we have recorded receipt of the grievance which will be placed on hold pending resolution of these issues. This will not in any way prejudice your position, as lodging the statutory grievances [is] recognised by the Employment Tribunal as the operative date for any application you may wish to make in the future.”

That standard form response letter was the product of a meeting amongst Redcar officials which the ET described as follows:-

“9.10

It was shortly before Christmas 2004 that a final decision was taken by a group consisting of Ms Kavanagh, Head of HR, Mr Moore the Chief Executive, the Finance Director, and Mr Winthrop, the respondent’s then solicitor, that there were to be no meetings with the employees who had raised grievances via Mr Cross. The decision was acted upon by use of the standard letter in the early New Year. It is noteworthy that no notes of any meeting to discuss this important issue have been disclosed. We have been told that the respondent received legal advice from Mr Winthrop. We accept that such advice was received and that it is privileged from disclosure. We are accordingly left with Ms Kavanagh’s oral evidence alone as to the reasons for that decision.”

At the hearing in the ET, Counsel for the claimants attacked the good faith of that decision, claiming that it was made for improper motives and was a deliberate breach of the statutory grievance procedure such as would justify an uplift of more than 10%. The ET rejected those contentions. They accepted “broadly speaking” that many of the reasons given by Ms Kavanagh of Redcar were, indeed, the reasons for the decision. The Tribunal then turned to examine the reasons which Ms Kavanagh had given.

First, the sheer number of grievances lodged had made it impossible for them to be dealt with within 28 days (although nowhere in the procedure is 28 days specified as the appropriate deadline; what is mentioned in Regulation 11(3)(c) supra is “within a reasonable period”). Second, the staff available at Redcar were already heavily engaged in dealing with other aspects of the Equal Pay litigation which had begun as early as 27 July 2003, well before any grievance here in issue had been lodged. By 8 December 2004, there had already been three hearings and three judgments. Third, Redcar relied on what the ET called a “practicality” reason. Those who had lodged grievances worked all over the borough, some working short hours, and the difficulties of arranging meetings within working hours, the possible interruption of care services during working hours and the possibility of a query as to whether they should be paid for attending grievance meetings during working hours were all regarded by Redcar as reasons which made the convening of meetings impracticable.

A fourth reason was set out in more detail by the ET in its paragraph 9.12 as follows:-

“A fourth reason may be summarised as the pointlessness reason. A decision had been taken that all post January 2004 claims were to be litigated on liability, together with pre 27^th January 2004 non-White Book claims. There were substantive points of law in the litigation; the Council could not be expected realistically to reply on an individual basis or until the outcome of the litigation was known. Furthermore, there had been a determined attempt to mediate collectively with Mr Cross in July/August 2004. Mr David Bean QC, as he then was, had been appointed; meetings had taken place but they were ultimately unsuccessful. The parties were too far apart. It was thus reasonable to expect that there was no prospect of settling any grievances with a claimant who was represented by Mr Cross. In the latter connection, Ms Kavanagh introduced into her oral evidence to the Tribunal the first version of Mr Cross’s CFA terms which have been referred to above. This is an interesting document. Its relevant terms were:

(i)

under clause 4 that the claimant “will accept our advice unless he wished to terminate the agreement”;

(ii)

a success fee of 25% plus VAT of the back compensation obtained, but not [of] any increased future pay;

(iii)

clause 9, “if you end the agreement before the case is won or lost, you are liable to pay our costs incurred at the rate of £160 per hour with letters, e-mails and telephone calls charged at £16 each (up to 6 minutes) and thereafter at the same hourly rate, plus VAT”;

(iv)

clauses 10 and 12 also contained provisions whereby the costs bit if the claimant did not comply with commitments under clause 4, or if the claimant rejected Mr Cross’s opinion about making a settlement.”

During the hearing at the ET two further and later versions of the CFA agreement with Mr Cross were produced and the ET summarised their effect as follows at the end of paragraph 9.12:-

“Without quoting detail from them our conclusions were that the provisions made it even less likely that a claimant would independently agree to settle a claim. Ms Kavanagh told us and we accept that she was aware of the terms of at least the first draft of the conditional fee agreement before the decision not to proceed with inviting employees to meetings was made.”

The ET then turned in some detail to whether the statutory grievance procedure had applied and concluded (wrongly, as it is now accepted) that it had not. Next it turned to consider what its conclusion would be if that view was wrong. It concluded that Redcar had been in breach of step 2 of the statutory grievance procedure, the requirement to invite the employee to a meeting. It held that it had been “practicable” to convene a meeting. Redcar do not appeal against that. “All that was required”, said the ET in paragraph 11:

“was that the employee be given the opportunity to explain their cases at a meeting with a manager. All that was required of the respondent was that the manager should state that the respondent had decided not to enter into any discussions with a view to avoiding Tribunal proceedings with individuals. No special knowledge of the merits or otherwise of the claimants’ claim was required. The claimants clearly had no such knowledge. The manager appointed to attend a hearing need not have had any such knowledge….. a collective meeting could have been arranged…. A decision to litigate the matters did not render it impracticable to hold a meeting or meetings, nor did the unlikelihood of any practicable progress in settling any claim…”

It had not been said that the tribunal had no evidence or insufficient evidence for its conclusion that the employees clearly had no knowledge of the merits or otherwise of their claims. The ET continued (at the end of paragraph 11):

“The statutory procedure was not completed before the relevant proceedings were begun and the failure was wholly attributable to a failure by the respondent to comply with an essential requirement”.

The ET then turned to what uplift, if any, was appropriate in the circumstances which it had described. It continued:

“12.

The tribunal has then to decide whether to uplift the award by an amount of between 10 and 50%, if we consider it just and equitable in all the circumstances under section 31(3), or, if there are exceptional circumstances which would make an increase of 10% unjust or inequitable the Tribunal may make no increase or a reduction of the increase of such lesser percentage as it considers just and equitable in all the circumstances under section 31(4).”

That is not an accurate summary of the import of section 31 supra, nor, indeed, is the way in which the Tribunal framed the question it set itself on the subject in its paragraph 7.5(iii) and (iv). In sequence, the section provides a duty to increase by 10%, a discretion, if it is just and equitable in all the circumstances, further to increase (but not so as to arrive at a total increase of more than 50%), then a disapplication of the otherwise mandatory 10% “if there are exceptional circumstances which would make …. an increase of that percentage unjust or inequitable”. Then, if that disapplication is appropriate, there is a discretion to make either no uplift or a reduced one (i.e. one less than 10%) in either case “as it considers just and equitable in all the circumstances”.

On the import of the word “exceptional” the ET directed itself by reference to a dictum of Lord Bingham in R v Kelly [2000] QB 198 at 208. It was unanimously of the view that the circumstances were exceptional in the present case having regard to the number of claims, the complexity of the claims, the difficulty in arranging individual or even group meetings and: (paragraph 12)

“(iv)

The unlikelihood that any particular employee would have anything useful to suggest as a means of avoiding litigation because of its complexity and also because of the nature of the contingency fee arrangements which bound the employee not to step out of line”.

Again, it has not been said that the evidence before the ET had not justified their finding of that unlikelihood. The ET concluded that it was difficult to see that relevant employees had lost any opportunity as a result of Redcar’s failure if the prospects of anything advantageous occurring at the required meetings was negligible. It held there “was considerable force in Redcar’s pointlessness argument”. The ET, in its concluding paragraph 12, continued:

“Based on this approach, we reject the claimants’ argument that it would be just and equitable to increase the amount to more than 10%. That would be to present the claimants with a wholly unjustified windfall. We do not however consider that it would be just and equitable to award no increase because there has been a blatant failure to follow the statutory grievance procedure which was able to be followed, for example, in the South Lanarkshire cases. Taking all the factors and circumstances into account we considered that if, contrary to our contentions about Regulation 10, there was a breach by the respondents of section 31(3) it would be just and equitable to restrict the increase to 5%.”

We will have to return to that reasoning but, to move to the EAT’s consideration of uplift, it noted that the employees had raised grievances but it indicated it was important to bear in mind the context in which that was done. The EAT continued at paragraphs 55-57:

“They did not do this as individuals, but through letters from the lawyer representing them, Mr Cross, which indicated that they would only deal with the matters through Mr Cross. Each of the employees represented by Mr Cross has entered into a conditional fee agreement under which Mr Cross will get a certain percentage of any back pay recovered. In return they do not have to make any payment, although they will have to do so if they seek to negotiate a settlement independently of him, or bring his services to an end. We were referred to the relevant terms of the agreement, which were as follows:

"If [a signatory ends] the agreement before the case is won or lost, you are liable to pay our costs incurred at the rate of £160 per hour (the hourly rate) with letters, emails and telephone calls charged at £16 each….(all plus VAT).”

There is a similar liability to costs if the solicitors "end the agreement if you do not keep your commitments." These provisions were later amended providing for the payment of 29.375% of the compensation with a fixed fee of £500 for every 6 months spent acting for the claimant. We understand that these terms apply to all these claimants.

The litigation concerning equal pay in this Council had gone on for some eighteen months prior to these individuals making their claims. Moreover, there had been attempts to mediate the dispute between the Council and Mr Cross under the auspices of Mr Bean QC, now Mr Justice Bean, in May 2004, but that proved to be unsuccessful. We have no doubt whatsoever that the effect of these clauses was that there could not conceivably be any settlement save though Mr Cross. The lay members were surprised and concerned about this.”

Speaking of that conditional fee agreement, the EAT continued at paragraph 58:

“An agreement of this nature does not sit happily with the statutory provisions designed to secure settlement; indeed, it undermines them. The lay members accept Mr Cavanagh’s submission that in effect this amounted to a potentially significant financial penalty on the claimants which created an equally significant incentive not to allow any mediated settlement. (It has not, however, been suggested that the terms to which we have referred were unethical or improper, and we say no more about them).”

After commenting on the fact that every grievance letter was couched in precisely the same terms and that not infrequently the terms were inappropriate, the EAT indicated, as we have mentioned, that, after inviting three employees to attend meetings, Redcar thereafter made a conscious decision not to hold meetings with any of Mr Cross’s clients. They then referred to the response letter to which we have earlier referred in paragraph 295.

The EAT concluded that the statutory grievance procedure had been applicable and that the ET had been entitled, leaving aside Redcar’s argument on pointlessness, to conclude that it would have been “practicable” to have held the necessary meetings. However, it saw considerable force in the argument that “practicable” in this context did not simply mean “feasible”. The EAT continued at paragraph 81:

“The purpose of this legislation is to ensure that there is every effort made to seek to settle disputes before they go before the tribunal. There was in truth no possibility whatsoever that grievance meetings held with individuals could have resolved anything. Mr Cross would not have been there since the employers were not obliged to allow him to be there under the procedure and for understandable reasons did not want him to be. The individuals could not resolve matters without risking potential significant liabilities under the contingent fee agreements; and in any event the issues are too complex for them properly to understand the implications of any decision they might take. The whole exercise would have been of an entirely hollow and formalistic kind. Any solution had to be reached with Mr Cross.”

While seeing force in Redcar’s submission that “practicable” meant more than merely “feasible”, the EAT held that Redcar could not escape liability on the ground that what was expected of them was not practicable. That left the question of whether the compensation should have been enhanced. The EAT, in effect recognising that the matter had been one for the discretion of the ET, continued at paragraph 86:

“We recognise that this tribunal will interfere with any such conclusion only in very rare circumstances, but we are unanimously of the view that this is such a case. The pointlessness argument is in our view overwhelming … it is wholly fanciful to believe that any agreement could be reached with anyone independently of Mr Cross, and attempts to resolve matters with him under the auspices of David Bean QC had failed.

A little later it continued at paragraph 88:

“We consider that, to use the language of s.31(4), it would be manifestly unjust and inequitable to increase by any amount at all any compensation owed to these women because of a failure to go through the charade of individual interviews. We strongly suspect in fact that most women would not even have turned up. If they had done so, they would have had precious little understanding of their claims, as the tribunal recognised in terms.”

The South Lanarkshire cases to which the ET had made reference proved to be unhelpful; the EAT accepted that the employee there, although invited to a meeting, had been unable to elaborate her grievance at it (although the tribunal’s use of the singular was not further explained). The EAT added at paragraphs 89-90:

“The fact that another Council called a meeting for form’s sake does not justify the conclusion that every Council should do the same.

The Council in our view adopted a sensible and practical approach to the difficulties with which they were faced.”

Mr Cross, as they understood it, had issued the grievances to protect himself against an allegation that there had been a failure to do so but, continued the EAT at paragraph 90:

“.. the formulaic way in which they were raised, without any tailoring to individual circumstances, showed that these were no more than documents designed to comply with the formal requirements of the law.”

The EAT accepted Redcar’s suggestion that the grievances had been simply part of the litigation process, rather than anything genuinely intended to be part of an alternative method of resolving the dispute, given that there was never the remotest chance, it said, that they could have achieved that objective. The only real possibility of any resolution of the cases was if Mr Cross and the Council could come to some agreement. Then the tribunal added at paragraph 92:

“Mr Allen says that we should only interfere with the tribunal’s conclusion on this matter if it is perverse. If it is necessary to do so, we do indeed unanimously consider that it was, even recognising the high hurdle required to establish perversity in cases such as Yeboah v Crofton [2002] IRLR 634. But in fact we think that the tribunal wrongly directed itself as to the meaning of just and equitable, and wrongly considered that because the failure to hold meetings was a deliberate policy, it could not be just to relieve the Council of the obligation to make any uplift.”

The EAT said it had no doubt that the Council’s approach had been justified. It would, said the EAT, be manifestly unjust and inequitable to increase by any amount at all any compensation owed to these women because of a failure to go through the charade of individual interviews.

The EAT could only have been justified in substituting their view for that of the ET if the ET had erred in law. However, the ET’s reasoning, especially in its concluding paragraph 12, is, in our judgment, vulnerable. Firstly, as we mentioned in paragraph 301 above, it had earlier misdescribed the processes, in sequence, which section 31 demands of a tribunal. Then, in its concluding paragraph, it rejected the increase to more than 10% on the ground that:

“… that would be to present the claimants with a wholly unjustified windfall”.

It is not easy to see why, in windfall terms, 10% would be wholly unjustified whereas its chosen proportion of 5% was not, nor why, if an award was to be a “windfall”, there should be any award at all.

It had held that the surrounding circumstances were, indeed, exceptional (as section 31(4) requires) so that it was open to the ET, if it chose, to make no increase at all but it declined to do so because, as the sole reason expressly given, of the “blatancy” of Redcar’s failure. In describing the failure to follow the statutory grievance procedure as “blatant”, the ET used a word which, in this context, suggests that it was not only conspicuous but unashamed, in the sense that it was decided upon and persisted in despite a consciousness that it was wrong. That the decision was conspicuous was hardly a fault; it would have been wrong of the Council to have hidden it from its employees or their solicitor. But a finding that it was unashamed in the sense explained seems to have been without any support in the evidence; the ET had held that the Council had had reasons, which it explained in evidence, for its decision not to hold a meeting and nowhere did the ET hold that there was any consciousness in Redcar that it was doing wrong in so deciding or in its persistence in the decision. The ET had specifically rejected that Redcar had not acted in good faith or had had any improper motive. The ET made no finding that either the employees or their solicitor had complained about the failure to convene meetings nor did the claimants’ oral or written arguments before us point to any such complaint. The very fact, if such it was, that Mr Cross had failed to insist on the meetings or complain of their absence might suggest that he was by then more looking to a prospect of windfalls for his claimants than for meetings. Moreover, it was particularly harsh to speak of any “blatancy” in Redcar’s decision given that the ET, even assisted by full argument, had taken the view, albeit wrongly, that the statutory grievance procedure had not even been applicable.

If, as in our view is the case, there was no relevant “blatancy”, then the ET’s rejection of there being no uplift and their choice, instead, of an uplift of 5% is left unsupported by any acceptable reason. Hence it was an error of law. Moreover, having accepted in terms that there was “considerable force in [Redcar’s] pointlessness argument”, they failed, as far as one can tell, to have that in mind save in their rejecting an increase of “more than 10%”. To judge from the reasons expressed, the ET had failed to take that into account as a factor which could lead to it being just and equitable to award no increase at all. A consideration of what is “just and equitable”, which is what section 31(4) invites, requires a consideration of all relevant surrounding circumstances. Although, in an overall assessment, one factor may, of course, tip the balance one way or another, the ET’s concentration on “blatancy” as the reason for rejecting a zero uplift, quite apart from being in any event misplaced, seems to have been part not of a consideration of all relevant circumstances, but of a focus upon one to the exclusion of the many others. We thus agree with the EAT’s analysis that the ET had, in effect, wrongly directed itself on the meaning of “just and equitable”. We hold that the ET’s decision on uplift was in error of law.

That being so, it was properly open to the EAT to substitute its own figure for the 5% which the lower Tribunal had settled on. Once one gets that far it is not possible to find any error of law in the EAT’s conclusion that the appropriate answer was that there should be no uplift. Mr Allen argues that one of section 31’s purposes is penal. At the higher percentages – up to 50% - of increase or decrease that may be so, but we see its primary purpose as being to add a form of incentive to encourage parties to engage in negotiations to attempt to settle their differences without their incurring the expense and delay of litigation or of further litigation. But even if the section’s purpose were to be penal, the punishment would need to meet the “offence”. As we have found no error of law in the EAT’s award of no uplift it would not be open to us to alter its award, but we would go further. The ET held – see paragraph 298 above – that there had been a determined attempt to mediate which had failed because the parties were too far apart. There was no prospect, it held, of settling any grievances with Mr Cross’s claimants. In those circumstances the meetings which, in order to comply with the required procedure, should have been held, would have been, as Mr Cavanagh’s metaphor rightly described them, merely a ritual dance. Although there was an “offence”, in all the circumstances we, like the EAT, see it to be one that merited no punishment.

Accordingly, on this part of the case, the claimants’ appeal fails; the uplift of 5% is not restored.

On the Pay Protection point we dismiss Redcar’s appeal, as there was no legal error in the decision of the ET. Redcar was not entitled to rely on its pay protection scheme either as a valid GMF defence under section 1(3) of the 1970 Act to an equal pay claim or as objective justification of unequal pay.

We allow the claimants’ appeal in the Middlesbrough case. As there was no legal error in the decision of the ET, the EAT ought not to have reversed the ET’s decision on objective justification. Middlesbrough was not entitled to rely on its pay protection scheme as a valid GMF defence to an equal pay claim or as objective justification of unequal pay.

On the Collective Bargaining point we dismiss Middlesbrough’s appeal, as there was no legal error in the decision of the ET in rejecting separate collective bargaining arrangements as a valid GMF defence.

On the Res Judicata point we dismiss Redcar’s appeal, as there was no legal error in the decision of the ET. In advancing equal value claims against Redcar under 1(2)(c) of the 1970 Act, the claimants were not relying on the same cause of action as in their RAE claims against Redcar under section 1(2) (b) of the 1970 Act and they were not prevented from advancing their equal value claims by the doctrines of res judicata, merger or election.

On the Retroactive Effect point we dismiss the claimants’ appeal. There was no legal error in the decision of the ET. A JES which complies with the 1970 Act does not have retroactive effect so as to entitle the claimants to rely on a person of the opposite sex, who is RAE under the JES, as a comparator for the purposes of an RAE claim for a period prior to the implementation of the JES.

On the Statutory Grievance Uplift point we dismiss the claimants’ appeal. The EAT correctly held that there was an error of law in the decision of the ET to award a financial uplift of 5% for Redcar’s failure to comply with the statutory grievance procedure as laid down in the 2002 Act and 2004 Regulations. There was no error of law in the EAT’s decision to award no uplift. Thus the uplift of 5% is not restored.

This is a bit complicated because a whole range of appeals were heard at once. For the reasons given in the judgment of the court, the various appeals will be disposed of in the way which I will indicate by reading out the relevant parts of the order which the parties have agreed. I will then deal with the parts of the order which they have not agreed and give the court’s decision on those.

There are three appeals; the first one is called Redcar and Cleveland Borough Council v Bainbridge (No 1) [2007] IRLR 91, Bainbridge being the name of the respondent, the appellant being Redcar and Cleveland Borough Council. The following order is agreed:

“(1)

The appeal of Redcar and Cleveland Borough Council is dismissed, (2) Redcar and Cleveland Borough Council to pay the costs of the Bainbridge claimants in the appeal to the Court of Appeal to be assessed, if not agreed, on a standard basis and (3) Redcar and Cleveland Borough Council are to pay £35,000 within 28 days as a payment on a count of costs in advance of the assessment process pursuant to CPR Rule 44.3(8).”

(Quote unchecked)

The next two provisions I will leave for the moment since they concern applications for permission to appeal to the House of Lords.

The second appeal is Middlesbrough Borough Council v Surtees (No 1) [2007] ICR 1644. The order agreed for the disposal of the appeal is as follows:

I will omit the next two paragraphs which deal with the contested question of a possible appeal to the House of Lords.

The third appeal is Redcar and Cleveland Borough Council v Bainbridge (No 2)[2007] IRLR 494. The following provisions have been agreed for the disposal of this appeal:

“(1)

The appeal of Redcar and Cleveland Borough Council is dismissed, (2) the Bainbridge claimants’ appeal is dismissed and (3) there be no order as to costs.”

(Quote unchecked)

Then the next three paragraphs are related to the contested question of the appeal to the House of Lords.

That is the entirety of the provisions that have been agreed. What the court has received in addition to the agreed parts of the order are applications for permission to appeal various issues to the House of Lords. The court has received lengthy written submissions on behalf of Redcar and Cleveland Borough Council in support of an application for permission to appeal to the House of Lords, principally on the question of pay protection as a defence to the equal pay claims that have been made in these cases. It is said that that the general importance of the pay protection issue is indicated by the fact that the Equality and Human Rights Commission intervened in the appeal. It is submitted that the court’s ruling on this issue is of the greatest possible practical significance to all concerned in and affected by the implementation of single status in local government.

The sums involved in these proceedings are very large indeed. The written submissions set out examples of the practical problems to which the judgment of this court is said to give rise. It is said that in the Employment Appeal Tribunal, from which these appeals were brought, the lay members recognised the practical difficulties that will face employers who seek, in good faith, to manage themselves out of historic discrimination in matters of pay. It is said that, in addition to the practical issue which the judgment gives rise to in the public sector, the legal issues dealt with in the part of the judgment relating to pay protection are of the greatest importance to the law of equal pay generally as they relate to fundamental issues of principle.

There are then set out the legal arguments, which the Council submit disclose a sufficiently arguable case for this matter to go to the House of Lords.

The Council also wish to take to the House of Lords the issue that is described in the judgment as res judicata. It is pointed out that, as the judgment noted, this issue gives rise to a novel question of law. It is submitted by the Council that the issue gives rise to very important questions as to the jurisprudential basis for equal pay claims and the relationship between the three types of claim; namely like work, equivalent work, and work of equal value.

It is also submitted that the issue is of great practical significance. It raises the possibility of lengthy, rated as equivalent claims being followed by even lengthier and more onerous and costly equal-value claims relating to the same pay period. This will happen in practice. It is said the court itself acknowledged that higher court’s advice about: “Robust case management is easier said than done.” This is not a difficulty, it is submitted, that can be resolved by case management alone. There are then set out the legal arguments as to why, at this point, these are of sufficient arguability to justify permission to go to the House of Lords.

There are also applications by the claimants for permission to go to the House of Lords on the points on which they were unsuccessful in this appeal. They seek permission to appeal on the issue described in the judgment as "retroactive effect". The Council agrees that this issue is of general public importance; however, the Council goes on to submit that the claimants do not have a sufficiently arguable case on this issue to justify an appeal to the House of Lords.

The court has also received submissions from the Middlesbrough Borough Council seeking permission to appeal to the House of Lords on the pay protection issue in their case. They submit that this is a matter of general public importance, as is acknowledged in the judgment itself. Of all the issues in this complex litigation, pay protection is the most important, because its resolution will affect the outcome of the thousands of equal pay claims which are pending in the Employment Tribunals, principally against local authorities and NHS Trusts. These claims will extend further so as to affect the way in which all employers, employees and trade unions approach equal pay in general, and in particular, job evaluation exercises and consequential changes to pay and grading structures.

Detailed points are then made in the written submissions about the particular legal arguments which it submitted would succeed in the House of Lords, though they have failed here.

Like Redcar and Cleveland, Middlesbrough also rely on the intervention of the Equality and Human Rights Commission to illustrate the importance of the principle of the transition from unequal pay to equal pay.

It is submitted that the economic consequences on a national scale of existing pay protection schemes are vulnerable to equal pay challenges generally. They cannot be computed, but are potentially vast. The public importance of the pay protection issue, Middlesbrough submit, cannot be overstated.

The parties seeking permission to appeal include all the parties to this litigation, Middlesbrough, principally in respect of the pay protection scheme; and in the case of Redcar and Cleveland, the res judicata scheme, and the claimants’ applications in relation to a retroactive claim are dealt with in detail in these written submissions.

There are also applications, if this court should decline to grant permission, to extend the time for presenting a petition to the House of Lords seeking leave to appeal.

The court has considered these written submissions. It does not dispute the public importance of the issues which are raised in this case which, in my experience, are the most complex employment issues ever to have been considered by this court. Nevertheless, the court has come to the view that in this matter it is for the House of Lords itself to decide which issues it is willing to take on appeal, if any.

The matter has been considered at enormous length over a number of years by the Employment Tribunals, by different divisions of the Employment Appeal Tribunal, and by this court in one of the longest judgments that we have ever had to deliver. It is really now for their Lordships to decide how much of this litigation should take up their time and how much should be resolved by other means. The court therefore refuses permission to appeal to the House of Lords on any of these issues without in any way diminishing the extreme public importance of them.

The court recognises the difficulties that will face counsel and their instructing solicitors if they are not given a substantial extension of time in which to prepare their petitions for leave to the House of Lords, which will undoubtedly be made. The court therefore proposes to accede to the request that, having refused permission, this court will extend the time for lodging petitions to the House of Lords for leave to appeal until 30 September 2008.

In summary, the court is disposing of all these appeals in the way that has been agreed in the order. It is not granting permission to appeal on any of the issues to any of the parties. It is for the House of Lords to decide how this matter should be dealt with from now on. There will be an extension of time until 30 September 2008 for the presentation of the petition to the House of Lords for leave to appeal.