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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Barry v Midland Bank Plc [1996] UKEAT 817_95_0202 (2 February 1996) URL: http://www.bailii.org/uk/cases/UKEAT/1996/817_95_0202.html Cite as: [1996] UKEAT 817_95_202, [1996] UKEAT 817_95_0202

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BAILII case number: [1996] UKEAT 817_95_0202

Appeal No. EAT/817/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 2 February 1996

Before

THE HONOURABLE MR JUSTICE MUMMERY (P)

MR R N STRAKER

MR A D TUFFIN CBE

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MRS J BARRY          APPELLANT

MIDLAND BANK PLC          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MS CHERIE BOOTH QC AND MR CLIVE LEWIS

(of Counsel)

Messrs Lawford & Co

Solicitors

102-104 Sheen Road

Richmond

Surrey TW9 1UF

For the Respondents MR PATRICK ELIAS QC

AND MS SUE ASHTIANY

(of Counsel)

Messrs Cole & Cole

Solicitors

Buxton Court

3 West Way

Oxford OX2 OSZ


 


MR JUSTICE MUMMERY:

Introduction

This is a difficult case. We shall attempt to simplify it. It is an appeal against the decision of the Industrial Tribunal held at London (South) over a period of six days between the beginning of October 1994 and early March 1995.

In extended reasons sent to the parties on 15 June 1995 the Tribunal explained in 28 pages why Mrs Barry was not unlawfully discriminated against on the ground of sex in relation to the calculation of the payment made to her when she took voluntary severance from her employment with the Midland Bank Plc ("the Bank") in April 1993. Her claim, based on the Equal Pay Act 1970 ("the 1970 Act"), the Sex Discrimination Act 1975 ("the 1975 Act"), Article 119 of the Treaty of Rome and the Equal Pay Directive (No. 117/75) ("the Directive"), gives rise to significant legal questions canvassed in detail in the Notice of Appeal served on 21 July 1995, in the Answer and Cross Appeal served on 7 September 1995, in skeleton arguments, supplementary skeleton arguments, notes, aide-memoires and summaries. The excellent oral submissions of Miss C. Booth QC, on behalf of Mrs Barry, and of Mr P. Elias QC, on behalf of the Bank, were indispensable to the clarification and resolution of the questions of law.

The Background Facts

In this case there are more sections, more Articles, more rules, more decisions than there are facts.

These are the few facts:

(1) On 2 July 1979 Mrs Barry began to work for the Bank as a full-time Grade S1 Clerk (35 hours per week).

(2) By 21 December 1989, when she gave notice to the Bank that she intended to take maternity leave with effect from 15 February 1990, she was employed full time as a Grade S4 Clerk at Mariner House, in the City of London.

(3) On 1 February 1990, earlier than originally intended, Mrs Barry went on maternity leave.

(4) On 10 March 1990 her first baby was born.

(5) On 24 May 1990 she gave notice of her intention to return to work, but asked if she could return as a part time (or "key-time") worker. Her request was granted.

(6) On 8 October 1990 she returned to work. She worked alternate weeks from 8.30 am to 4.30 pm. Her total hours as a part-time worker were equivalent to 17.5 hours per week, compared with 35 hours per week as a full time worker.

(7) Early in 1992 her division moved to Park Street, Southwark.

(8) Later in 1992 the Bank invited applications for voluntary severance in the division where Mrs Barry worked as a Research and Adjustment Tracer Clerk. She applied for voluntary severance. She was supplied with an illustrative figure of her entitlement. She accepted the figure. The Bank accepted her application.

(9) On 30 April 1993 Mrs Barry's employment terminated. She received a total payment of £5,806.08 for voluntary severance.

(10) Although she had worked for 11 years full time and only 2½ years part time, her severance payment was calculated solely on the basis of her part time salary as at the date of severance.

The Proceedings

(1) On 27 July 1993 she presented an application to the Industrial Tribunal complaining of contravention of the 1970 Act, the 1975 Act and Article 119. Her union (BIFU) acted as her representative. She attached to her application the table of payments in Part 4 of Appendix 1 of the Bank's Security of Employment Agreement with BIFU. The Table sets out the way in which cash payments are calculated on voluntary redundancy. The chart has three columns. The first column lists the number of years service; the second column lists the number of weeks pay; and the third column (included for comparison purposes only), shows the number of weeks used to calculate the statutory redundancy payment. In Mrs Barry's case she had over 13 years' service, which entitled her to a cash payment of 42 weeks pay. That was calculated by reference to her pay part-time at the date of redundancy. In the details of her complaint she explained that, although for 11 of her 13 years' service she had worked full-time, the Bank applied her current part-time pay to calculate the redundancy payment.

"There is no provision in the Security of Employment Agreement to adjust the calculation of the redundancy payment in the case of employees who, while working part-time and receiving pay commensurate with part-time working at the date of the termination of their employment, have during the period of their continuous service worked full-time."

In those circumstances Mrs Barry contended that, by calculating her redundancy payment in that way, the Bank indirectly discriminated against her -

"In that they applied to me the condition that I had to be working full-time at the date of the termination of my employment in order to avoid my redundancy payment being calculated as if all my years of service were years of part-time service which results in my redundancy payment being less than that of a man who is able to comply with this condition."

(2) In those circumstances she alleged contravention of Section 6(2) of the 1975 Act; of her contract, as modified by the equality clause deemed to be included by virtue of Section 1 of the 1970 Act; and of Article 119 of the Treaty of Rome. She contended that the Bank were unable to justify the discriminatory condition or to establish that the variation between the effect of her contract on her and of the contract of a full-time man on him was genuinely due to a material factor, irrespective of sex.

(3) On the issue of quantum, it is contended that, if Mrs Barry's severance payment had been calculated to reflect fully her period of full-time service (i.e. by calculating her entitlement on the basis of her full-time salary, not her part-time salary, reduced proportionately in relation to her part-time employment for 2½ years) she should have received £8,080.80. This case concerns her entitlement (if any) to the difference between (a) what she in fact received and (b) what she should have received, if there had been no alleged unlawful discrimination i.e. £2,274.72. This is, of course, a test case on a general principle which may affect not only others under the Bank's severance scheme, but also many employees under similar severance schemes, as well as under the statutory redundancy scheme.

(4) It is not, therefore, surprising that when the Bank contested the claim. In their Notice of Appearance dated 9 December 1993 they disputed every argument advanced by Mrs Barry. They contended that she had received a termination payment calculated exactly in accordance with the provisions of the Security of Employment Agreement. They denied that the payment was discriminatory in any way. The scheme for calculation of redundancy payments did not amount to a requirement or condition as alleged by her. The basis of calculation of the scheme was identical for all staff. Past employment history was not a relevant factor, except for length of service and, to a limited extent, age. For all employees the termination payments were made irrespective of salary, grade or place of work prior to the date of termination. There was no condition or requirement which part-time workers were unable to meet. It was not admitted that any requirement or condition there might be was such that a considerably smaller proportion of people in her position could comply with it.

(5) It was also contended that the basis of calculation of termination payments was not to her detriment, since a termination payment calculated on the basis of her actual remuneration throughout her employment would in fact have resulted in a reduced figure. That would have occurred in consequence of the rise in earnings of the Applicant at the time of the termination of her employment, compared with her previous earnings with the Bank. The Bank submitted that the terms of the redundancy payment scheme were justifiable and that there was therefore no indirect discrimination in breach of the 1975 Act, Article 119 or the 1970 Act. As the purpose of a redundancy payment is to compensate an employee for what could be the consequences of becoming unemployed, it was justifiable that the payment should be predicated on the employee's actual income at the time of termination. It was the same basis of calculation of statutory redundancy payments found by the Court of Appeal in R v Secretary of State for Employment ex-parte Equal Opportunities Commission [1993] ICR not to be discriminatory. For all those reasons Mrs Barry's claim was denied and her contentions disputed.

The Decision of the Industrial Tribunal

The extended reasons set out at length the rival arguments on the points in the Originating Application and the Notice of Appearance. It is unnecessary to repeat or to attempt to summarise all the arguments. It is important at this stage in the judgment to highlight the essential reasoning of the Tribunal in rejecting Mrs Barry's claim. The Tribunal held that:

(1) The difference in severance pay received by a full-time worker and by a part-time worker with previous full-time service in the form of the severance payment was not indirectly discriminatory on the ground of sex because -

(a) The relevant group for the purposes of comparison were the full-time and the part-time (or key-time) workers employed as Grade S4 Clerks in the Bank's Operations Clearing Department;

(b) The question was whether the percentage of women who worked full-time within that relevant group was considerably smaller than the percentage of men who worked full-time in that group;

(c) The percentages of the selected group (i.e. the Operations Clearing Department) were that 92.68 per cent of women worked full-time and 99.33 per cent of men worked full-time.

(d) That difference (6.65 per cent) was not considerable.

(2) Article 119 was directly effective. (It was conceded that a severance payment is "pay" within the meaning of the Article). There was, however, no breach of Article 119 in the severance scheme, because it was not proved that there was any adverse impact on women. Although the overwhelming numbers of part-time workers were women, the overwhelming percentage of women in the Operations Clearing Department worked full-time. There was, therefore, no indirect discrimination based on sex and no breach of either Article 119 or of the 1970 Act.

(3) If, contrary to the Tribunal's conclusions under (2), there was indirect discrimination, the Bank had not demonstrated that it was objectively justified on the test laid down in Bilka-Kaufhaus [1987] ICR110. The Tribunal found that the primary purpose of the severance scheme was to deal with the reorganisation and redundancies in as fair and acceptable way as was possible and to cushion employees against unemployment and job loss. The Tribunal also found that the scheme reflected an element of compensation for loss of job and for loyalty to the Bank. The length of service and loyalty to the employer which that denoted was an element of the Security of Employment Agreement and increased in importance as the length of service increased. In rejecting the defence of objective justification the Tribunal stated that it was not the sole purpose of the scheme to compensate employees for disruption caused by untimely loss of their jobs. The payment was also to compensate employees for their contribution. That element increased with time. The scheme failed to take into account, to a significant extent, the full service of an employee and did not, therefore, meet the objectives of the scheme. It was not necessary for the scheme to be in the form that it was. It did not become justifiable simply because some full-time employees, with previous key-time service, benefited from the operation of the scheme. The Tribunal concluded that, "The scheme as drafted is convenient, rather than necessary".

(4) As for the claims under the 1975 Act and the 1970 Act the Tribunal decided that Mrs Barry could only argue her case under the 1970 Act, not under the 1975 Act. Her claim under the 1970 Act failed because Section 1(1) of that Act is solely concerned with the terms on which an employee is employed. Unlike Article 119 it is simply concerned with a difference in pay. Mrs Barry's terms of employment were not less favourable than those of the male comparators, as the same terms were used to calculate severance pay for full-time employees and part-time employees alike. There was no breach of the 1970 Act or the equality clause implied by it.

(5) In any event, any difference in treatment of Mrs Barry was due to a genuine material factor other than the difference of sex within Section 1(3) of the 1970 Act. The Bank relied on "administrative convenience" and the intention to cushion employees against the loss of their work, particularly older, long serving employees. The Tribunal accepted that those were objective reasons unconnected with the difference in sex between Mrs Barry and her male comparators. Her claim under the 1970 Act failed for that further reason.

Issues on the Appeal

The critical issues on this appeal and cross appeal are whether the Industrial Tribunal erred in law in holding that:

(1) There was no indirect discrimination on the ground of sex contrary to Article 119.

(2) The practice complained of did not fall within the scope of Section 1(1) of the 1970 Act.

(3) The indirect discrimination was not objectively justifiable.

(4) Any difference in the treatment of persons in the position of Mrs Barry was due to a genuine material factor, other than the difference of sex.

Common Ground

The following points are common ground on this appeal -

(1) The payments received by Mrs Barry were made in accordance with the Security of Employment Agreement, a collective agreement concluded between the Bank and BIFU and applicable to virtually all the staff of the Bank. The method of calculation was based on the length of continuous service at the date of termination of employment, coupled with the salary payable to the employee at the date of termination. The scheme is based broadly on the statutory redundancy scheme, though more generous in its terms.

(2) The 1975 Act is irrelevant.

(3) Article 119 of the Treaty of Rome is directly effective in national courts and tribunals as between individuals.

(4) The reference to "pay" in Article 119 includes voluntary severance payments.

(5) Article 119 prohibits indirect discrimination on the ground of sex, which may occur when a practice or provision in a collective agreement has a disproportionate adverse impact on women, as compared with men e.g. where the disadvantaged group is largely or predominantly composed of women.

(6) The provisions of the 1970 Act must be read with the provisions of Article 119 and be construed to conform with them, so far as it is possible to do so without distorting the language.

(7) In the case of incompatibility between the statutory provisions and Article 119, the Tribunal must give effect to the primacy of the provisions of Community Law.

The Equal Opportunities Case and the Statutory Redundancy Scheme

It is important to place the rival arguments in a wider historical context, before addressing the detailed points on the appeal. The decision in R v Secretary of State for Employment Ex parte The Equal Opportunities Commission [1992] ICR 341; [1993] ICR 251 sets the scene.

(1) Although this decision was cited in the Bank's Notice of Appearance it is not mentioned in the extended reasons of the Tribunal, save for the ruling in the House of Lords on the effect of Article 119 and the Directive on the qualifying hours thresholds for a redundancy payment. In our judgment, the decisions in the lower courts on a second application, not appealed to the House of Lords, are significant in setting the principal issues in this case in proper context. The judgments in the Divisional Court and in the Court of Appeal are relied on by the Bank on this appeal. Some of the Bank's main submissions reflect arguments which found favour with some of the Judges who heard that case at a level lower than the House of Lords.

(2) The judgment of the Divisional Court (Nolan LJ and Judge J) is reported in [1992] ICR 351. The three judgments of the Court of Appeal (Dillon, Kennedy and Hirst LJJ) are reported in [1993] ICR 251. The cases were brought before the court by way of judicial review with claims for declaratory relief. The first application, ultimately successful in the House of Lords, was an attack on the qualifying hours thresholds in the Employment Protection (Consolidation) Act 1978, and their alleged discriminatory effect on part-time workers and their incompatibility with the provisions of Article 119 and the Directive. That application is not relevant to the issues of this case. The relevant application was an unsuccessful attack by the Equal Opportunities Commission on the method of calculating statutory redundancy pay in cases where the individual worked full-time, before becoming employed part-time, and was employed part-time at the date of redundancy. There are three factors in the calculation of the statutory redundancy pay - age, length of service and level of earnings at the time of redundancy. In theory, the factors are identical for both men and women, for both full-time workers and for part-time workers. In that case the factor pinpointed as discriminatory by the Applicants was the rate of pay at the time of redundancy. That was criticised as operating arbitrarily. A change from being a full-time worker to a part-time worker meant not only a reduced weekly wage, which could not be described as discriminatory or, if it was, could be objectively justified as lower pay for less work, but also a reduced redundancy payment. It was argued that this is indirectly discriminatory of women, because the change from full-time worker to part-time worker involves significantly more women than men. The majority of part-time workers are women. So more women than men are adversely affected by the factor of pay in the calculation of the statutory redundancy payment to be made to a person who was a part-time worker at the time of redundancy, but had previously rendered full-time service to the same employer.

(3) The Divisional Court decided that there was no infringement of Article 119, despite the fact that more women than men were affected by the changes from full-time to part-time employment. They pointed out that it did not follow that the statutory redundancy scheme infringed Article 119 simply because a greater number of women than men were affected. The scheme was identical for all who qualified. The rate of pay at the moment of termination was the critical factor, whether it was a person with previous full-time employment, who had become part-time, or whether it was a person with previous part-time employment, who had become full-time. A woman who had moved from part-time to full-time worked before being made redundant would benefit in the same way as a man. There was identical treatment of men and women. The fact that there was an arbitrary element in the result did not make the calculation discriminatory. The Divisional Court concluded that the scheme would not infringe Article 119 and that there was a good objective justification for the scheme, which was regarded as clear, direct and simple. Changes in the scheme would involve administrative complexity and cost. It would involve increasing the obligations of the employer to one group (i.e. those who moved from full-time work to part-time work), with no favourable allowance to the employer in respect of another group (i.e. those who moved from part-time employment to full-time employment). The proposal of the Applicant that she should be credited with pay based on earnings when the change to part-time work took place and with further pay, based on earnings at the time of redundancy, would justify adjustments made when the move was in the opposite direction, but that was not proposed.

(4) There was an appeal to the Court of Appeal against both the decision on the first application and on the second application. We are only concerned with the decision on the second application. The appeal was dismissed, but for different reasons given by each of the three appeal judges. The decision of the Divisional Court on this point was not therefore overruled or varied by the Court of Appeal.

(a) Kennedy LJ dismissed the appeal for procedural reasons relating to judicial review proceedings. He expressed no view on the issue of the discriminatory nature of the statutory redundancy scheme.

(b) Dillon LJ, between pages 267 F to 270 D identified the issue i.e. whether the method of calculating statutory redundancy payments offended against Article 119 and the Directives and the failure of the scheme to give credit for the higher wages earned when the person, who was a part-time worker at the date of redundancy, had been working full-time. He identified three issues: first, the discrimination issue, on which it was argued that there was no condition or requirement which could be discriminatory. There was simply a single factor to be taken into account (i.e. the rate of pay) which applied equally to all, men and women, full-time workers and part-time workers. The second issue was objective justification. The argument on that was that the scheme was clear, direct and simple. The changes would involve complexity in connection with changes to past dates. The third point, decisive in his view, was the relief issue. He pointed out the difficulties of granting the relief sought. It was not a case, as in the first application, where the court was simply asked to disapply certain requirements, i.e. the threshold requirements as to hours in the 1978 Act. The second application involved relief in the form of re-writing the scheme contained in the statutory provisions. He pointed out the difficulty that there was no valid reference point for making changes. He formed the view that, in those circumstances, the court had no right to entertain the application. He avoided expressing any views on the merits of the discrimination issue and the objective justification issue, both of which arise in these proceedings.

(c) Hirst LJ, however, expressed views both on the discrimination issue and the objective justification issue. On the discrimination issue he said that it had been argued that the Divisional Court had held that the method of calculation of redundancy pay, based on salary at the date of redundancy, was discriminatory of part-time workers. On the authority of decisions of the European Court of Justice indirect discrimination occurred where an equal rule had a disproportionate adverse impact on women, where there was inequality of result: See Botel. Hirst LJ did not accept this argument. In his view, there was no discrimination. The method of calculation treated all those affected identically. There was no discrimination against any definable group of workers. The scheme operated in the same way for full-time and part-time workers. No distinction was drawn between them. The same rules applied to them. There was no requirement or condition that, in order to obtain a benefit under the scheme, the worker had to be in full-time employment. There was no condition that a part-time worker was unable to meet. There was no discriminatory disadvantage. What the Applicant was really seeking was the substitution of an entirely new set of rules for the scheme. That was something that the court could not provide and was not a basis for a complaint of discrimination. He also agreed with the view of the Divisional Court that the scheme was objectively justified as containing a straightforward formula applicable to all employees without distinction. It was clear, simple and direct, and avoided costs and complexity. He rejected the argument that the scheme could not be justified, because one of the objectives of the scheme was to compensate for length of service and that was not achieved in the case of those who switched from full-time service to part-time service. In his view that argument placed too much weight on one of the factors in the scheme. The Divisional Court had pointed out that a redundancy payment is a contingent right, accepted to be a form of pay to which a worker was entitled in respect of employment, but only at the end of the relationship. The main purpose of the payment was to facilitate adjustment to new circumstances resulting from the loss of employment and to provide the worker who has lost his job with a source of income during the period when he is seeking re-employment.

The importance of that case is that there was an unsuccessful challenge to the statutory redundancy scheme on which the Bank's scheme is broadly based. In the view of the Divisional Court and of Hirst LJ the attack failed because there was an objective justification for the scheme. In the view of Hirst LJ the attack also failed because the scheme, though it might appear to be arbitrary, was not indirectly discriminatory of women. The decision of the Divisional Court was not overruled and the Equal Opportunities Commission did not take the second application on appeal to the House of Lords. The legal position of the statutory redundancy scheme therefore remains as decided by the Divisional Court.

B. European Case Law

Whereas Mr Elias QC placed considerable importance on the views expressed in the Divisional Court and in the Court of Appeal in the EOC case, Miss Booth QC placed most of her emphasis on the case law of the European Court of Justice on Article 119. She submitted that the issue on this appeal concerns the appropriate test for determining indirect discrimination in cases where a practice produces a disadvantage for one group of workers (part-time workers) and an advantage for another group of workers (full-time workers). She cited a number of cases in the European Court of Justice for the proposition that a disparate impact will be established where either:

(1) a considerably smaller proportion of women than men fall within the advantaged group. (A considerably smaller proportion of women than men work full-time; full-time workers are the advantaged group); or

(2) the disadvantaged group is comprised largely or predominantly of one sex; (Part-time workers are largely or predominantly women. Part-time workers are the disadvantaged group).

The disparate effect on the disadvantaged group may be established by comparing the proportion in the advantaged group who are women (i.e. the proportion of full-time employees who are women) with the proportion of the disadvantaged group who are women (i.e. the proportion of part-time employees who are women). This comparison demonstrates that there is a greater adverse effect on women, because they form a higher proportion of the disadvantaged group than would be expected, given their proportion of the advantaged group. She submitted that, in so far as the Industrial Tribunal considered that the European Court of Justice required it to decide whether or not the percentage of women who work full-time is considerably smaller than the percentage of men who work full-time, it misinterpreted the relevant decisions of the European Court. The relevant decisions were:

Rinner-Kuhn [1989] ECR 2743

Nimz [1991] ECR-1297

Ruzius-Wilbrink [1989] ECR 4311

Kowalaska [1990] ECR-1 2591

Bilka [1986] ECR 1607

Botel [1992] 3 CMLR 446

Stadt Lengerich v Hemig [1994] ECR-1 5727

Enderby [1994] ICR 112

Submissions of Mrs Barry - General

On the basis of those propositions derived from decisions of the European Court of Justice, Miss Booth QC argued that the appeal raised two issues of general importance for the law of Sex Discrimination and Equal Pay. They were -

(a) in a case of indirect discrimination in respect of pay, how should disproportionate impact be measured? and -

(b) what is the correct pool for comparison in the case of indirect discrimination in respect of pay? The finding of the Tribunal was that there was a difference in pay between part-time and full-time workers, as the severance pay which a part-time worker with previous full-time service received in respect of that full-time service differed from the severance pay received by a full-time worker. If that difference was indirectly discriminatory, the Tribunal held that the Bank had failed to discharge the burden of showing that the difference in pay was objectively justified. The Tribunal concluded, however, that the test for determining whether the practice was indirectly discriminatory was whether or not the percentage of women who worked full-time in the relevant group was considerably smaller than the percentage of men who worked full-time. The relevant group was, for the purposes of that comparison, the full-time and part-time workers employed as Grade S4 Clerks in the Midland Operations Clearing Department. They found that within that group the percentages of women and men who worked full-time revealed no considerable difference. The Tribunal also concluded that the genuine material factor defence available under the Equal Pay Act was different and less onerous than the objective justification test under Article 119 and found that it was satisfied under the 1970 Act.

Detailed Submissions for Mrs Barry

Miss Booth QC made detailed submissions in respect of indirect discrimination, disparate impact, the relevant pool and the questions of objective justification and general material factor.

Her submissions may be summarised as follows:-

(1) The concept of indirect discrimination is incorporated in the 1970 Act. Section 1 of the Act refers to a term of a contract being "or becoming" less favourable. That phrase is broad enough to cover a situation where, on the face of it, the term of the contract is not discriminatory, but, when applied in practice, it has a discriminatory effect (i.e. when an employee switched from full-time to part-time work). This scheme has a discriminatory effect, because it does not treat full-time and part-time workers in the same way. Mrs Barry received a voluntary severance payment of £5,806.08. The two male comparators, who were both full-time, received £8,806.98. If Mrs Barry had received equal pay she would have been entitled to a sum that represented a severance payment proportional to her hours of work (calculated at £8,080.80).

(2) The result of the method used by the Bank in the calculation of severance payments resulted in differential treatment for full-time workers compared with those who worked part-time. A full-time worker who had worked for 13 years full-time service would receive 40 weeks of full-time pay, but a person, who was a part-time worker at the time of redundancy, had her previous years of full-time service valued at a part-time salary. This method of calculation led to a difference in the pay for those years actually worked for full-time and part-time work. Yet a significant element in the purpose of the cash payment was to reflect the years of service actually worked. A part-time employee in the position of Mrs Barry is paid less than a full-time employer in respect of their periods of full-time service.

(3) The difference produced a discriminatory effect because part-time workers in the Bank are predominantly women.

(4) The remedy required by Section 1(1) of the 1970 Act, by modifying the term, and by the European Court of Justice, is to apply the rules applied to full-time workers to part-time workers, but proportionately for the hours worked. This is done by taking the formula used for full-time workers (the current full-time weekly pay for the years of continuous service) and applying it to part-time workers in proportion to the hours actually worked. If that method of calculation were used full-time service would be fully recognised and part-time service would be recognised proportionately.

(5) Mrs Barry was not contending for any particular scheme. Her point was that the scheme adopted and applied by the Bank should not be one that results in indirect discrimination. The Tribunal had found that the scheme was intended to reflect the employee's actual contribution to the job, but it failed to do that. The scheme, based on the existing criteria with discriminatory effects, should be modified to remove such discrimination.

(6) Article 119, which has direct effect, prohibits all forms of discrimination that can be identified with the aid of the criteria of equal pay. Discrimination was not apparent on the face of the scheme, but there was indirect discrimination contrary to Article 119, because a greater proportion of women than men were adversely affected by the application of the scheme. This could not be justified on objective grounds unconnected with sex. The unlawful effects can be corrected by reflecting part-time service proportionately in severance pay. It was emphasised that the court was not being asked to re-write the scheme, but simply to see that it was applied in a non-discriminatory way.

Miss Booth QC argued that there were a number of legal errors in the decision of the Industrial Tribunal.

(A) The Pool

The Industrial Tribunal wrongly narrowed the pool by confining it to a subsection of the workforce invited to apply for redundancy i.e. the grade S4 Clerks in the Midland Operations Department. Adopting the approach of the Court of Appeal in Jones v University of Manchester [1993] IRLR 218 paragraphs 44 to 46 and 71 and 72, the pool should consist of all those men and women to whom the collective agreement is, or would be, applied. See Kowalaska [1992] ICR 29. The Tribunal should have compared the proportions of all those subject to the provisions of the SEA Collective Agreement i.e. nearly all the staff.

(B) Disparate Impact

The Tribunal erred in law in concentrating on the percentage of women in the advantaged group who were identified as the full-time workers. The Tribunal should have considered the proportion of women in the disadvantaged class (the proportion of part-timers who are women), as against the proportion of men in the disadvantaged class. On the statistics relevant to that comparison, the only conclusion that the Tribunal could reach was that the disadvantaged group of part-time workers was predominantly female and that there is a disparate impact, even if the absolute numbers are small. (Relevant statistics on this comparison are not to be found in the Industrial Tribunal and were not agreed between the parties on this appeal).

(C) Objective Justification/Material Factor Defence

In the case of indirect discrimination the material factor defence is to be interpreted by reference to the test in Article 119 i.e. whether objectively justifiable facts unconnected with sex justified the different treatment: Rainey v Greater Glasgow Health Board [1987] ICR 129 at 143. To be material, a factor must be objectively justifiable. The Industrial Tribunal found that it was not objectively justifiable on the Bilka-Kaufhaus test. Therefore it could not be a material factor within section 1(3).

Conclusions

Although we do not agree with all the reasoning of the Industrial Tribunal on individual points, we have reached the conclusion that the Industrial Tribunal were legally correct in dismissing this application and that this appeal should also be dismissed. In our judgment, the legal position may be shortly stated as follows.

(A) Nature of Mrs Barry's Claim

Although Mrs Barry's claim on the Bank's scheme in the Industrial Tribunal is multi-pronged, it can in fact only be a claim under the 1970 Act:-

(1) The 1975 Act, though invoked, is conceded to be irrelevant. It is not concerned with discrimination on the grounds of sex in the matter of pay.

(2) The Equal Pay Directive, which is concerned with pay, cannot be invoked directly against the Bank, because the Bank is not the state or an emanation of the State.

(3) In so far as Mrs Barry is asserting a free-standing claim for breach of the directly effective provisions of Article 119, the Industrial Tribunal, from which this appeal is brought, has no statutory or inherent jurisdiction to determine it. The Tribunal's jurisdiction is confined to cases brought under specified legislation, such as the 1970 Act. The specified legislation does not include the European Communities Act 1972 or European Community Legislation.

(4) In the claim under the 1970 Act the provisions of Article 119 and of the Directives are relevant in two respects:-

(a) The Industrial Tribunal and this Tribunal are under a duty to interpret the 1970 Act so as to be consistent with the provisions of Article 119 and the Directive, if it is possible for that to be done without distortion of the language of the 1970 Act.

(b) If, on their proper interpretation, the provisions of the 1970 Act are incompatible with the directly effective provisions of Article 119, then the directly effective provisions have primacy and the provisions of the 1970 Act are to be disapplied to the extent of their incompatibility in order to give effect to the provisions of Article 119.

(B) Discrimination

The voluntary severance payments calculated in accordance with the SEA Agreement were made to Mrs Barry as a contractual payment under or by reference to the terms of her contract of employment. The critical question is therefore whether the relevant terms of Mrs Barry's contract of employment were less favourable than the terms of a similar kind in the contract of a male comparator. The answer is "No", for the following reasons.

(1) The scheme as a whole does not treat a woman, such as Mrs Barry, less favourably than a man in her situation. If Mrs Barry had

(a) remained a full-time worker throughout the period of her employment; or

(b) been a part-time worker throughout her employment; she would have had no complaint under the 1970 Act or under any other Statute, Treaty Article or Directive. Her terms of employment and her treatment as an employee would have been exactly the same as in the case of a male comparator employed by the Bank working full-time or part-time, as the case may be, and opting for voluntary redundancy.

(2) Similarly, Mrs Barry would have had no complaint under the 1970 Act (or in any other way) if she had been a part-time worker who became a full-time worker before opting for redundancy. She would have suffered no detriment in the calculation of her entitlement under the Scheme. She would be treated more beneficially in all those circumstances than either

(a) men and women who remained part-time workers and

(b) men and women who had been full-time workers throughout.

(3) As with the statutory redundancy scheme, the rules of the Bank's scheme are not formulated so as to treat either

(a) women less favourably than men or

(b) part-time workers less favourably than full-time workers. The same rules apply to both men and women, to both full-time and part-time workers. In all cases the calculation of the entitlement to the severance payment is on the basis of pay at the date of redundancy.

(4) It is not contended that there are conditions or requirements for access to the scheme which women or part-time workers cannot comply with or which are more difficult for them to comply with than male employees or full-time workers.

(5) The force of Mrs Barry's case is that the scheme has the appearance of being arbitrary and unfair in its effect on a group of Bank employees which include her i.e. those full-time employees who, before opting for redundancy, have become part-time. That group includes men as well as women. Men in that group are the comparators in like circumstances. Women in that group receive the same treatment as men in that group.

(6) The essence of Mrs Barry's complaint is not that she has been treated less favourably than a male comparator in that group of full-time workers who have switched to part-time employment before opting for redundancy (she has not been so treated). It is that the Bank ought to have constructed the scheme (but failed to do so) to include rules which would ensure that payments for voluntary severance mirrored more precisely the nature of past service rendered by employees before redundancy (for example, where past service of a part-time worker included full-time employment). The Bank should have ensured that those in her position - both men and women - should have received a more generous payment. One way of securing that would be a proportional arrangement reflecting the past service both full-time and part-time.

(7) In other words, Mrs Barry would like to have a different scheme, with different provisions in it for men and women in her position. Such a scheme might have been fairer than the present scheme when compared with the treatment under this scheme of those who worked full-time throughout or those who worked part-time throughout and those who, before redundancy, changed from part-time to full-time status. Such a provision might well have benefited more women than men (though no statistics are available in the Tribunal decision as to the number and proportions in the group switching from full-time to part-time employment). But none of these matters mean that the Bank has treated Mrs Barry less favourably in the matter of pay than a male comparator was or would be treated. The essential point is that the rules of the scheme are not in themselves discriminatory and the rules have not been applied to Mrs Barry in a discriminatory way. The terms of the contract between men and women and the relevant group are the same and the women's contract does not require any modification made to it in order to make it not less favourable than the contract of a man. There is, therefore, no breach of any equality clause. The Bank's failure (if there is one) is in not adopting a scheme which contains more favourable treatment than it does for beneficial payments to part-time workers with previous full-time service. In our view, such a failure is not in contravention of the 1970 Act, either read alone or subject to the provisions of European Community Law. It is not unlawful discrimination on the ground of sex to fail to have different rules which might have operated more or less fairly to men and women.

For those reasons we dismiss the appeal on the discrimination point.

(C) Material Factor Defence - Objective Justification

If, contrary to our conclusions, there is a variation between Mrs Barry's contract and that of a male comparator, we agree with the Industrial Tribunal that the difference is due to a genuine material factor not based on sex within the meaning of section 1(3) of the 1970 Act. The genuine material factor, unconnected with the difference in sex, is identified in paragraph 57 of the Extended Reasons as:

"... administrative convenience, plus the intention to cushion employees against the loss of their work, particularly older, long-serving employees. ..."

There is no error of law in those conclusions. The question was whether cause of the difference was a factor other than sex. The answer to that is a question of fact.

The situation is no different under Article 119 and we would allow the cross-appeal of the Bank against the Industrial Tribunal's finding that there was no objective justification. It is not necessary, in the absence of any indirect discrimination, to find that, in order to constitute a material factor other than sex within section 1(3), the factor must amount to objective justification: National Vulcan Engineering Insurance Group Ltd v Wade [1978] ICR 800 and Coulder v Rowntree Mackintosh Confectionery Ltd [1993] IRLR 212. The Equal Pay Act 1970 should be interpreted without reference to the distinction between direct and indirect discrimination: Ratcliffe v North Yorkshire County Council [1995] IRLR 439.

Conclusion

For all those reasons the appeal is dismissed and the cross-appeal is allowed.