Appeal No. UKEAT/0135/06/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 16-19 October 2006
Judgment delivered on 15 November 2006

Before
THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)
MRS M McARTHUR BA FCIPD
MR P SMITH

REDCAR & CLEVELAND BOROUGH COUNCIL	APPELLANT

Ms P BAINBRIDGE & ors	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR JOHN CAVANAGH QC
(One of Her Majesty’s Counsel)
and MR RICHARD LEIPER 
(of Counsel)
Instructed by:
Ms Sharon Langridge
Employment Lawyer
8 Statford Grove Terrace
NEWCASTLE-UPON-TYNE
NE6 5BA	
For the Respondents	MR ROBIN ALLEN QC
(One of Her Majesty’s Counsel)
and MS DEE MASTERS
(of Counsel)
Instructed by:
Messrs Stefan Cross
Solicitors
Buddle House
Buddle Road
NEWCASTLE-UPON-TYNE
NE4 8AW	

SUMMARY

Equal pay in the North East. Women whose jobs had been rated as equivalent with comparator men (and in some cases had been rated higher) were paid less because of the effect of bonuses and other extra payments known as attendance allowances and wet weather payments.  Disparate impact was conceded and indeed, in the case of a number of claimants who submitted their claims before a particular date, it was conceded that they were entitled to the bonuses.  However, for claims submitted after that date the employers claimed that the difference in pay was objectively justified because it resulted from productivity schemes which conferred real efficiency savings on the Council and were largely self financing. The Tribunal held in some cases the bonuses no longer reflected any genuine incentive bonus scheme, and even with respect to the group of workers where they did, namely refuse collectors, the extra bonus was not justified because it would have been possible to construct a different kind of bonus scheme for the claimants, albeit not one which made any relevant cost savings.  It was conceded by the employer that where the claimants could have been subject to a similar productivity scheme, then the bonus payments could not be justified.  The Tribunal therefore had to consider whether this would have been possible.  They found that although in some cases analogous productivity schemes could not have been constructed, in a number of other cases there was no evidence before them to suggest that they could not, and since the burden was on the employer, these cases succeeded.  The Tribunal also held that the attendance allowances were not justified but that the wet weather payments were justifiably paid only to those who worked in inclement weather.  They also held that claimants could legitimately compare themselves with a comparator rated lower in the job evaluation scheme.

The claims related to a period pre April 2004. Since that date a new job evaluation scheme has been entered into.  This provided pay protection (red circling) for those whose pay was adversely affected as a consequence.  The claimants contended that if their claims succeeded (and some had been conceded) then they should also be given the benefit of pay protection on the basis that although they were not in fact in receipt of the higher pay, they ought to have been had they been given equal pay.  Accordingly they contended that the employers could not rely upon a genuine material factor defence under s.1(3) of the Equal Pay Act because the factor relied upon was not a material factor “other than sex” within the meaning of that section. It was sex tainted.  The employers contended that the historic sex discrimination was irrelevant.  The purpose of pay protection was to cushion employees from the practical consequences of having to move towards lower pay; if they had not in fact been in receipt of that pay, and adjusted their financial arrangements accordingly, it was wholly reasonable that they did not qualify for the payment.  The Employment Tribunal found against the Council.

There were various appeals and cross appeals.  The Council appealed the finding that there was no objective justification with respect to the refuse workers; that comparison could be made with those rated lower; that there was no evidence that bonus incentive schemes could not have been introduced for certain of the claimant groups; and the conclusion that the claimants should receive the protected pay which would have been available to them had they been paid their legal entitlement at the relevant time.  The claimants cross appealed certain detailed findings relevant to particular claimants, principally on perversity grounds.  

The EAT upheld two of the grounds of appeal.  They held that the Tribunal had erred in finding that the fact that some other non-incentive based bonus scheme could have been introduced for some claimants defeated the council’s GMF defence with respect to those claimants; and that the Tribunal was wrong to say that there was no evidence relating to the issue whether some of the claimant groups could or could not be subject to a productivity scheme.  The other grounds of appeal, and the grounds raised in the cross appeal, were all dismissed.

  

THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT)

1.	This is an appeal in connection with an equal pay claim brought in the Employment Tribunal by a large number of predominantly female employees against the respondent local authority. The council is the appellant, although the claimants have cross-appealed on certain matters. The council was represented by Mr Cavanagh QC and Mr Richard Leiper and the claimants (whom we shall continue to call the claimants although they were the respondents to this appeal) by Mr Allen QC and Ms Dee Masters.

2.	The appeal concerns the judgment of the Employment Tribunal sitting in Thornaby-on-Tees, which dealt in particular with the contention by the council that the difference in pay between the claimants and their chosen comparators was explained by a genuine material factor other than sex within the meaning of  s.1(3) of the Equal Pay Act 1970. The Tribunal rejected that defence. However, various other related matters also arose for determination in the course of that hearing and are the subject of appeal or cross appeal. 

The statutory background. 
3.	Before considering the factual background to this appeal, it is helpful to consider the basic legal principles in play.  Article 141 of the Treaty Establishing the European Union (formerly Article 119 of the Treaty of Rome) is as follows; 
“1.	Each Member State shall ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied.”

That Article is to be read together with the Equal Pay Directive which, amongst other matters, states in Article 1 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.”

4.	The implementation of Article 141 into domestic law is achieved by the Equal Pay Act 1970.  Section 1, so far as is material, is as follows:
“(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 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;
(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 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 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 demands made on her (for 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 he treated as so modified as not to be less favourable, and
n
(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).
(3) 	An equality clause shall not operate in relation to a variation between the woman’s contract and the man’s contract if the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor—
(a)	in the case of an equality clause falling within subsection (2)(a) or (b) above, must be a material difference between the woman’s case and the man’s; and
(b)	in the case of an equality clause falling within subsection (2)(c) above, may be such a material difference.]
(4)	A woman is to be regarded as employed on like work with men if, but only if. her work and theirs is of the same or a broadly similar nature, and the differences (if any) between the things she does and the things they do are not of practical importance in relation to terms and conditions of employment; and accordingly in comparing her work with theirs regard shall he had to the frequency or otherwise with which any such differences occur in practice as well as to the nature and extent of the differences.
(5)	 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 give 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.”

5.	There are certain differences between the scope of Article 141 and the Equal Pay Act. The principal one is that Article 141 relates only to pay although that concept has been very widely construed by the European Court and will include both contractual and non-contractual aspects of remuneration. By contrast, the domestic legislation is not limited to pay but applies to all contractual terms and conditions of employment. Non-contractual aspects therefore have to be dealt with under the Sex Discrimination Act 1975 rather than the Equal Pay Act as a matter of domestic law. But a woman can, in any event, rely directly upon Article 141 in such circumstances where the issue is pay. The regulation of non-pay issues is regulated in European law by the Equal Treatment Directive 76/207/EEC. There are certain undisputed legal principles which provide the context in which this appeal must be determined.  
(1)	Article 1 can be directly relied upon in the courts of the United Kingdom by a woman wishing to claim equal pay with an appropriate male comparator.  This was established by the ECJ in the seminal case of Defrenne v Sabena [1976] ICR 547.

(2)	 It follows that the duty of the court is to interpret the relevant provisions of the Equal Pay Act, which is the domestic implementation of Article 141, fully in compliance with that Article. Any inconsistency must be resolved in favour of community law. Lord Nicholls of Birkenhead expressed the position as follows in Autologic plc v IRC [2006] 1AC 118 at paras 16-17:
“Where such an inconsistency exists the statutory provision is to be read and take effect as though the statute had enacted that the offending provision was to be without prejudice to the directly enforceable community rights of persons having the benefits of such rights. That is the effect of section 2 of the European Communities Act [1972] ….
17 ….Accordingly, if an inconsistency with directly enforceable community law exists, formal statutory requirements must where necessary be disapplied or moulded to the extent needed to enable those requirements to be applied in a manner consistent with community law.” 

(3)  Article 141 forms part of the social objectives of the community.  As the European Court of Justice expressed it, in Deutsche Telecom AG v Lille Schröeder [Case C-50/96):
“the right not to be discriminated against on grounds of sex is one of the fundamental human rights, whose observance the court has a duty to ensure”. 

(4)   The scheme of the Equal Pay Act was expounded by Lord Nicholls in Glasgow City Council v Marshall [2000] UKHL 5; [2000] ICR 196 at  202 as follows:
“The scheme of the Act is that a rebuttable presumption of sex discrimination arises once the gender-based comparison shows that a woman, doing like work or work rated as equivalent or work of equal value to that of a man, is being paid or treated less favourably than the man. The variation between her contract and the man's contract is presumed to be due to the difference of sex. The burden passes to the employer to show that the explanation for the variation is not tainted with sex. In order to discharge this burden the employer must satisfy the tribunal on several matters. First, that the proffered explanation, or reason, is genuine, and not a sham or pretence. Second, that the less favourable treatment is due to this reason. The factor relied upon must be the cause of the disparity. In this regard, and in this sense, the factor must be a 'material' factor, that is, a significant and relevant factor. Third, that the reason is not 'the difference of sex'. This phrase is apt to embrace any form of sex discrimination, whether direct or indirect. Fourth, that the factor relied upon is or, in a case within section 1(2)(c), may be a 'material' difference, that is, a significant and relevant difference, between the woman's case and the man's case. 
When section 1 is thus analysed, it is apparent that an employer who satisfies the third of these requirements is under no obligation to prove a 'good' reason for the pay disparity. In order to fulfil the third requirement he must prove the absence of sex discrimination, direct or indirect. If there is any evidence of sex discrimination, such as evidence that the difference in pay has a disparately adverse impact on women, the employer will be called upon to satisfy the tribunal that the difference in pay is objectively justifiable. But if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity.”

    In short, once the work is established to be of equal value, the employer must satisfy the tribunal that any difference in pay is genuinely due to a material factor other than sex. (We refer to this hereafter as the “GMF” defence.) Absent any indirect discrimination, that is all that he has to establish.  However, where there is prima facie indirect discrimination, which arises when the difference in pay has a disparately adverse impact on women for reasons in some way connected with their sex, then the employer will have to go further and satisfy the tribunal that the difference in pay is objectively justified.  
Lord Nicholls in Marshall was considering and rejecting an argument that the  employer always had objectively to justify any difference in pay, even although there was no direct or indirect sex discrimination.   One of the arguments was that whatever the position in European law, the concept of “material factor” in s.1(3) imposed this obligation in English law. His Lordship rejected that and concluded that “material” simply required a causative relationship between the material factor and the difference in pay.

(5)  There is an argument which has not in the event been relied upon in this case that as a consequence of a recent decision of the European Court of Justice in Brunhoffer v Bank der Osterreichischen Postsparkasse AG [2001] IRLR 571, the approach adopted in Marshall is no longer good law.  It is said that the effect of Brunhoffer is that Article 141 requires an employer objectively to justify a difference in pay even where there is no hint of sex discrimination. In other words, the mere fact that a woman is making a comparison with a man whose job is of equal value itself automatically requires that any difference in pay is objectively justified.  Equal pay has broken loose from its moorings in discrimination law.  The EAT analysed that argument very fully in the case of Villalba v Merrill Lynch [2006] IRLR 437 and decisively rejected it.  Mr Allen made written submissions why Villalba was wrong, but agreed that it was not necessary to rely on that argument to sustain his appeal in this case.  So the resolution of that issue awaits another day.

(6)  The test which the courts must apply when prima facie indirect discrimination exists and the employer has to show objective justification is now well established.  The classic definition was given by the European Court of Justice in Bilka-Kaufhaus Gmbh v Weber von Hartz [1987] ICR 110 and has been regularly repeated since.  In the very recent decision of Cadman v Health and Safety Executive [2006] IRLR, the European Court summarised it thus (para 33): 

“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”.  

6.    In Rainey v Greater Glasgow Health Board [1987] 1 AC 224, the House of Lords considered the scope of the GMF defence in s.1(3) of the Act where prima facie indirect discrimination exists and objective justification needs to be established.  It adopted the approach of the European Court in Bilka.  Lord Keith, giving the only reasoned speech in their Lordship’s House, held that there was no difference between European and domestic law on this matter.  

The factual background 
7.  The background to this case is complex. The legal issues are difficult and some are of no little significance in the world of equal pay. There are currently thousands of claims that have been lodged against local authorities, particularly in the north east of England, by women claiming equal pay with male comparators. 

8.   The council in this case is one of the local authorities against which claims have been     made.  Many claims were lodged from 27 July 2003 and they continued thereafter for some two years. They concern not only pay but also other terms and conditions of employment although we have been told that most of the latter have been resolved and this appeal relates to pay issues only.

9.   In addition to equal pay claims there have also been sex discrimination claims brought against the council and indeed at one stage also against the trades union and ACAS officials in connection with the collective agreement which led to the change in terms and conditions relating to a large section of the council’s workforce. These claims have, however, now been withdrawn.

10.    The Tribunal has heard various different aspects of these claims in different proceedings. It is fortunately not necessary to recount the scope of the previous judgments. Suffice it to say that they have covered such issues as the time limits, various issues relating to the equal value claims, and calculation of compensation (for conceded claims).

11.	The claimants whose cases are material to this appeal can be divided into two categories. The first category is known as the “White Book claimants” and the second category is the “Purple Book claimants.” The former are women employed on manual work, including caterers, care workers and others. Their terms and conditions of employment have been regulated since 1988 by what is known as “the White Book”. The White Book sets out the nationally agreed job evaluation scheme which was agreed by the unions and employers in local government.  Their comparators are also covered by the White Book.  They fall into three groups, namely street sweepers, gardeners and refuse collection workers.  Not all the comparator groups have been identified by each claimant; different claimants have chosen different comparators. 

12.	 The White Book claimants also fall into two quite distinct categories. First, there are those who lodged their claims prior to 27 January 2004. These have been described as the “first multiple claimants”. The second group presented their claims later and are known as the “second multiple claimants”.  

The concession for the first multiple claimants.
13.	The employers conceded with respect to the first multiple claimants that they did not have a legitimate material factor defence to explain the difference in pay. There was a formal ruling from the tribunal recognising their right to equality on 13 February 2004. The concession was withdrawn, however, on the 27 January 2004 for the future.  It is, however, accepted by the council that the pay arrangements have a disparate impact on women, and that any difference between the pay of the claimants and their chosen comparators must therefore be objectively justified.  For those lodging claims after 27 January 2004, the council have sought to run the GMF defence.

14.	For the most part White Book claimants have compared themselves with comparators in the same grade.  In such cases the basic rates of pay are the same for claimants and comparators. The reason for the pay disparity is that over the years there have been certain productivity agreements which have led to bonuses being paid to workers in the comparator groups.  In some cases these were supplemented by what were termed attendance allowances and wet weather payments. 

15.	The effect of these bonus schemes is that the comparators have been receiving significantly more pay than the claimants. In the case of gardeners the bonuses, taken together, have increased pay by some 40% and in the case of refuse workers by some 36%.  These claimants submitted that they were entitled to the bonuses, but the council contended that the comparators were subject to productivity agreements which gave savings and efficiencies to the council which justified much of the difference in pay, and the attendance and wet weather allowances justified the rest. 

16.	    In some cases the claimants have sought to compare themselves with a comparator who is graded lower in the job evaluation scheme.  This is either because there is no appropriate comparator in the same grade, or because once bonuses are taken into account, the overall pay for the comparators is greater notwithstanding the fact that they are in the lower grade.  

17.	The second category, the “Purple Book claimants”, have jobs which were rated under a different national job evaluation scheme which applied to white collar staff, that is, APT and C workers (administrative, professional, technical and clerical).   Their jobs have not, therefore, been rated as equivalent with their chosen comparators because they are subject to a different job evaluation scheme.   They have launched equal value claims comparing themselves with male White Book employees, but it has not yet been determined whether their jobs are indeed of equal value to their chosen comparators.  Even if they are, the Council has submitted that the same GMF defence would apply to these claims as to the White Book claims.  Hence they are affected by the outcome of this appeal.

18.	In 1997 there was a national agreement under which the parties agreed to replace both the White Book and the Purple Book with a new set of terms and conditions. This is contained in what is now known as the Green Book.  However, the 1997 agreement did not establish a national scheme to be applied to all local authorities as was the case with the White and Purple Books.  Rather it stipulated that local authorities and trade unions should within each local authority determine the new ratings.

19.	Redcar was, in fact, one of the first councils to carry out its own large scale job evaluation process and it implemented the new Green Book terms with effect from 1 April 2004.

20.	From that date, therefore, the former White Book and Purple Book employees moved on to the new Green Book ratings and pay scales. 

21.	Inevitably, in a major re-organisation of this kind employees found themselves in new grades and with different pay after the new scheme were implemented. Some employees received an increase in pay, some stayed the same and some received a decrease in pay. 

22.	 As is almost universally the case where new job evaluations of this kind are introduced, there was a specific provision in the agreement providing for pay protection. This was to operate for a maximum of four years.  The purpose of pay protection is to seek to ensure that those facing a reduction in pay will maintain their former higher pay for a while so that they suffer the adverse consequences of financial loss only gradually.  Usually they are denied annual pay increases given to those not pay protected.  Frequently the result is that there does not in practice have to be an actual reduction of pay at any stage; the comparators’ pay is frozen and the claimants catch up over time.  

Three further concessions.
23.	In respect of this particular appeal, there were three concessions of some importance.  One, as we have mentioned, was that the difference in pay has a disparate impact on the claimant groups and therefore needs to be objectively justified.   The effect of the other two has been to concede a number of the claims of the second multiple claimants. 
 
24.	The first concession was that the council had no GMF defence as regards those claimants who were seeking to compare themselves with street sweepers.  Accordingly, subject in some cases to the issue whether claimants can compare themselves with comparators who are rated lower, and in the case of the Purple Book employees whether their jobs are of equal value, the claimants who have named street sweepers as comparators will succeed.

25.	The second concession was that the GMF defence could not be pleaded successfully with respect to the cleaners. It was accepted that it would have been possible to formulate a productivity scheme of a similar kind to that adopted in respect of the gardeners and refuse collectors. They also will succeed in their claims, subject to the same qualifications as set out in the paragraph above.  

26.	Indeed, Mr Cavanagh in his submissions to the court accepted that this concession applies to all the claimants in respect of whom it is found that a similar productivity scheme could be adopted, whatever their comparators.  The Employment Tribunal found that there were a number of groups of workers falling into that category, but that finding is one of the issues being challenged in the appeal.  The concession does not relate to the attendance or wet weather allowances, however, save for a minor concession that crossing patrol officers should be entitled to a wet weather allowance.

The  Tribunal’s decision: a summary.
27.    At the risk of some repetition, we think it is helpful at this point to summarise the issues before the Tribunal and how they resolved them.  The particular issues on appeal can then be identified.  

28.   The relevant comparisons were drawn with gardeners and refuse collectors, it having been conceded that the claim against the street sweepers would succeed.  The claimants were drawn from many disparate groups including caterers, caretakers, youth workers, and teaching assistants.  They were in general receiving the same basic pay as their comparators, since usually they were in the same grade in the job evaluation scheme, but the comparators were receiving the bonuses to which we have made reference. 
 
29.   The council was contending that the gardeners and refuse collectors were subject to genuine productivity schemes which justified the difference in pay. They also submitted that the attendance allowance and wet weather payments could be objectively justified, although conceding that the latter ought also to be paid to the road crossing patrol officers.  They conceded that the justification could not be established if the claimants’ groups could be the subject of similar productivity arrangements, but contended that they could not (save for the concessions made with respect to the cleaners).  

30.	The claimants argued that all the claimants’ jobs could be subject to similar schemes, but that in any event the schemes for the gardeners and refuse collectors were not genuine schemes justifying the significant difference in pay over such a lengthy period of time.  They also submitted that in any event the attendance allowance, which was a specific element of the bonus schemes involving payment to gardeners and refuse collectors who actually attended work, was not justified even if other aspects of the bonus scheme could be justified.  Similarly, it was argued that a wet weather payment made to the refuse collectors because of their obligation to have to be out in adverse weather should have been applied to all the groups.  

31.	In some cases the claimants sought to compare themselves with street sweepers who had been rated lower in the job evaluation scheme. The council denied that this was legally permissible.  

32.   	Finally, the claimants contended that once they had successfully established that they were entitled to equal pay with their White Book comparators with respect to a period immediately prior to the Green Book scheme being introduced, then they were entitled to the benefits of the pay protection scheme in just the same way as the comparators.  This was so even though they did not in fact receive the pay at that time, and indeed even although in some cases there was no knowledge at that point that a claim would even be made.  The council contended that there was a genuine material factor other than sex which justified limiting these payments only to those actually in receipt of the higher pay at the time the Green Book was introduced.

The Tribunal’s conclusions: a summary.
33.   	The Tribunal found that in the case of the gardeners the extra pay made up of incentive bonuses had become wholly unrelated to any genuine productivity benefits to the employer, and therefore the genuine material factor defence failed.  Initially the scheme did justify the different payments, but it had ceased over time to do so and in 2000 when the payments became fixed and no longer properly related to performance.   It was agreed that the relevant date was   3 April 2000.  That conclusion has not been the subject of any appeal. Accordingly, those claimants will now be entitled to equal pay as from that date.

34. 	The Tribunal found that the bonuses paid to refuse collectors were genuinely related to the productivity benefits achieved, but nonetheless the GMF defence failed for two reasons. First, in the case of all the claimants except caterers, carers and road crossing officers, there was no evidence to show that it would not have been possible to have adopted and applied a similar productivity scheme.  As we have said, it is conceded that if that is so then these claims succeed.  Second, and in any event, the Tribunal held that it would have been possible to construct some other different bonus scheme for the claimants who could not be subject to a similar productivity scheme, and thereby to equalise the pay.  The failure to do this, or even to explore the possibility, prevented the employers contending that the difference in pay was objectively justified.  

35.	All these findings are subject to appeal or cross appeal. The council contends that the tribunal erred in concluding that the failure to implement a different bonus scheme for caterers,   which prevented them from demonstrating that the difference was objectively justified.  They also submit that there was evidence that the other groups could not be subject to a similar productivity scheme and that the Tribunal ought to have considered and assessed that evidence.  The claimants contend that the Tribunal reached a perverse conclusion in finding that the caterers could not be subject to a similar productivity arrangement and that in so far as that conclusion rested on considerations of cost, the Tribunal ought not to have given them any weight at all. 

36.	The Tribunal found, however, that the attendance allowance paid to these workers could not be objectively justified.  It simply operated as a lump sum addition to their salaries without any corresponding benefit to the employer. By contrast, the wet weather allowance was justified because of the outdoor conditions under which these workers had to work, it having been conceded that it should be extended to the road crossing patrol officers who worked in similar conditions.  The council is appealing the former conclusion and the claimants are cross appealing the latter.

37.   The Tribunal held that it was lawful for claimants to compare themselves with someone rated lower in the White Book job evaluation scheme. It also held that once a woman had succeeded in establishing her right to equal pay, she should be given the benefit of the pay protection arrangement.  It was unlawful discrimination to refuse to apply that arrangement, and the employer’s GMF defence failed.  Both these findings are the subject of appeal by the council

The issues on appeal.
38. 	To summarise, therefore, the appeal raises the following questions:
1.	Was the Tribunal justified in concluding that the difference in pay between the claimants and the refuse collectors with respect to the bonus could not be justified under Article 141 read with s.1(3) of the Equal Pay Act?

2.	Is it open to claimants who have been rated higher than the relevant street sweeper comparator to compare themselves with that person, notwithstanding that the comparator is in a lower grade?

3.	Was the Tribunal entitled to conclude that the pay protection awarded to the comparators was not objectively justified? 

4.	Was the Tribunal entitled to conclude that there was no evidence to show that a similar productivity or incentive bonus scheme could have been introduced for the work groups other than caterers, carers and school crossing patrol officers?

5.	Was the decision that there could be no equivalent productivity scheme for catering workers perverse? 

6.	Was the decision that the attendance allowance for refuse workers could not be justified perverse?
7.	Was the decision that the wet weather payment should not be applied to the claimants other than the school crossing staff perverse?

The first three grounds raise issues of some wider significance. The other issues turn on the particular facts and findings in this case.

The refuse workers’ bonus.
39.	The first question which the Tribunal had to address was whether the bonus received by the refuse workers was genuinely due to a valid bonus incentive scheme.  In view of the concession that this defence would not run where the claimants could have been subject to a similar productivity scheme, this was relevant only to those claimants in respect of whom the Tribunal accepted that a such a scheme could not have been adopted, namely the caterers, carers or crossing patrol officers. (It could apply to others also if the council succeeds in its appeal that the Tribunal was wrong to find that similar productivity schemes could have been adopted for the other work groups.) These claimants had argued that the refuse collectors’ productivity scheme did not objectively justify the difference in pay. 

40.	They made four principal challenges against the scheme. First they alleged that it was a sham. This was part of a wider argument to the effect that the council had deliberately and knowingly connived in seeking to promote the interests of men as against women. 

41.	Second, it was submitted that whatever the original justification for the scheme, the fact that the bonus had become fixed at a percentage of the salary (33%) demonstrated that it was no longer truly related to productivity. 

42.    Third, it was suggested that the validity of the scheme had changed when the refuse workers ceased to have the incentive calculated on an individual basis and instead was calculated by assessing the performance of a group of workers operating as a team. Different teams operated in different areas. 

43.    Finally, it was contended that there was no proper monitoring of performance and therefore there could be no serious contention that this was indeed a productivity scheme.

44.      The Tribunal considered and rejected each of these points. They did not accept the serious charge that the scheme was a sham and found that none of the other factors operated to prevent the scheme properly being described at the date of the claim as a proper and valid productivity scheme. It was not entirely self-financing but it was substantially so and the Tribunal found (para 21.2) that “the explanation for the difference in pay was the existence of the bonus scheme which genuinely rewarded increased productivity by this workgroup”. This particular finding reflects what was stated at the very beginning of the judgment when the Tribunal noted in terms that
“The bonus scheme including the wet weather allowance in respect of the refuse collectors was a genuine scheme designed to reward productivity and to ensure working outside in inclement weather and remained so up to 1 April 2004.” (emphasis added).

This particular finding is not challenged on appeal.

45.      We should at this point deal briefly with an area of some confusion in the decision.  There is a sentence in para 24 of the Tribunal’s decision, reproduced below, which says that since the bonus schemes were abolished and not replaced on the 1 April 2004, this suggested that they were not reasonably necessary immediately prior to that date.  That sentence does not sit happily with the clear conclusions expressed earlier in the judgment, and in particular the phrase we have italicised above.  

46.	We accept Mr Cavanagh’s observation that the sentence could not have been intended to undermine the detailed analysis and conclusion on this very point dealt with earlier in the judgment.  Had the Tribunal intended to cast doubt on their earlier unambiguous ruling they should have said so, and moreover they would have needed to identify the date when the justification ceased to exist, in the same way as they did with the gardeners.  In fairness, Mr Allen accepted that this sentence was not intended to alter the Tribunal’s earlier finding; he submitted that the fact that the scheme did suddenly cease without any apparent adverse effects was, however, a factor to which the Tribunal could properly have regard when considering the issue of the GMF defence. 

47.	The Tribunal concluded that notwithstanding that the bonuses genuinely reflected the increased productivity the council had not established objective justification within the meaning of s.1(3).  The reason was that whilst it would not have been feasible to have a similar productivity scheme for certain other categories of workers, namely the caterers, carers or crossing patrol officers, nonetheless it would have been possible for the employers to have adopted some other different kind of bonus scheme which could have achieved equality.  The Tribunal’s reasoning was set out at some length as follows (para 24):

“Notwithstanding that the bonus paid to the refuse collectors was a genuine incentive based productivity bonus scheme which could not be applied to some of the claimant work groups, could the failure to pay a bonus based on some other measure be justified? Would such a bonus be of a similar kind or corresponding to the men’s bonus?

We considered first the extent of the disproportionate affect of the payment of a bonus to the road sweepers. It gave them an opportunity every week to earn a pay enhancement of 36% and in practise they did earn it every week. None of the claimant groups whose jobs were rated the same had this opportunity. The comparator groups were 100% male. The claimant groups, with the exception of the caretakers, were overwhelmingly female. Thus the disproportionate effect was very substantial. There was no evidence of any kind indicating that the respondent ever considered this disproportionate effect, or took any steps to deal with it, at least until the single status negotiations in 2004, when, at one meeting, Mr Moore is recorded as saying that there were “some cases of inequality that were historic and needed addressing as soon as possible”. This must be looked at against the background of the bonus working party report to the NJC in 1998, which gave a clear warning of the disproportionate affect of bonus schemes such as these. We accept that the respondent established a real need for productivity schemes at the time of the government pay freeze policy in the late 60’s and 70’s, but that policy came to end in the late 70’s. There was no rule that pay increases had to be linked to increased productivity.”

48.    The Tribunal then considered the authorities on whether costs could be weighed in the balance when assessing proportionality and concluded that they were bound by the decision of the EAT in Cross v British Airways [2005] IRLR 423 to hold that they could. We return to this point below.    The Tribunal then continued:
“However, we consider that the length of time that this disproportionate disparity in pay has continued without any attempt to redress, at least until 2004 - some 30 years - militates against justification. The respondent has not justified a continuation of such pay disparity for such a lengthy period. The factor of delay is a factor to which the ET and EAT in Home Office v Bailey [2005] IRLR p757 attach significance (see especially at paragraphs 51 to 57). It is further clearly of significance that these bonus schemes were abolished abruptly on 1 April 2004 and not replaced. That does not lead us to accept that such schemes were even reasonabIy necessary or conducive to the aim in question immediately prior to that date. 
As to the point that some of the claimant groups jobs are not amenable to a bonus scheme of this type, we do not accept that the terms of section 1(2)(b) of the Act require us to reject those claims. The Act does not require the term in the woman’s contract to be identical in all respects. It merely has to be a similar term, or a term corresponding to the man’s. In this case, the men’s contract including a bonus term; the women’s did not. A bonus term recognising quality of performance and thus adding value to the service is capable of being a term of a similar kind. Any other stricter definition of the term similar kind would lead to a substantial loss of protection from inequality of pay. An employer would be able to construct a bonus scheme for a particular group of workers which would be beyond challenge. Such an interpretation would in our view be contrary to the provisions of Article 141 of the treaty.
We thus conclude that the justification defence fails. ” 

49.	The Tribunal had earlier indicated that the kind of bonus scheme it had in mind was one based on an assessment of merit and skills.  However, it recognised in terms that “such schemes could be implemented for the claimant groups but not on the basis of saving money or being self financing.” (para 21.4)

50.	Mr Cavanagh submits that the conclusion that this did not amount to a GMF defence constituted a fundamental error by the Tribunal. He says that the Tribunal should simply have focused upon the material factor relied upon by the council. This was that the difference in pay was explained by the receipt of the incentive bonus which flowed from the productivity scheme. These particular comparators not only did not have such a scheme but, as the Tribunal found, no similar productivity scheme could sensibly have been adopted for them. 

51.	 The Tribunal had posed for itself the wrong question when it asked whether the failure to pay a bonus on some other basis could be justified.  Furthermore, the fact that a different bonus scheme might be considered a similar term within the meaning of s.1(2)(b) was wholly irrelevant.  No doubt such a term could be incorporated if the equality clause dictated it, but where there is a valid GMF, the equality clause is to that extent modified.

52.	It was an error for the Tribunal then to speculate as to what different schemes might have been put in place for these other work groups. The only purpose of establishing arrangements based upon bonuses for skill or merit or factors of that kind would be artificially to seek to increase the comparators on the assumption that it was in some sense fair that they should be so increased.

53.	Mr Cavanagh points out that there are now reams of authorities, including the Marshall and Villalba cases to which we have made reference, which emphasise that the equal pay legislation is not concerned with fair pay but only with removing differentials which are the result of sex discrimination. He also notes that the argument accepted by the Tribunal would run in virtually all cases where the material factor defence operates. It would always be open to an employer to manufacture some kind of arrangement so as to secure that claimants who would otherwise be on lower pay can have their pay brought up to the level of the comparator. 

54.	He also says that the Tribunal was wrong to observe that the fact that the disparity had run for so long militated against justification.  It may in some circumstances do so, such as where pay protection is involved, but in general the only issue is whether the genuine difference other than sex has continued to explain the difference in pay right up to the date of the claims.  The fact that the difference in pay is significant and has lasted for a long time will call for the most careful scrutiny of the defence advanced, but once the justification is established for the relevant duration, there is no further significance in the period for which it has been operating.

55.	Mr Allen submits that whether justification is established, is entirely a matter of fact for the Tribunal. That, we accept, is well established: see, for example, the observations of Lord Slynn in North Yorkshire County Council v Ratcliffe [1995] ICR 833 at 840B.   In carrying out that task the Tribunal were entitled to look at the range of factors they did and to have regard to them all, taken cumulatively, when rejecting the GMF defence.  The guiding principle should be equality, and where there is a long and significant departure from that principle the Tribunal is not only entitled but indeed required to test the employer’s defence with the most careful scrutiny.  The Tribunal were right to have regard not only at the justification for paying the men more but also to ask why the women were paid less. The Tribunal found that this was because no thought had been given to adopting an appropriate bonus scheme which might suit their particular situation, and it would have been relatively easy to have done so. In short, the Tribunal reached a conclusion of fact which displayed no error of law and the EAT should not interfere with its conclusion.

56.	We bear fully in mind our limited jurisdiction and our duty loyally to accept the findings of fact made by the Employment Tribunal. We also agree with Mr Allen that the extent of the difference in pay, and the lengthy period for which it had continued, demanded a very careful scrutiny of the council’s GMF defence. But we are satisfied that in this case the Tribunal’s approach does manifest a clear error of law.  

57.	We accept that in assessing the issue of proportionality it may be necessary to focus on the disadvantaged as well as the advantaged group and to ask why the disadvantaged group were not given the same benefits, or opportunities to benefit, as the advantaged group. The council has implicitly accepted as much by conceding that their GMF defence will not succeed if a similar productivity scheme could have been implemented for these claimants.  Here, however, there was an obvious and vital difference between the situation of the claimants and their chosen comparators. The refuse collectors were employed in work which enabled a productivity scheme to be adopted and which, as a consequence, brought savings and greater efficiency to the work being carried out for the council. That opportunity did not exist in relation to these particular claimants.  The comparators were fortuitously in posts where they could largely pay for their own bonuses by productivity improvements. These particular claimants could not. Mr Allen submitted that a merit based scheme might have resulted in greater efficiencies.  However, the Tribunal recognised in terms that they could not be formulated in a way which would save money or be self financing for these particular groups.

58.	It cannot in our judgment be the case that in order to seek to bring the pay back into equilibrium that the employer should be under some obligation to adopt some other technique, be it a bonus scheme or some other way, of seeking to pay the claimants more. That is simply adding costs to the employer without any corresponding benefits.  That argument would always be available where a GMF had been established; if correct it would fundamentally undermine the scope of the GMF defence. 

59.	Moreover, in our view any such suggestion is inconsistent with the general approach of the courts to the scope of the GMF defence.  For example, the European Court has accepted that there may be cases where, for example, full time workers may justifiably be paid more than part timers if there are objectively justified economic reasons, such as the better use of resources by full time workers: see e.g Jenkins v Kingsgate Ltd [1981] ICR 592 and Bilka Kaufhaus v Weber von  Harz [1987] ICR 810. It has never been suggested that in those circumstances some alternative scheme should be adopted to allow part timers to be brought up to the same level as the full timers.  Nor in our view does the GMF lose its force merely because the disparity in pay is significant or has operated for a long period.  

60.	As we have said, that will raise a question as to whether the difference in pay really can be explained by the scheme relied upon.  It may be, for example, that over the years it has lost its justification, which is what the Tribunal found in this case with respect to the gardeners.  But if it remains valid and properly explains the difference in pay, there is no principle which justifies the courts requiring the employers to manufacture some alternative means of rewarding the claimants merely because of the passage of time. This would be unjustifiably to restrict the proper reach of the GMF defence.

61.      Mr Allen submitted that the justification for the Tribunal’s approach is that the principle of equal pay should be respected and only allows of limited exceptions. He contends that the Tribunal were right to consider the impact of the pay differential from the perspective of the disadvantaged group and to focus on the long period during which it had continued.  The premise of the argument is that if such a disparity continued for a long period then the employer would be obliged to do something about it.  We do not agree.  

62.	It is of course true that the employer must objectively justify the difference in pay, and to a relatively high standard and as part of that he must show that it has remained objectively justified throughout the relevant period. But it does not mean that an employer who meets this standard should be obliged to remove or mitigate the effects of any GMF simply because the disparity has continued for some time.  The right is to equal pay unless there is a GMF explaining the difference; it is not a right to the same pay even where the GMF continues to explain and justify the difference. Where  the GMF applies there is no discrimination on grounds of sex - by definition the difference has been justified on non-sex grounds - and therefore the principle of no discrimination in relation to pay, required by Article 1 of the Equal Pay directive, is fully respected.  Nor is the fact that a different bonus arrangement would be a similar term within the meaning of s.1(2)(b) relevant.  The question remains whether the disparity in pay is objectively justified.

63.	We agree with Mr Cavanagh that the Tribunal was essentially concluding that it was unfair for the comparators to be entitled to have this advantage for so long, and that in fairness some way of mitigating the difference should have been developed.  That is the wrong approach.  

64.	It follows that in our judgment the Tribunal made an error which goes to the heart of its finding on this matter. Once the Tribunal had concluded that the higher bonus paid to the refuse workers was justified because of the arrangement they made they ought not, in our judgment, to have found that the material factor defence was not made out because of the failure to apply a wholly different kind of scheme for the benefit of these comparator groups.  As the Tribunal accepted, no such scheme could finance itself or indeed involve any savings to the council. We conclude that the council has objectively justified the difference in pay, and we quash that part of the Tribunal’s decision and substitute a finding that there was a GMF defence explaining the differential between these particular claimants and the refuse workers.

Certain perversity grounds
65.	There are a number of issues which relate to the GMF defence and which it is appropriate to consider at this stage. 

The finding in relation to the comparator groups.

66.	The Tribunal concluded that certain categories of claimant, namely the youth workers, site supervisors, assistants and caretakers, were employed in work which could be the subject of a productivity arrangement. They reached this conclusion because they said that they had heard no evidence about these jobs and therefore the employers had not made good their GMF defence (para 21.4). The significance of this argument is that if the Tribunal was entitled to reach that conclusion then these claimants would not in any event be affected by our conclusion that the employers have made good their GMF defence in relation to refuse workers.  If, on the other hand, this part of the appeal succeeds then it is common ground that the question whether they could have been subject to a similar productivity scheme would have to be remitted to the Tribunal.

67.	Mr Cavanagh accepts that there was no evidence adduced directly by the council itself, save for some very brief comments in the witness statement of Mr Watts, an HR professional, who expressed the view that an incentive bonus scheme would be inappropriate for classroom supervisory assistants.  

68.	He submitted, however, that there were witness statements before the Tribunal from the various claimants themselves, together with certain job descriptions, and that he made submissions to the Tribunal to show how impractical it would be for productivity schemes to be implemented for these groups. To take one example, in the case of youth workers he apparently submitted to the Tribunal that the evidence is that they are effectively dealing with youngsters in the community, tasks which to some extent are analogous to the role of carers, and that a productivity scheme would have been as inappropriate for the former as the Tribunal found it to be for the latter.

69.	He entirely accepts that it would have been open to the Tribunal to say that they were dissatisfied with the nature of the evidence before them and that the employers had not discharged the duty cast upon them of showing that productivity schemes could not sensibly have been adopted for some or all of these workers.  His complaint is that the Tribunal ought at least to have engaged in that exercise and that had they done so, then it is not unrealistic to believe that they might have been persuaded that, as limited as the evidence was, it was enough to enable the Tribunal to reach the conclusion that the council had made good its submissions, either in whole or in part.

70.	Mr Allen accepts that the council can in principle make good its case by relying on evidence from the claimants themselves. (None of them gave oral evidence because their witness statements were accepted as being accurate and reliable.) However, he contends that, save for the brief comment in Mr Watts’ witness statement to which we have referred; there was no evidence from the council itself in relation to any of these groups of workers to demonstrate that an appropriate productivity scheme could not be adopted for them too.

71.	He submitted that when the Tribunal said there was no evidence, they were intending to draw attention to the lack of direct evidence from the council; there was a clear and unambiguous onus on the council to prove its case and they had                                                                                                                                                                                                    not done so. As he emphasised, referring to a paragraph from the judgment of Mummery LJ in the case of Secretary of Defence v Elias [2006] EWCA Civ 1293 at para.131, it is not for the Tribunal to seek to make good defects in the case provided by the employers. It was not enough for counsel simply to advance arguments as to why it would not be appropriate.

72.	There is no doubt that the evidence on this matter before the Tribunal was limited, but we accept that in some cases at least, there may have been sufficient evidence to lead the Tribunal to conclude, perhaps by considering the jobs by analogy with the caterers and carers in respect of whom far more evidence had been adduced, that the employers had demonstrated that it was unrealistic to think that a productivity scheme could be introduced.

73.	We think, therefore, that Mr Cavanagh was entitled to say that the Tribunal could not properly assert that there was no evidence. There plainly was some and we accept that it was not of such a rudimentary nature as obviously to defeat the case being put by the council. The evidence was not considered by the Tribunal in the way it ought to have been, no doubt because it did not figure significantly in the arguments.

74.	In our judgment, therefore, on this point the matter must be remitted to the same Tribunal. The issue we have had to consider is whether it should be determined on the same evidence or whether the parties should be allowed to adduce fresh evidence on this point. 

75.	We have considered this issue carefully.  Mr Allen makes the observation that it would be giving the council a conspicuous advantage if they were now able to adduce further evidence on this point. They should be restricted to arguing the case on the material already before the Tribunal.   There is considerable force in that submission.  

76.	However, the contrary argument is that  particularly in a case of this nature, where the ramifications of the decision are potentially so significant, both for the claimants and the council, it is undesirable to limit the focus of the factual analysis with a real risk of the Tribunal thereby reaching a wrong result.  On balance, we are persuaded by that consideration. We also bear in mind that the hearing before the Tribunal took many days and raised innumerable issues.  It is not altogether surprising that some matters which in the event prove to be important are not appreciated to be of such significance when the case is being prepared.  Accordingly, we remit the matter to the Tribunal to consider this issue again after hearing such further evidence as any party wishes to adduce on the matter.

77.	We should add this. We have not heard argument on the point but we would not wish it to be thought that it would necessarily be incumbent upon employers every time they introduce a productivity scheme to conclude that they have to introduce a similar scheme, or a scheme resulting in identical pay, for all other groups of workers who could properly be the subject of such a scheme. The mere fact that a productivity incentive scheme could have been adopted in respect of other claimant work groups does not of itself, so it seems to us, establish that a genuine material factor defence is doomed to fail. A concession to that effect has been made in this case and it is binding on the council.  We do not suggest that it was not correctly made in the particular circumstances of this case.  However, in our view before determining whether or not that fact of itself defeats a genuine material factor defence it would in principle be necessary to consider why a scheme has been adopted in relation to one group of workers and not another. 

78.	There may be at a practical level all sorts of reasons why a council responds to particular difficulties or problems with one group of workers and resolves the issue by introducing a productivity scheme whilst facing quite different pressures from another group. Indeed, it may be clear that the other group would not want to enter into such a scheme, perhaps fearing potential redundancies.  Nor does it follow that the level of savings that could be achieved by one group could be replicated by another; the opportunity to make efficiency savings may be more limited.  The possibility that the employers may be able objectively to justify the different treatment of different groups, in our view gains support from the Court of Appeal decision in Armstrong v Newcastle upon Tyne NHS Hospital Trust [2006] IRLR 124.    However, the issue does not arise here and we say no more about it.

The claimants’ cross appeal concerning the caterers.
79.	The Tribunal found that the employers were justified in not applying a similar productivity scheme to caterers.  They accepted the evidence of Mr Cooper that it would have been impractical to have done so, although they also thought that financial considerations - what they termed “impecuniosity” - also played a part.  The claimants submit that the Tribunal erred in law in two ways in reaching this conclusion.  First their finding that it was not practical to introduce such a scheme was perverse.  Second, the Tribunal was wrong to accept that cost could play any part in the decision.

The perversity argument.
80.	We can deal with this briefly.   Mr Allen took us to the written witness statement of Mr Cooper and suggested that in comparison with the much fuller material justifying the application of the productivity bonus scheme to refuse workers, the material available to the Tribunal on this matter was flimsy. He also suggested that the reasons given by Mr Cooper were in any event not convincing and should not have been accepted by the Tribunal.

81.	We wholly reject this argument. A fundamental problem facing the claimants is that in addition to the written evidence there was oral evidence given about this matter by the relevant witness. Mr Allen fully accepts that he does not know to what extent the written statement was supplemented or further explained in that oral evidence. In short, he is asking us to find perversity after drawing our attention only to some of the material before the Tribunal. That ground therefore has absolutely no prospect of success. 

82.	In any event, the Tribunal was fully entitled in our view to conclude that a productivity bonus scheme would not have been practical, even on the evidence we have seen. The fact that there was substantially more evidence provided to the Tribunal about the scheme adopted in connection with the refuse workers is hardly surprising. There the employer had to discharge the burden of showing that it was a genuine scheme justifying a significant difference in pay. Here, the employer faced the wholly different task of seeking to explain why a particular productivity scheme would not be appropriate given the nature and character of the particular work being carried out by these claimants. So this ground of appeal fails.

The Costs argument.
83.     The Employment Tribunal concluded that the caterers could not have an incentive scheme which rewarded productivity, both because it was impractical and because of what the Tribunal described as ‘impecuniosity’.  In our judgment the practical issue alone is enough to justify this material factor defence.  If a suitable productivity scheme cannot be introduced for a  comparator, that is enough to explain the difference in pay. To that extent the issue we now address is strictly irrelevant to the appeal. However, we have heard submissions on it and will briefly state our conclusions. 

84.       Mr Allen submits that the Tribunal costs can never legitimately be taken into account by an employer as part of an objective justification defence.  He relies in particular upon the decision of the European Court of Justice in Schonheit v Stadt Frankfurt Am Main [2004] IRLR 983.  In that case a part time worker received a proportionately smaller pension than her full time equivalent; the justification put forward at the time by the employers was the aim of limiting public expenditure.  The European Court of Justice confirmed that the employer was not precluded from relying on an objective justification other than that expressed at the time, but confirmed that the right to equal pay could not be frustrated by the state relying on the constraints of public expenditure.  The Court said this (paras 84 and 85):
“It must be observed at the outset that the aim of restricting public expenditure, which, according to the national court, was invoked by the state when the pension abatement first became part of national law, cannot be relied on for the purpose of justifying a difference in treatment on grounds of sex.  
The Court has already held that budgetary considerations cannot justify discrimination against one of the sexes.  To concede that such consideration may justify a difference in treatment between men and women which would otherwise constitute indirect discrimination on grounds of sex would mean that the application and scope of a rule of community law as fundamental as that of equal treatment between men and women might vary in time and place according to the state of the public finances of Member States (Roks, paragraphs 35 and 36; case C-226/98 Jorgensen [2000] IRLR 726, paragraph 39; and Kutz-Bauer, paragraphs 59 and 60)”

85.      Mr Allen says that equally budgetary considerations cannot weigh in this case.  However in Cross v British Airways plc 2005 IRLR 423 the EAT (the then President Burton J presiding) considered the Schonheit case and the other authorities to which it referred, and concluded that although budgetary considerations could not be the sole justification for failing to give effect to the principle of equal pay, nonetheless they could be a factor to be weighed with other considerations when determining whether the difference in pay could be objectively justified.  

86.      In the Cross case British Airways had different retirement ages for those recruited before 1971 and those recruited later.  Those recruited before had a contractual retirement age of 60; those later had a contractual age of 55.  There had earlier been direct discrimination between the sexes but this had been eradicated by 1975.  The employers accepted that the rules had a disparate impact on women since proportionately more women than men were in the post- 1971 group.  The employers had put forward a number of grounds on which they sought to justify the difference in treatment.  The Employment Tribunal rejected a number of these but they found that there were two significant justifications, one of which was the employer’s aim of minimising its costs.  The employers contended that whilst it was not legitimate to rely upon costs alone, the authorities demonstrated that they were a factor that could be considered with others in the weighing process which is involved when the principle of proportionality is applied.  

87.	The EAT referred to a number of cases where economic reasons had been considered as legitimate factors to take into consideration.  In Jenkins v Kingsgate Clothing Ltd [1981] IRLR 228 the European Court held that it was in principle legitimate to pay full timers more than part timers if they were maximising the use of expensive machinery and encouraging productivity.  Similarly in Bilka Kaufhaus it was recognised that a possible justification for treating full timers differently from part timers was where the former ‘entails lower ancillary costs and permits the use of staff throughout opening hours’.  The EAT considered that these and other cases demonstrated that in principle costs must be a relevant factor to take into consideration.  It said this (para 63):
“It seems to us, as a matter of obvious common sense (and in accordance with the principle of the concept of proportionality), and by way of example drawn from these cases, that, albeit that, in the weighing exercise, costs justifications may often be valued less, particularly if the discrimination is substantial, obvious and even deliberate, economic justification such as the saving, or the non expenditure, of costs (which must, for example, include the avoidance of loss) must be considered.  It would, in our judgment, need clear reasoning and binding authority to prevent that occurring.”

88.     The argument advanced before the EAT and rejected was that this conclusion was not open to it because of the European authorities.  It was submitted that Schonheit bars any consideration of budgetary matters.  However the employers contended that if one analyses the seminal case of Kutz-Bauer v Freie und Hansestadt Hamburg [2003] IRLR 368 referred to approvingly in paragraph 86 of Schonheit reproduced above, the court following the earlier case of Hill v Inland Revenue Commissioners [1998] IRLR 466 did not state that budgetary considerations could have no weight at all, but merely that discrimination could not be objectively justified solely on the grounds that it involved an increase in costs.  

89.	Mr Allen contended that when the judgments were read in context it was plain that the intention was to exclude consideration of costs altogether.  The word “solely” had crept into the analysis in Hill only because there had been a number of objective justifications advanced in that case and they had all been rejected in turn by the court, which then focused on this final justification of costs.

90.        The EAT in Cross rejected that argument and Mr Allen has re-run the same point before us.  We are not persuaded that it would be right for us to be depart from the decision in Cross at least not unless we were convinced that Mr Allen’s argument is plainly right and that the only proper construction of these decisions of the European Court is that costs can never be taken into consideration when considering the question of objective justification.  We do not think that such a broad statement is consistent with the case law.  We accept that the cases show that it is not legitimate to discriminate where the aim or purpose is to save costs; see De Weerd, Nee Roks v Bestuur van de Bedrifsvereniging voor de Gezondheid (“Roks”) [1994] ECR 1571 where the ECJ held that a state cannot rely upon budgetary considerations to justify a discriminatory social policy.  But we do not think that the case law supports the conclusion that the question of cost should always be irrelevant.  

91.	We would add this.  It is not in our view helpful simply to talk about costs in an abstract way.  Almost every decision taken by an employer is going to have regard to costs.  Given an unlimited purse there need be no losers at all.  We wholly accept that where a benefit is introduced and where costs determine the scope and size of that benefit, as they inevitably will, then it would be unlawful to allocate the benefit on a discriminatory basis.  In that sense it would not be open for an employer to say that the restriction on cost prevented him from conferring the benefit on the disadvantaged group.  

92.	If there are cost constraints, they must be allocated in a way which limits any discriminatory impact as much as possible: see for a recent example the Elias case to which we have made reference.  This in our view is the explanation of the Schonheit case.  Usually, however, the issue of costs may become material when an employer is being asked to put right some alleged continuing discrimination.  Cross suggests that an employer cannot defeat the right to equality by pointing to financial burdens alone, but he can pray the financial burdens in aid as some support for a decision which is objectively justified on other grounds.  Pay protection arrangements provide a good example.  Transitional arrangements of such a kind will sometimes be appropriate (and often unavoidable in practice) to cushion the pay of those moving to lower pay.  It would theoretically be possible to confer the benefit of the higher pay on  everyone, but the cost  may  reinforce the justification limiting the benefit.

93.  	In our view, that is the position here. The council has identified a significant material factor defence which explains the difference in pay.  The cost of bringing about equality is in that context merely a supportive reason, but it was never relied upon as the principal basis for the objective justification.  
Attendance Allowance
94.	Mr Cavanagh advances a perversity argument with respect to the finding that the council had not objectively justified the attendance allowance paid to the refuse workers. The Tribunal’s conclusions on this were as follows (para 23.1)
“We do not reach the same conclusion in relation to the attendance allowance. What in effect was happening was in part a buy out of overtime in respect of the drivers in particular and, a form of inducement to those absent apparently on the sick whose absence had achieved levels of 10% of the relevant workforce. Ms Romney’s criticisms are well made. The former reason means that the drivers received an automatic uplift on basic pay for working their normal hours. In the latter case, the workforce also received an automatic uplift merely for turning up and not claiming to be sick. lf they were genuinely sick, presumably they did not receive the attendance allowance. Mr Cooper’s figures indicated a reduction to 3 or 4%, but that had increased to about 10% again by the time that the scheme was abolished. We do not consider that this satisfies the Marshall test. Even if it did, we still have to consider whether the payment of this enhancement could be justified applying the Bilka test. In our view the attendance allowance did not satisfy those tests. It may have been intended to improve productivity and to that extent to have pursued a legitimate objective at the time but there are insuperable difficulties so far as the other tests are concerned. There were clearly other means of managing absenteeism which did not involve the favouring of one group, male dominated, over other groups, female dominated; for example by implementing a strict sickness absence scheme backed up by disciplinary sanction. The scheme was abolished, at 1 April 2004. It was not replaced. This does not support the proposition that the scheme was even reasonably necessary on 31 March 2004 or before that. The disproportionate effect was substantial; none of the claimant workgroups, some of whom did unpleasant jobs, received an attendance allowance simply because their attendance record was better. Attendance allowance was paid to another male dominated group, namely the gardeners, to whom the same reasons apply. A concession has been made in their case. We find that the same applies to the attendance paid to the refuse collectors who already received payment for working in inclement weather as part of their bonus. There is no evidence that the respondent considered the disproportionate effect of paying an attendance allowance to a 100% male group and not to others including female dominated groups. This is of course merely a factor but it is not itself conclusive.”
 
95.	Mr Cavanagh submits that there are a number of errors here. First, it is not clear what the Tribunal meant when it said that it was not satisfied that the Marshall test had been met. There are a number of elements to the Marshall test, as the Tribunal recognised in para 11 of its decision and this, he submits, is a cryptic conclusion. If and to the extent that the Tribunal was seeking to suggest that the payment was a sham that was not a conclusion justified on the evidence. 

96.  	Second, he identifies various alleged errors in the Tribunal’s reasoning with respect to the objective justification. He says that the Tribunal were wrong to take into consideration that other means may have been used to achieve the relevant objective; they wrongly referred to the fact that the attendance allowance had been conceded for gardeners whereas the concession related to the street sweepers; and they were wrong to have regard to the fact that there was no evidence as to whether the council had had regard to the disproportionate effect. Whether they had or not was, he submitted, quite irrelevant.

97.	Mr Allen says that it is plain that the Tribunal was saying that the payment was a sham and it was entitled so to describe it.  He referred us to a later paragraph of the Tribunal’s decision at para 25.1 when they describe the attendance allowance specifically in those terms, although that is with respect to the gardeners and street sweepers.   He says that this clarified any doubts which the earlier paragraph may have created. 

98.	Mr Allen contends in addition that the Tribunal was fully justified in concluding that whatever merits the allowance originally had, it no longer fulfilled its purpose and it had become plain that the attendance allowance was in reality no more than an additional payment to this group of refuse workers, effectively operating as part of their basic pay, without any corresponding benefit to the council. The level of absenteeism amongst this group by the time the claims were lodged was back to the level it had been when the scheme was introduced.  

99.	For good measure, Mr Allen says that the Tribunal were entitled to consider the alternative means of taking disciplinary action; that it was relevant to assessing the question of objective justification to consider whether the council had recognised and considered the adverse impact on the claimants’ groups; and that the admitted error in relation to the gardeners was of no materiality at all.

100.	We accept Mr Cavanagh’s submission that it cannot fairly be said that the allowance was a sham, although we think it likely that this is how the Tribunal intended to describe it.  However, the Tribunal adopted a very broad definition of that concept: see para. 14.1 of their  decision.  We would not ourselves read the concept as broadly as they do.  To say that a payment was a sham suggests to us that it was intended deliberately to conceal the real purpose of the payment.  We see no evidence to support any such inference here.  The allowance originally had a legitimate objective which was at least partly achieved since there was initially some reduction in absenteeism, and it was not suggested that the council at any subsequent time deliberately kept the allowance in place whilst appreciating that its effect was artificially and unlawfully to improve the pay of the refuse workers.  

101.	However, we think that the Tribunal’s alternative finding that the differential was not objectively justified was manifestly sustainable.  The Tribunal did not commit the litany of errors which Mr Cavanagh attributed to them. In our judgment a Tribunal considering objective justification is obliged to have regard to whether different and less discriminatory means could have been used to achieve the same objective, in this case to reduce the days of alleged sickness absence.  

102.	It is inherent in the principle of proportionality that where different means of achieving a particular objective could be achieved, the one which has the least discriminatory impact should be chosen.  For a recent example, see the decision of the Court of Appeal in Secretary of State for Defence v Elias [2006] EWCA Civ 1293.  In that case the Court of Appeal held that the adoption by the government of a compensation scheme designed to provide compensation for those interned in the War by the Japanese could properly seek to require that a recipient had close links with the United Kingdom but the particular means chosen for achieving that purpose discriminated on grounds of national origin and other, less discriminatory schemes could have been adopted.  

103.	Nor do we think that Mr Cavanagh is right to say that the failure by the council specifically to have focused upon the potential discriminatory effect is not in itself a factor to be taken into account at all when assessing objective justification.  We accept that it cannot of itself defeat such a claim.  As Maurice Kay LJ noted in Health and Safety Executive v Cadman [2005] ICR 1546 at para.28, it cannot be right that an employer who has justification contemporaneously in mind can rely on that justification whilst another employer, who had not applied his mind to the problem but has precisely the same justification, cannot. However, it is of some relevance when a court has to decide whether the employer has discharged the burden of proof imposed upon him, and in practice it is likely to make it more difficult to do so: that is implicit in the judgment of Maurice Kay LJ, and is supported further by some of the observations of Mummery LJ in Elias at paras.128-133.  Whilst it would not, in our view, be a factor of any great weight in the circumstances of this case, the Tribunal did not err in giving it some significance.                     . 

104.	The reference to the gardeners was a simple mistake, immaterial to its conclusions; the concession had been with respect to the street cleaners.

105.	In our judgment the Tribunal’s fundamental reasoning is sufficiently transparent. Even if the scheme originally had some merit and justification, it had ceased to achieve the desired objective well before any of these claims had been taken.  There was plainly evidence to sustain this conclusion.   Indeed it is very telling that the evidence of Mr Cooper, the council’s own witness, was that the scheme seemed “daft with hindsight but not 10 or 15 years ago when it was introduced”. This is consistent with the Tribunal’s conclusion.  The Tribunal was entitled to find that the justification had long since ceased and that in practice the effect of the attendance allowance had become to reward the refuse collectors for no legitimate reason when compared with the claimants. Accordingly, this part of the appeal fails.

The wet weather allowance
106.     The Tribunal found that the wet weather allowance paid to the refuse workers was justified and that it should not be paid to other groups (save for the road patrol officers, in respect of whom a concession was made) for the simple reason that they did not habitually work outdoors in inclement weather.  It is not suggested by those claimants that they did. It is said that this finding is perverse and cannot be sustained, although not surprisingly, perhaps, the point did not surface - or if it did it barely floated - in Mr Allen’s oral submissions. Indeed, it may be that it is not being pursued. Whether it is or not, we think that the argument is wholly unsustainable. There was plainly a proper evidential basis for this finding and an obvious explanation why this bonus was justifiably limited to those working outside only.  There is a criticism of the Tribunal for accepting Mr Cooper’s evidence on this matter, but they found him to be an honest witness and there can be no criticism of their acting on his evidence whatsoever.

Reliance upon comparators rated lower on the JES.
107.	Certain comparators wished to compare themselves with street sweepers even although the latter were graded lower. Mr Allen accepted that where this occurs the claimants must accept the whole package; they would be entitled to the same pay as the comparators.  They could not, for example, seek to keep their higher basic pay and add to that any bonuses payable to the comparators.  That would leave them better off than the comparator which would be inconsistent with the application of the equality clause on which they are relying.  

108.	The Tribunal thought that there was “no sensible reason” why such a comparison could not be made.  They also held that this was dictated by the decision in Murphy v Bord Telecom Eireann [1988] ICR 445 and the decision of the EAT (HH Judge Wakefield presiding) in SITA UK Ltd v Hope EAT 0787/04.  In the former the ECJ held that an applicant was entitled under Article 141 to compare herself with someone whose work had been assessed as having a lower value.  The key part of the judgment is as follows (paras 9-10): 
“It is true that Article 141expressly requires the application of the principle of equal pay for men and women solely in the case of equal work or …work of equal value, and not in the case of work of unequal value.  Nevertheless, if that principle forbids workers of one sex engaged in work of equal value to that of workers of the opposite sex to be paid a lower wage than the latter on grounds of sex, it a fortiori prohibits such a difference in pay where the lower category of workers is engaged in work of higher value.
To adopt the contrary interpretation would be tantamount to rendering the principle of equal pay ineffective and nugatory.  As the Irish Government rightly emphasised, in that case an employer would easily be able to circumvent the principle by assigning additional or more onerous duties to workers of a particular sex, who could then be paid a lower wage.”

109.	In the SITA case the employers claimed that a like work case could not succeed because the claimant’s job differed from that of her comparator because she did not have a deputy and therefore had more responsible work!  The EAT merely commented that any purposive construction of the Equal Pay Act would allow a comparison in these circumstances.

110.	Mr Cavanagh submitted that the point in issue is a simple one of statutory construction. The Act says that comparison must be made with somebody rated as equivalent and the comparators were not so rated. He recognised that in an equal value claim, pursuant to s.1(2)(c) of the Act, it would be legitimate to make such a comparison.  That, he accepts, is the effect of the decision in the Murphy case.  That was a case which on its facts would have been argued under s.1(2)(c) in English law.  He submitted that it was this route which the claimants should take and that there could be no comparison under s.1(2)(b).  Section 1(2)(c), the equal value provision, is the “sweep up” provision designed to give effect to the equal pay for equal value concept in European law.  Whilst it was necessary for domestic law to provide a remedy in a case where a claimant wished to compare herself with someone whose work was valued lower, the equal value claim would achieve that objective.

111.	The claimants say that this is to adopt a construction of the section which wholly fails to achieve its purpose. It would be nonsense to allow comparison with somebody whose work is equally rated and yet to permit an employer to pay more to somebody whose work has a lower rating.  It would also have the potential for abuse recognised by the European Court.

112.	Furthermore, they contend that the Murphy decision is in fact decisive of this case. It is concerned with Article 141 and confirms that under that Article a comparison can be made with somebody whose work is of lesser value. Both ss.1(2)(b) relating to jobs rated as equivalent and 1(2)(c) relating to equal value constitute the implementation of the obligation to provide equal pay for work of equal value.  Indeed, the latter was only added to the section after the European Court had found that s.1(2)(b) itself was not an effective implementation of what is now Article 141: see Commission of the European Communities v United Kingdom [1982] ICR 578. The two must therefore be read together to give effect to the duty placed on the United Kingdom to translate the principle of equal pay for equal value into domestic law. Accordingly, Mr Allen submits that it would make no sense at all to treat the different domestic means whereby that principle is achieved differently. Whilst on the facts Murphy was a case which had it occurred under UK law would have fallen under s.1(2)(c), that was not a justification for restricting its scope.

113.	Moreover, in practice it would be absurd if a claimant whose work by definition had been graded higher by the employer in his own job evaluation scheme should have to incur the cost and time involved in pursuing an equal value claim with all the consequential delays.  The only reason could be so that the employer would have an opportunity to argue that the claimant’s job should be assessed at a lower rather than higher value and that his own job evaluation scheme was inadequate and inaccurate.

114.	We agree with those submissions. Murphy is, in our view, decisive of the point. There is no justification for distinguishing between work rated as equivalent and equal value claims since they have to be read together as the implementation of the Article 141 duty to provide equal pay for work of equal value. This in our judgment is plainly so, since an equal value claim is not open to a claimant whose work has been rated as equivalent.  It is not, therefore, possible to treat s.1(2)(c) as the implementation of that provision and s.1(2)(b) as providing merely an additional and purely domestic remedy.  There is no problem at all in reading s.1(2)(b) to give to effect to Article 141, consistent with the Autologic case, simply by reading in the words “or rated higher than” after “with” in the first sentence of s.1(2)(b).

115.	In any event, even ignoring European law, we would have construed the statute in this way so as to give effect to its manifest purpose under English law, just as the EAT did in SITA. A literal meaning relied upon by the council is wholly inappropriate, given the important social objectives of this legislation.

116.	This in our view is reinforced by the concession.  The notion that the claimant would have the right to go via an equal value route but could not rely directly on the employer’s own job evaluation scheme is bizarre. The only practical reason which Mr Cavanagh could advance was that it would enable an employer to argue that his own scheme had become inept and inappropriate so that a job rated higher under that scheme should indeed now be rated lower. 

117.	It seems to us that if the scheme were to suffer from such fundamental defects it would surely be necessary for there to be a complete overhaul. It is extraordinary to suggest that the law should be framed to enable the coherence of the job evaluation scheme to be undermined by a legal challenge in which the employer can only succeed if he accepts that the scheme he is adopting and applying is manifestly distorted. For these various reasons, this part of the appeal fails.

Pay Protection.
118.	This raises an issue of general importance. When the Green Book was introduced, this led to some workers facing a reduction in pay.  As frequently occurs when a new job evaluation scheme is introduced, it was agreed between the employer and the unions that such workers should not immediately suffer a reduction but should be cushioned from that effect.   Equality would gradually be achieved over a period of four years.

119.	It was specifically stated in the Green Book that the purpose of pay protection was to “balance the risks of potential discrimination against the adverse effects on some staff”, and it noted that the technique is supported by ACAS as a way of helping workers adjust to their new and lower incomes.

120.	The claimants submit that if they can establish that they were entitled to equal pay with their chosen comparators prior to the introduction of the Green Book and if, on the basis of that pay,  pay protection under the scheme would have been triggered, then they should be entitled to recover the benefits that pay protection would have conferred.   The council say that there is a GMF defence explaining and justifying the difference, namely the fact that the pay protection was only necessary for those who were actually in receipt of pay which was due to be reduced following the new Green Book pay scales.  It was only this group of workers who had actually organised their affairs on the basis of the higher pay.  Although the successful women claimants had been entitled to the higher pay when the Green Book was being introduced, they had not in fact been receiving it and consequently did not require any cushioning. They fell outside the purpose of the payment.

121.	This claim is made by all those claiming equality with the White Book comparators whether they were in the class of claimants whose cases had been conceded prior to the implementation of the Green Book, or had simply lodged claims by that date, and even if they lodged claims later.  Neither the claimants nor the council have sought to draw either here or below any distinction between these different categories and we have heard no argument to the effect that the pay protection- or more accurately the GMF which justifies the pay protection for the comparators- might be sustainable with respect to one of those groups but not another.  

The Tribunal’s analysis.
122.	The Tribunal rejected the council’s GMF defence.  First they considered whether there was any indirect discrimination.  They accepted Mr Cavanagh’s submission that the appropriate pool was all those who were in receipt of pay protection.  It is common ground that a larger proportion of women than men so benefited.  On that analysis, therefore, there was no disparate impact upon women and therefore no need objectively to justify the pay protection arrangements.  

123.	However, the Tribunal considered that this was not the only way in which indirect discrimination could be shown. They noted that the men were in receipt of the higher pay only because they had been given the discriminatory bonuses.  The pay protection was protecting these discriminatory bonuses.  They concluded that the women had been subject to a provision, criterion or practice with which they could not comply.  They had to meet one of two conditions in order to have pay protection, namely that their jobs should have been re-evaluated with a resulting loss of pay; and second, that they should have been in receipt of the discriminatory bonuses which were being abolished. 

124.	The Tribunal fairly, if succinctly, summarised the justification given by the council for the different treatment, namely the fact that it would not have been possible to reduce the pay of the men without breach of contract, and that the unions would not have agreed to the new job evaluation scheme without pay protection; that the peremptory removal would have been likely to lead to industrial unrest; and that the aim was to prevent hardship to the comparators who would have faced real financial difficulties if faced by a sudden drop in wages.  

125.	They noted that the claimants were not saying that the comparators should be denied pay protection, only that they should receive it also; and they observed that they had no evidence of any kind as to the anticipated cost of extending the pay protection in this way. 

126.	Having analysed various authorities which we will shortly consider, the Tribunal concluded that the council could not justify granting the pay protection to the men but not the women who were entitled to equal pay.   They considered that the issue was determined by the decision of the European Court of Justice in the case of Smith v Avdel Systems Ltd [1995] ICR 596.  The employers could not legitimately delay in implementing the women’s right to equal pay.   Since they ought to have given the women equal pay before the Green Book scheme was introduced, it would be exacerbating the consequences of the discriminatory treatment if they were allowed to deny these women claimants the benefit of protected pay.

The arguments.
127.	Both parties have challenged various aspects of the Tribunal’s analysis.  Mr Cavanagh submits that the Tribunal was wrong to say that it was a condition of receiving the protected pay that the worker should be in receipt of the discriminatory bonuses. That might explain why the pay of the comparators before the job evaluation was higher than after it, but it did not change the fact that the reduction in pay was the only condition for receiving pay protection, and that statistically it benefited men more than women. 

128.	Mr Allen for his part relies upon the Tribunal’s reasoning to the extent that it found that the difference in pay was tainted by sex, but submits that the obligation to justify arose on a traditional approach to indirect discrimination.  He says that the Tribunal were wrong to treat the relevant pool as all persons receiving protected pay. Rather they should have identified it as those in receipt of the unlawful bonuses, which of course would make it exclusively male. He also contended as a fallback that in any event the obligation objectively to justify arose from the single fact that a woman was paid less than a man, thereby raising the question of whether Villalba had been correctly determined.  

129.	We do not intend to spend time analysing these arguments in any depth.  For what it is worth, we think Mr Cavanagh is right both in his criticism of the Tribunal’s conclusion that there were two conditions which had to be satisfied before pay protection came into play, and in his analysis of the appropriate pool.  There was no indirect discrimination on the traditional analysis. Mr Allen’s submission on the appropriate pool had no merit other than that it would sustain his argument. 

130.	However, as both parties accepted in the course of argument, the real issue does not depend upon whether there is indirect discrimination or not.  The fundamental question is whether the GMF defence relied upon can properly be described as a “genuine material factor other than sex” within the meaning of s.1(3).  Both parties submit that in substance the reasoning of the Tribunal is that it cannot. We agree that this is essentially what they have decided, which is why a detailed analysis of the Tribunal’s somewhat convoluted reasoning on this point is not in our view necessary. 

131.	The core issue here, therefore, is this: in circumstances where the pay protection principle has the effect of continuing a historic but, at the time of the implementation of the scheme, uncorrected pay discrimination, can it properly be described as a genuine material factor other than sex?  Or does the fact of the historic inequality in pay mean that the GMF must be considered to be tainted by sex so that it cannot properly be invoked even where the correct pay is not received until after the implementation of the pay protection principle?  If it is a non-sex tainted GMF, then in the circumstances of this case it would also constitute an objective justification even if there were any indirect discrimination. Conversely, if it is tainted by sex then it cannot be relied upon under s.1(3) at all, whether there is indirect discrimination or not.  It could not constitute a proper objective justification for any indirect discrimination there may be.  For this reason, in our view it matters not in this case whether any discrimination is indirect or not.

132.	Once the issue is simplified in this way, the arguments fall within a relatively small compass.  Mr Cavanagh submits that there was a plain justification for the pay protection, essentially for reasons the Tribunal accepted. It was cushioning employees from the adverse consequences which a sudden drop in pay would otherwise cause. The employees’ financial commitments would be fixed in the light of what they were in fact being paid.  If they were not actually suffering a drop in pay, they would not need the cushioning which the pay protection scheme was designed to provide.  Furthermore,   the unions would not have agreed to the new Green Book job evaluation scheme without pay protection; any unilateral introduction of the Green Book would almost certainly have led to strike action.  Moreover, without such agreement the employers would have had to terminate the contracts of those who were facing a reduction in pay and to have offered re-engagement on new terms.  However that would have taken time and would have involved consultation pursuant to s.188 of the Trade Union and Labour Relations (Consolidation) Act 1992.  

133.	He submitted that Smith v Avdel did not dictate that the Tribunal should have found that the pay protection was unjustified.  The error which the Tribunal made was to fail to focus upon the precise GMF being relied upon by the employer.  The fact that the council was unable to justify the difference in pay received by the complainants and comparators under the White Book job evaluation was irrelevant to the quite separate question of whether the reasons for the pay protection, resulting from the introduction of the Green Book scheme, could constitute a valid GMF defence.  The council was seeking to rely upon a fundamentally different GMF.  The council was entitled to seek to protect those who, at the time when the Green Book scheme was introduced, were in receipt of higher pay than they would receive under that scheme.  That was the only category for whom mitigating measures were necessary.  Those not suffering a loss of income, even if it subsequently transpires that they were wrongly denied their rights and paid less than they ought to have been, fell into a different category.  Mr Cavanagh also claims that there are numerous authorities to the effect that protection of higher pay may be justified even where it reinforces historic sex discrimination.  We consider these cases below.

134.	Finally, Mr Cavanagh contended that if the claimants were right it would seriously impair the willingness of employers in future to enter into job evaluation schemes.  Pay protection is in practice an essential feature of such schemes, but if employers were subject to the risk that equal pay claims, lodged in many cases subsequent to the introduction of the pay protection scheme, might establish not merely equal pay, but in addition secure for successful claimants the benefits which pay protection would have afforded them, the uncertainty and the cost would inhibit employers from agreeing to any voluntary job evaluation scheme at all.

135.	Mr Allen for his part accepts that in principle there can be pay protection.  He does not challenge the basic notion that protecting pay for a limited period is capable of being justified.  It could  properly be granted to those workers who suffer a reduction in pay following the introduction of the new job rates under the Green Book scheme, even although they would for a period earn more than those rated equally with them under that scheme.  To that extent even if there is a disparate impact on one sex, the difference in pay can be justified by the very factors relied upon by the employers in this case.  His complaint is that the same pay protection should not be denied to those who had the right to equal pay even before the Green Book job evaluation scheme was brought into force. They have been subject to what we shall call “historic discrimination”, simply meaning that their right to equality predated the introduction of the new job evaluation scheme with its pay protection. The fact that they did not receive what they were legally entitled to receive is irrelevant.  That cannot found the basis of a GMF defence. Had they been given equal pay, as they should, they would have received pay protection.  The inequality in treatment is therefore rooted in sex discrimination, and the employer cannot legitimately extend or reinforce that discrimination by taking advantage of his own wrong.  The women were only not receiving the proper pay because the employer was in breach of the equality clause in their contracts. The council is not relying upon a GMF other than sex because its origin is sex tainted.  There is a direct causal connection between the claimants’ sex and the fact that they were not in receipt of the pay that would have secured them pay protection.

136.	He also contends that the question is determined in his favour on the authority of Smith v Avdel.  As to the observation that it will jeopardise voluntary job evaluation schemes if his argument succeeds, he submits that this is unduly pessimistic since there are a number of advantages which employers acquire by entering into such schemes.  In any event, this argument rests on the contention that the costs of extending the benefits to the claimants would be prohibitive, but as the tribunal observed, it had no evidence at all about that. The extent of any liability is wholly speculative. Furthermore, even if it would inhibit the willingness of employers to enter into job evaluation schemes, that would not be a legitimate reason for denying these claimants the rights which the law confers upon them.

The authorities.
137.	Both parties have taken us to a number of authorities on which they rely and which they say are potentially relevant to the question whether, to put it somewhat loosely, pay protection can trump historic discrimination.

138.	This issue first arose for consideration in Snoxell v Vauxhall Motors [1977] ICR 700. The employers had graded men and women on separate pay scales.  In 1970 they reorganised their pay structure.  Certain machine part inspectors in an all male grade were placed in a protected pay category (known as “red circling”).  Women had not been permitted to join that grade.  After the implementation of the Equal Pay Act some women machine inspectors claimed equal pay with those males. It was conceded that the jobs were of like work.

139.	The Industrial Tribunal found that there was a genuine material difference other than sex within the meaning of s.1(3) but the Employment Appeal Tribunal upheld the appeal. Phillips J, giving the judgment of the EAT, noted that it was common ground that had the claimants been men, they would have been within the red circle. The Tribunal held that in those circumstances the employers were not able to establish that the difference in pay was explained by a material difference other than sex within the meaning of s.1(3).  

140.	It is instructive to consider the arguments advanced by counsel and the conclusion of the Tribunal: 
“Mr. Lester [counsel for the employees] submitted that section 1 (3) is not a general escape clause designed to enable employers to phase in equal pay gradually; that was provided for in the Equal Pay Act 1970 itself which did not come into operation until December 29, 1975, five years after it was enacted. Nor, he submitted, could reliance be placed on section 1 (3) where the facts said to constitute the difference other than sex could be shown to have their origin in sex discrimination. Thus in the present case, although the immediate cause of the discrimination lay in the fact that the male inspectors were red circled whereas Miss Snoxell and Mrs. Davies were not, and although they were red circled in order to preserve their status for reasons unconnected with sex, it was necessary to look to see why Miss Snoxell and Mrs. Davies were not also within the red circle. The answer was that, because they were women, they were not able to enter grade X2, and so did not qualify. Thus at the root of the difference relied upon lay sex discrimination, and it would be contrary to the purpose and intent of the Equal Pay Act 1970 to allow such an answer to the claim.

Mr. Grabiner [counsel for the employers] submitted that the reason for the red circling of the male inspectors had nothing to do with sex discrimination, but was intended merely to preserve their status, and that it was not brought into existence to discriminate against women. If there had been no circle, he submitted, all the men and the women would have been paid the same. The difference for the purpose of section 1 (3) was the formation of the red circle. The substantive cause of the discrimination, he submitted, was the formation of the red circle, and it was the effective cause. Thus there was no discrimination, and a good answer to the claim was available to Vauxhall Motors Ltd. under section 1 (3).

Putting these arguments 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 circle male inspectors on the 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 contracts 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) between her case and his when it can be seen that past sex 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, 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. ” 

141.	Mr Allen submits that the same principle applies here; the variation in terms was because the women had, by being denied equal pay, wrongly been excluded from the group to which pay protection applied. Mr Cavanagh contends that there is a significant difference, namely that the pay protection in Snoxell was permanent whereas here it is for a transitional period only; and also that the discrimination in that case was direct. He also contends that Phillips J resiled from the views he had expressed in the Snoxell case in Outlook Supplies v Parry [1978] ICR 388. 

142.	In Parry the claimant was a woman who sought to compare herself with a man employed on like work.  The employers said that the reason he was paid more was that his status had been reduced following an illness and out of considerations of humanity they had kept his pay the same. The EAT held that this was in principle capable of constituting a GMF other than sex.  It emphasised that whether there is a valid GMF is a question of fact.

143.	It is true that Phillips J did cast doubt on one of the observations he had made in Snoxell.  In that case it had suggested that if red circling is valid for any period then it cannot become invalid merely because it is continued in perpetuity.  Phillips J accepted that this was not correct and that a prolonged red circle could in certain circumstances render a red circle unlawful, even although it could legitimately have been operated for a short period.  We do not accept that these comments involve any backtracking by the judge with respect to the issue of historic discrimination.

144.	Mr Cavanagh also said that we were bound by the decision of the Court of Appeal in Ministry of Defence v Farthing [1980] ICR 705.  This was an unusual case. Following the implementation of the Equal Pay Act the Ministry sought to eradicate unlawful sex discrimination and they did so by reducing women from grade 6, which was exclusive to women, to a new grade 4, common to all drivers both male and female. The women were allowed to retain their old wage whilst they remained drivers.  This gave them a benefit which the grade 4 drivers, principally men, did not have, and so the men alleged that this was sex discrimination.  

145.	The Industrial Tribunal found that this difference was rooted in a difference of sex and therefore that section 1(3) provided no defence.  The EAT agreed but the Court of Appeal reversed them.  Lord Denning MR said this: 
“If one inquires into the reason for this variation, one finds that it came about because of a curious and exceptional situation.  The Ministry of Defence introduced the system to prevent discrimination because of sex.  They were seeking over five years to eliminate the difference.  In the process of that elimination, they introduced the device of putting ladies into female band 6.  Having introduced that device, what was the reason for the variation which was made in 1977?  It was because of the pressure which was brought by the union - and the ladies - that they should not (as they called it) be down graded.  They should not be taken from female band 6 to common band 4.  It was because of that pressure that the variation was introduced.
It seems to me that the variation came about - not because of a difference of sex – but because of the system which had been adopted to eliminate the difference in pay between men and women.”

146.	Waller LJ agreed that the red circling arose because the women were being treated on a personal basis because their pay was being protected as part of an effort to bring about equal pay.  

147.	We are not persuaded that this case justifies the weight which Mr Cavanagh places on it. It is true that Lord Denning said that the higher pay resulted from pressure from the women and the unions, and to that extent it is similar to this case. But the discrimination there was not historic, and the case does not, in our view, support the proposition that historic discrimination can be justified.  It was not alleged that the woman had, prior to the introduction of the common grade 4, been receiving higher pay than their male equivalents on discriminatory grounds.  The men were not saying that they had unlawfully been denied the same pay as the women even before the new job scheme was introduced. This was a classic red circle case (save that it extended for somewhat longer than would perhaps be considered appropriate today) in that the women were allowed, following the re-grading, to retain their old pay.  That is akin to those reassessed under the Green Book retaining their higher pay whilst other workers rated as equivalent are paid merely the rate now fixed for the job.    

148.	Mr Cavanagh also relies upon two more recent decisions of the Employment Appeal Tribunal. In Home Office v Bailey (No. 2) [2005] IRLR 757 women prison officers sought equal pay with their male comparators.  Part of that claim concerned what was described as “pension doubling” which meant that years of service in excess of twenty years were treated as double for pension purposes.  This was abolished for all prison officers joining after 1987 when a new pay structure was put in place.  The claimants, who were administrative officers who joined prior to 1987, claimed to be entitled to the same pension doubling benefit as their comparators.  The employers contended that there was a GMF defence. 

149.	It was described by the EAT (HH Judge Peter Clark presiding) in the following terms (para 50): 
“ [The tribunal] looked at the position in 1987, the time of the Fresh Start agreement, and found that at time the ‘red-circling’ of existing prison officers’ pension-doubling was objectively justified on the grounds that to remove the benefit would jeopardise union acceptance of Fresh Start and to buy out the benefit would be prohibitively expensive, undermining the economies which Fresh start was designed to achieve. In addition, withdrawing the benefit would have led to the loss of experienced officers from the service, presumably anxious to retain their existing pension entitlements. Thus, on the employment tribunal’s findings, as at 1987, the Prison Service had objectively justified this less favourable treatment of pre-1987 administrative staff. ”

	
The Industrial Tribunal found that although originally justified, this difference in treatment was no longer justified by the time the claims were brought in 1999, and the EAT held, by a majority, that they were entitled to take that view.  Mr Cavanagh says that this is a case where the historic discrimination was in principle allowed to continue, at least for some period of time.  Had historic discrimination always to be put right, without any potential for a material factor defence, then the EAT could not have found that the GMF was even in principle applicable.  

150.	We accept that it was certainly the finding of the employment Tribunal that red circling could in principle have been justified in 1988 and for a period thereafter, even though this meant that the male group was being more favourably treated than the female group.  However, that aspect of the decision was not apparently challenged before the EAT, who therefore heard no argument on the point. The only issue before the EAT was whether the Tribunal was entitled to find that the original justification could still be maintained as at 1999.   
 
151.	The other decision is Cross v British Airways plc [2005] IRLR 423, a case we have already considered.  By 1975 British Airways had adopted a retirement age of 60 for all staff recruited before 1971 but of 55 for those recruited later.  The Employment Tribunal held that this was objectively justified and the EAT held that they were entitled to take that view.  The claimants had contended that the objective justification relied upon could not be said to be untainted by sex because initially, in 1971, there had been discriminatory retirement ages and they had only been put right in 1975.  Not surprisingly the EAT was not persuaded by that argument.  It noted that the rule from which the claimants were being denied access was that adopted in 1975; in short, any discrimination had been eradicated. The history was thereafter irrelevant.  Accordingly, we do not think that this case has anything to do with historic discrimination. 

152.	Finally, Mr Cavanagh relies upon the decision of the House of Lords in North Yorkshire County Council v Ratcliffe [1995] ICR 833.  In that case the pay of women was reduced in order to enable the local authority to put out their work for competitive tendering. They had to compete with private employers who paid their predominantly female workforce less than the council had been doing, and the Employment Tribunal found that this was because the competitors were paying them effectively women’s rates.  We do not find this case of any assistance because it did not involve any historic discrimination at all.

153.	Mr Allen relies upon the ECJ decision in Smith v Avdel Systems Ltd.  Once again this concerned the equalisation of pension benefits following the seminal case of Barber v Guardian Royal Exchange Assurance Group [1990] ICR which held that they must be equalised with effect from 20 May 1991. Up to that date Avdel’s pension rules provided that men should retire at 65 and women at 60. In fact, Avdel did not equalise pensions until June 1991 and it did so by retrospectively making the retirement age of all employees 65, thereby adversely affecting the rights of the women. The ECJ held that for past service it was not permissible to take the benefit away from the favoured class, namely the women: rather, the disadvantaged had to be brought up to the higher standard. Accordingly, men were entitled to pensions calculated on a retirement age of 60 between 17 May 1990 and the equalisation of pensions in June 1991. Thereafter, however, the court held that it was open to the employer deliberately to achieve equality for the future by changing the women’s rights to their detriment and implementing a common retirement age of 65.

154.	One of the issues in the case was whether, when achieving equality by adversely affecting the interests of the women, the employer was under a duty to minimise those adverse effects. It appears to have been envisaged that for some transitional period the employer might continue to afford more beneficial rights to the women, perhaps gradually equalising the position over time. The court held that not only was this not obligatory, but that it was not permissible at all:
“25.	In reply to that point 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 temporary.”

155.	 Mr Allen submits that this is decisive of this part of the appeal. It could not be legitimate to delay implementing the principle of equal pay in its full rigour. Transitional arrangements of any kind are unlawful.

156.  We do not accept that Smith v Avdel renders unlawful all transitional arrangements. Indeed, if Mr Allen were right then in logic it would not be legitimate for the employers to provide pay protection to those whose pay was reduced as a result of the implementation of the Green Book, even where there was no historic discrimination.  Yet he is not choosing to challenge the pay protection insofar as it is limited to that objective. 

157.	We accept Mr Cavanagh’s argument that the case is more limited in its effect. It was a pensions’ case in respect of which it had been determined that equality should be achieved from the Barber date. It would have seriously undermined that general principle to allow for further transitional exceptions. We do not think it is legitimate simply to read across pensions cases, with their own specific issues in relation to accrued and ongoing benefits, into other contractual areas. Any differential could not in practice have been limited for a short transitional period, but would have had an effect on pensions’ benefits well into the future. We do not therefore consider that Smith is the short answer to this part of the appeal.

Discussion.
158.	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 upon.  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 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 then 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 situation as the comparators.  They would have had the benefit of the pay protection.  (We recognise that had the true cost been appreciated then the council may have structured a different scheme with lesser pay protection.  To that extent the claimants may receive more than they would have done had their pay been equalised earlier. But this is no more than speculation.)

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 taken 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.

162.    We confess that this conclusion does cause us some concern. The experienced lay members consider that it is important that employers with discriminatory pay structures should be able to manage their way out of them by entering into sensible job evaluation schemes, without thereby opening themselves up to the risk of cascading claims alleging past discrimination.  If because of the risk of such  claims it is not possible to cost the job evaluation scheme, or if the consequences are that costs cannot be kept within reasonable limits, then employers will simply avoid such schemes altogether. That would be undesirable and potentially damaging to the wider objective of eliminating discriminatory pay.   It is true that in this case we do not know what the costs of retrospectively giving effect to pay protection will be, but we suspect that they could be considerable.  In any event, they frequently will be very large.  We record these concerns but consider that they do not justify distorting what we see as the appropriate legal principles. We have to determine the legal rights of these particular claimants and not interpret the law as we might like it to be.

163.    However, it does not follow from our conclusion that pay protection can never be relied upon in connection with what we have termed “historic discrimination”. We have had to consider whether this Tribunal could properly find that the GMF was not free from sex.  It may be that different considerations would apply in other cases, for example where employees do not even raise a right to equal pay until after the implementation of the pay protection scheme. 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.

Conclusion
164.   This appeal succeeds on two grounds.  First, we find that the Tribunal erred in concluding that the council had failed objectively to justify the difference in pay in so far as it related to the bonuses paid referable to the bonus incentive scheme between the refuse collectors and the claimants who had named them as comparators. We find that the bonuses were objectively justified.  

165.  	Second, the Tribunal wrongly stated that it had no evidence to determine whether various categories of claimants were employed in jobs which could properly have been the subject of a bonus incentive scheme.  We remit the matter to the same Tribunal to consider this question, hearing such further evidence as the parties wish to advance. 

166.  The other grounds of appeal and the grounds of the cross appeal fail and are dismissed.