The facts of the case can be found with the EAT judgment [here](). In this appeal counsel for the respondent argued two grounds:

a) that the EAT had not followed the steps required by Armstrong as, having found that the bonus scheme was not a sham, they should have then considered whether there was a non-sex discriminatory reason for the pay differential rather than going straight on to consider objective justification, and

b) that the ET's finding that the bonus schemes had long since ceased to have anything to do with productivity was perverse

In this judgment Maurice Kay LJ first tackles the perversity appeal as success on that ground would 'enliven' the Armstrong point. He reviews the relevant authorities and provisions including Armstrong and Enderby before concluding that

a) the perversity challenge failed because, broadly, the ET was entitled to reach the conclusions it did as, although the primary evidence of an alleged continued link with productivity came from council officials and was not contradicted, they had been entitled to take into account evidence, such as the lack of monitoring of bonus targets and only exceptional withdrawals of bonus payments, when making their findings; and

b) given the failure of the perversity challenge and the preserved finding that there was no link to productivity

'there could only be one answer to the "missing" question, namely that there was Enderby-type indirect sex discrimination which could only be defended if objectively justified'

and so the EAT was right to then consider that question next

______________

Neutral Citation Number: [2012] EWCA Civ 413

Case No: A2/2011/0552

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

(Mr Justice Underhill, Mr T Haywood and Mr B Gibbs)

Ref No: UKEAT/0241/09/CEA

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 03/04/2012

Before :

LORD JUSTICE MAURICE KAY, Vice President of the Court of Appeal, Civil Division

**LORD JUSTICE RIMER

**and

LORD JUSTICE TOMLINSON

• - - - - - - - - - - - - - - - - - - - -

Between :

COUNCIL OF THE CITY OF SUNDERLAND (Appellant)

- and -

BRENNAN & ORS (Respondent)

• - - - - - - - - - - - - - - - - - - - -

Mr David Reade QC and Mr Seamus Sweeney (instructed by Law and Governance) for the Appellant

Mr Robin Allen QC and Mr Philip Engelman (instructed by Stefan Cross Solicitors Ltd) for the Respondent

Hearing date : 7, 8 March 2012

• - - - - - - - - - - - - - - - - - - - -

Judgment

Lord Justice Maurice Kay :

1. This case concerns equal pay claims brought by female employees of the Council of the City of Sunderland (the Council) whose case is that their jobs were either "rated as equivalent," or had been determined to be of equal value, to those of male comparators but they did not receive bonus payments which were paid to the men. There have been many such cases in recent years. The historical reasons are well-known. They were succinctly described by the Employment Appeal Tribunal (EAT) in the present case and I gratefully adopt and adapt that account.

1. Traditionally there were three principal categories of local authority employee and they had different arrangements for determining their terms and conditions. Manual workers were covered by the White Book; administrative, professional, technical and clerical workers by the Purple Book; and craftsmen by the Red Book. Different national negotiating structures governed each of the groups. Most jobs covered by the White Book were the subject of a job evaluation study and graded accordingly but there were no job evaluation studies in relation to Purple Book or Red Book employees. From the 1970s, it became common for employees in some White Book jobs to enjoy locally negotiated bonus arrangements which resulted in their receiving total earnings between 33% and 50% above the basic level of remuneration for their grade. Typically (although not invariably) the jobs attracting the bonus arrangements were predominantly done by men and jobs which were predominantly done by women tended not to benefit from bonus arrangements.

1. In the 1990s there was pressure for the negotiation of a single system of negotiation and grading covering employees in all three categories. This became known as "single status". In April 1997 agreement was reached at national level amalgamating the White Book and Purple Book pay scales into the Green Book. However, it was recognised that the allocation of particular jobs to particular points in the scale necessitated job evaluation studies and negotiation at local level with the result that there was no immediate effect on actual terms and conditions relating to pay and grading. Progress towards single status agreements was slow. Eventually, national agreement was reached for a deadline of 1 April 2007 but some local authorities failed to meet that deadline.

1. Once a local authority achieved the implementation of single status, the bonus schemes were formally withdrawn but it often happened that employees who had been beneficiaries of the schemes became covered by pay protection agreements enabling them to continue to receive bonuses at the same or a lower level for a period of time.

1. All this set the scene for the prolific equal pay litigation of recent years. Female employees on White Book jobs who did not receive bonuses were, in respect of the period prior to the implementation of the Green Book, prima facie entitled to bring claims for amounts equivalent to those paid by way of bonus to male employees on the same White Book grade because their jobs were "rated as equivalent" within the meaning of section 1(2)(b) of the Equal Pay Act 1970. Following the withdrawal of the bonus schemes on the implementation of single status, such claims would come to an end but the question then arose as to whether the women had claims in relation to the pay protection agreements under which predominantly male groups continued to enjoy bonus arrangements. In Sunderland, female claimants issued proceedings in the Employment Tribunal (ET) by reference to both periods. Thus far, however, only the claims in relation to the earlier period have been determined. Their pay protection claims remain part-heard in the ET.

1. The Sunderland claimants commenced their claims in 2004 with the consequence that any liability for arrears can go back six years to 1997. As often happens in such cases, the ET decided to deal first with the issue whether the non-payment of bonuses to the female workers during the relevant years was "genuinely due to a material factor other than the difference of sex" within the meaning of section 1(3) of the 1970 Act – the "GMF defence". The lead claimants fell into five groups: caterers, cleaners, carers, school support staff and leisure centre attendants. The male comparators were gardeners, road sweepers, drivers and refuse collectors. The hearing in the ET was protracted, occupying some 24 days spread over May, June, July and September 2008. In its careful and detailed judgment dated 31 March 2009 the ET rejected the GMF defence except in relation to the leisure centre attendants (about whom I need say no more).

1. The Council appealed to the EAT, where the case was heard with the appeal of Bury Metropolitan Borough Council in a similar case. The EAT (Mr Justice Underhill, Mr T Haywood and Mr B Gibbs) dismissed the appeals but granted the local authorities permission to appeal to this Court. We were to hear the appeals in both cases together but, shortly before the hearing, we were requested and agreed to adjourn the Bury case so as to facilitate the continuation of negotiations.

Grounds of appeal

1. The Council seeks to advance two grounds of appeal. The first is what Mr David Reade QC describes as "the Armstrong point", that being a reference to Armstrong v Newcastle upon Tyne NHS Hospital Trust [2006] 1 IRLR 124, [2005] EWCA Civ 1608, otherwise known as Armstrong No 1. Essentially, the complaint is that, when addressing the GMF defence, the EAT missed out a stage in the structured approach set out in the judgment of Arden LJ in Armstrong No 1. Having held that the Council's explanation for the pay differential occasioned by the bonus scheme was not a "sham" (as the ET had held it to be), the next question in the analysis, according to the pleaded grounds, -

"should have been whether the Council has established a non-sex discriminatory reason for the pay differential. However, in the EAT's analysis, the next step is to go straight to the question of objective justification. This is contrary to the approach taken by the Court of Appeal in Armstrong No 1."

1. In other words, it was legally erroneous to proceed to objective justification without having first concluded that there was a need for the Council to establish objective justification.

1. The second ground of appeal is in the form of a perversity challenge to central findings of the ET, in particular the finding that, by the material period of 1997-2003, the bonus schemes enjoyed by the predominantly male groups "had long ceased to have anything to do with productivity". This finding amounted to a rejection of the Council's case that right up until the abolition of the original bonus schemes in 2007, they were linked to productivity.

1. Although it is the first ground of appeal that is advanced on the basis that it is a pure point of law, it became apparent in the course of the hearing that it is closely bound up with the perversity challenge. If the Council were to succeed on that challenge, that success would enliven its case on the Armstrong point. Accordingly, I propose to deal with it first. Before I do so, it is appropriate to set out the legal landscape.

The law

1. At all material times, the predominantly male and the predominantly female groups were employed on "work rated as equivalent" pursuant to section 1(2)(b) of the Equal Pay Act 1970, as amended, which gave rise to equality clauses in the individual contracts of employment, subject to section 1(3) which stated:

"An equality clause falling within subsection (2) ..(b) ..above 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) ..(b) above, must be a material difference between the woman's case and the man's case …"

This is the GMF defence.

1. The leading authority on section 1(3) remains Glasgow City Council v Marshall [2000] ICR 196 in which Lord Nicholls said (at pages 202F – 203B):

"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 … 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 element 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." (Emphasis added).

1. Lord Nicholls's speech attracted the concurrence of Lords Slynn, Mackay, Hope and Hutton. The claim failed because, in the succinct words of Lord Slynn (at page 198A), it was "plainly in essence a claim that the pay is not fair and not a claim that the pay is unequal because of discrimination between the sexes".

1. In Armstrong No 1, Arden LJ referred to the approach of Lord Nicholls as a "step by step guide to proving a genuine material factor defence" (paragraph 32). She then restated it in numbered sub-paragraphs. It seems that some employment lawyers take the view that Armstrong No 1 represented a new development. That was argued in [Gibson v Sheffield City Council]() [2010] EWCA Civ 63, where it was even submitted (unsuccessfully) that Armstrong No 1 was decided per incuriam. It is true that in Gibson Pill LJ (at paragraph 49) found it "very difficult" to reconcile with earlier authorities, including Marshall, but he considered it to be binding authority, albeit distinguishable on the facts. Smith LJ (at paragraph 59) considered that Armstrong No 1 was not only binding but correct. So did I (at paragraph 74). I said:

"An employer who can prove that a difference in pay as between a man and a woman is due to a material factor which is not the difference of sex is protected by the defence contained in section 1(3) … In the Armstrong case, Arden and Buxton LJJ … took that to be axiomatic and consistent with what Lord Nicholls said in [Marshall]. I agree."

1. In Armstrong No 1, the relevant passage in the judgment of Buxton LJ is at paragraph 110:

"Once disparate adverse impact has been established, the burden passes to the employer in respect of two issues. First, that the difference between the man's and the woman's contract is not discriminatory, in the sense of being attributable to a difference of gender. Second, if the employer cannot show that the difference in treatment was not attributable to a difference of gender he must then demonstrate that there was nonetheless an objective justification for the differences between the woman's and the man's contract."

1. It is the first of those issues which Mr Reade places at the forefront of his appeal on "the Armstrong point". I should record that Gibson was the subject of a grant of permission to appeal to the Supreme Court but the case was settled before any hearing took place.

1. I should refer to one other authority at this stage. In Enderby v Frenchay Health Authority [1994] ICR 112, the European Court of Justice, in answering the questions posed by the national court, said:

"19… where significant statistics disclose an appreciable difference in pay between two jobs of equal value, one of which is carried out almost exclusively by women and the other predominantly by men, Article 119 of the Treaty requires the employer to show that that difference is based on objectively justified factors unrelated to any discrimination on grounds of sex.

…

23… the fact that the respective rates of pay of two jobs of equal value, one carried out almost exclusively by women and the other predominantly by men, were arrived at by collective bargaining processes which, although carried out by the same parties, are distinct, and, taken separately, have in themselves no discriminatory effect, is not sufficient objective justification for the difference in pay between those two jobs."

1. Enderby preceded Marshall and Armstrong No 1. To the extent that there is a tension between Enderby and the domestic authorities, it is that Enderby appears not to embrace the question antecedent to the need for objective justification, namely whether the difference in pay is "not discriminatory in the sense of being attributable to a difference of gender" – or in the inelegant jargon "not sex-tainted". However, this tension has been exposed as more theoretical than practical by Smith LJ (with whom I agreed) in Gibson where it is accepted that the antecedent question is capable of providing a defence without the need to proceed to objective justification but

"… where the statistics show that the pay practice has produced an adverse impact on women over a long period and where the statistics are convincing, it will generally be difficult for an employer to show that the adverse impact had nothing to do with sex." (Paragraph 71).

1. Against that legal background, I now turn to the perversity challenge.

Perversity

1. The essence of this ground of appeal is a challenge to the central and repeated finding that the bonus schemes applicable to the gardeners, the refuse collectors and the road sweepers "had long since ceased to have anything to do with productivity". Mr Reade seeks to set his challenge in two contexts. First, whereas the ET (at paragraph 21) had concluded that "each of these three bonus schemes was a sham and a pretence and therefore could not be a genuine explanation for the variations in pay", the EAT held that the words "sham" and "pretence" were not justified. The EAT stated (at paragraph 43):

"It was clear that the Tribunal's reasoning was not based on any consideration of the honesty of the Council's witnesses or decision takers and that it had not found any intention deliberately to conceal the true reasons for the payment/non-payment of bonus. Rather, it found the explanation to be a sham simply because the relevant schemes no longer in fact rewarded productivity. That did not justify a finding of sham."

1. Thus, it equated "sham" with deliberate fabrication. However, it plainly concluded that the focus on the question of whether the Council's explanation was genuine or a sham was unhelpful and that it had possibly resulted from the way in which the parties had put their cases (see paragraph 45). Mr Reade submits that, contrary to the conclusion of the EAT, the findings of the ET were skewed by its erroneous classification of the bonus schemes as a sham. Secondly, it is a fact that the evidence about the bonus schemes came entirely from senior employees of the Council. They were cross-examined but the claimants adduced no evidence on the points in issue. This leads to the submission that, as the integrity of the Council's witnesses was not doubted, it was perverse to reach a conclusion that flew in the face of their evidence. In effect, the ET and the EAT impermissibly substituted their own views about the effectiveness of the bonus schemes as drivers of productivity for the evidence of the witnesses.

1. The Council's case in the ET and now is that the productivity link remained right up until the abolition of the bonus schemes. Their case is encapsulated in this extract from Mr Reade's skeleton argument:

"[The Council's] evidence, stripped down to its bare essentials, was that by fixing the rate of output at certain performance levels …, management was able to deploy the requisite numbers of employees in order to fulfil the Council's contractual obligations. If the employees were in fact working at a lesser rate … then they would not have been able to fulfil those contractual obligations with their existing labour-force; they would need to deploy more employees and greater numbers of plant/vehicles. This did not happen. On the contrary, there was a reduction in numbers over the years."

Accordingly, the productivity link remained unbroken throughout the years covered by this part of the claimants' equal pay claim.

1. It is not surprising that, in a case of this complexity and duration, the ET went into great detail about the three comparator work groups, namely the gardeners, the refuse collectors and the road sweepers. It observed at paragraph 21 that each of the three bonus schemes was separate from the others with a different factual background and each had to be considered separately. Detailed findings were made in relation to the separate considerations. However, a useful starting point is to be found in the part of the judgment which drew the various strands together. The ET stated (at paragraph 21):

"… certain features were common to them all. In particular each of them had been created in the early 1970s and at that time had been the subject of measurement of performance by the [Council's] Work Study section. On the other hand, and most importantly: there was little if any monitoring and no further measurement whether in relation to performance or with regard to the effect of the scheme on productivity; increases in expected performance levels and/or decreases in numbers deployed appeared to be linked significantly to greater efficiency through increased mechanisation and new technology and/or the conversion of a sliding scale for the bonuses to a fixed percentage which occurred at a relatively early stage; at least since that event, there were at best very few occasions on which bonus payments had been withheld or reduced; from a fairly early stage each scheme operated a Task and Finish system which allowed all the bonus earners to leave work early at least on a Friday (and the refuse collectors on each day of the week) once the workload had been completed and notwithstanding that they also received a bonus; and the abolition of each bonus scheme, and thus the withdrawal of the alleged financial incentive, had no effect at all on performance levels. On a number of occasions during the Joint Problem Solving Meetings held in 2005 several senior officers of the [Council] … made comments which were recorded in the Minutes and which amounted to an acceptance that the bonus payments to the male workers were discriminatory: while those phrases had to be treated with some care, it was implicit in the stance being taken on behalf of the [Council] that there was an acceptance on its part that these schemes were no longer productivity-based incentives. Indeed, as we have made clear we concluded that not merely then but many years before and certainly before the period with which these issues were most concerned the bonus payments were seen by the workforce and management alike to be a fixed part of salary."

That passage, in a nutshell, demonstrates the rationale behind the ultimate conclusion that, although productivity was a significant consideration when the bonus schemes were introduced in the 1970s, by the late 1990s they had long ceased to have anything to do with productivity and were perceived as being and were a fixed part of salary.

1. This conclusion, if correct, would place a massive obstacle in the way of any attempt by the Council to establish that the reason for the differentials between the predominantly male and the predominantly female groups was due to a reason, namely productivity, which was not attributable to a difference of gender. If the Council is to rid itself of these findings, it must discharge the heavy burden facing any perversity challenge as explained by Mummery LJ in Yeboah v Crofton [2002] EWCA Civ 794. I shall set out a slightly longer extract from that judgment because Mr Reade and Mr Robin Allen QC have emphasised different parts of it. Mummery LJ said:

"93. [a perversity appeal] ought only to succeed where an overwhelming case is made out that the employment tribunal reached a decision which no reasonable Tribunal, on a proper appreciation of the evidence and the law would have reached. Even in a case where the Appeal Tribunal has 'grave doubts' about the decision of the employment tribunal, it must proceed with 'great care': British Telecommunications plc v Sheridan [1990] IRLR 27 at paragraph 34.

94.Over the years there have been frequent attempts, consistently resisted by the Employment Appeal Tribunal, to present appeals on fact as questions of law. The technique sometimes employed is to trawl through the extended reasons of an employment tribunal, selecting adverse findings of fact on specific issues on which there was a conflict of oral evidence, and alleging, without adequate particulars, supporting material or even proper grounds, that these particular findings of fact are perverse and that therefore the overall decision is perverse. …

95.Inevitably there will from time to time be some cases in which an employment tribunal has unfortunately erred by misunderstanding the evidence, leading it to make a crucial finding of fact unsupported by evidence or contrary to uncontradicted evidence. In such cases the appeal will usually succeed. But no appeal on a question of law should be allowed to be turned into a rehearing of parts of the evidence by the Employment Appeal Tribunal. …"

The question will become: did the ET in the present case make findings which were erroneous in law by reason of perversity?

1. The summary of common features contained in paragraph 21 of the judgment of the ET (see above) followed a detailed review of the evidence relating to the gardeners, the refuse collectors and the road sweepers. That review, extending over 30 pages of single-spaced typescript, included many specific findings of fact. It would serve no purpose to set out lengthy extracts in this judgment. What I shall do is to focus on the main points advanced by Mr Reade.

(1) Uncontradicted evidence

1. As I have said, Mr Reade emphasises the fact that the evidence about the bonus schemes came exclusively from the Council's witnesses who were senior officials of long service and whose good faith was accepted by the ET. This leads to the submission that the Council's case of a perennial productivity link was evidence-based whereas the claimants' case was based simply on assertion. In my judgment, this submission is misconceived. Although the evidence adduced by the Council was uncontradicted in the sense that the claimants adduced no contrary evidence on these points, it was vigorously challenged in cross-examination. Whilst the witnesses continued to claim an on-going productivity link, it was a matter for the ET as to whether and, if so, to what extent, to accept that evidence. At numerous points in its review of the evidence, the ET indicated points at which it did not accept or was unimpressed by features of the evidence adduced on behalf of the Council. At other points the non-acceptance was implied. The real question is whether findings such as an absence of further monitoring or remeasurement during the years in question, an absence of occasions on which bonus payments had been withheld or reduced (save on a few explained occasions), the history of early finishing on Friday and an absence of evidence of male employees having to complete tasks in their own time and the fact that the ultimate withdrawal of the bonus system led to no decrease in productivity were permissible findings in the light of all the evidence. In my judgment, they plainly were. Moreover they paved the way for a permissible inference that the bonus systems had long since ceased to relate to productivity.

(2) Mr Charlton

1. One (but only one) of the claimants named Mr Raymond Charlton as a comparator. He was employed as a gardener. A point came when the Council was developing Sunderland's Winter Gardens as "a flagship project". The Council needed a gardener to do dedicated and no doubt important work at the Winter Gardens. The job was advertised internally but not externally. It went to Mr Charlton who moved to the Winter Gardens and continued to receive the same remuneration as he had been receiving, in the form of basic salary plus bonus, as a general gardener. The ET said (at paragraph 20.21):

"There was never any attempt on the part of the [Council] to assess the true value of the post in terms of the appropriate annual wage. … From the start, the view was taken that if at all possible the post should be filled by one of the [Council's] gardeners and furthermore that the salary of the post should be whatever the successful candidate was already receiving. Thus, although the role did not actually carry any bonus at all, it was treated as if it did so. … Mr Charlton … simply retained his entire remuneration package … no thought had been given to the assessment of the true and appropriate rate of pay for the job, to whether someone might wish to undertake a role at that level of pay even if it was less than they were currently receiving or to the measurement of the necessary task in order to apply a proper bonus scheme … that indicated that at least by the end of the 1990s management as well as the workforce viewed the so-called bonus payment as being part of the remuneration package and in effect part of the going rate for the job."

1. There is no dispute about the facts surrounding Mr Charlton's employment at the Winter Gardens. Mr Reade's complaint is that the objective facts did not support or – to use the ET's word – "exemplify" a break in the link between remuneration and productivity. I tend to agree with Mr Reade about this. The Council had a need for a gardener of the ability of Mr Charlton to move to the Winter Gardens where his work would be somewhat different but it is perhaps unrealistic to expect that anyone in Mr Charlton's position would move there for less remuneration. Whilst Mr Allen seeks to support the approach of the ET and submits that the circumstances show that the Council was not interested in measuring the content of a job or linking it to a value but was content to place Mr Charlton in an unevaluated job virtually on a "jobs for the boys" basis, I do not consider that the very specific circumstances surrounding Mr Charlton ought to have assumed importance in the ET's reasoning. However, where I do agree with Mr Allen is in his submission that this aspect of the evidence should not be seen as fundamental to the ultimate conclusion of the ET. It was not irrelevant evidence. The case proceeded on the basis that the claimant in question and Mr Charlton were engaged in work of equal value. However, the approach of the ET to it, even if it was perverse, does not by itself point to a perverse ultimate conclusion.

(3) Historical legacy

1. When summarising the conclusions of the ET I referred to occasions in 2005 when Council officials seemed to have accepted that the bonus payments to male employees were discriminatory. Much was sought to be made of this by the claimants at the hearing in the ET. Their approach met with some, but not total, success. The point was relied upon by the ET in its conclusions. It was said to be "implicit in the stance being taken on behalf of the [Council] that there was an acceptance on its part that these schemes were no longer productivity based incentives". Factually, the point made on behalf of the claimants had undeniable documentary support. In a note of a meeting with the unions made by Mr Rawling in the course of the single-status negotiations he recorded that the parties were "a long way apart"; that there might be a difference of legal advice which could be resolved by procuring joint or shared legal advice; but "our genuine belief can't perpetuate discriminatory bonus earnings". Oral evidence at the hearing included the suggestion that the note ought to have referred to "allegedly" discriminatory bonus earnings but the ET does not seem to have found this gloss to be persuasive. I have no doubt that the ET was entitled to view this item of evidence as it did. It is nothing to the point that Mr Rawling had been of a lower grade than the Council's principal witnesses. He had been the senior official representing the Council at the meeting in question. It seems to me that the ET was entitled to give some weight to this evidence. When one considers how much weight it was accorded, it soon becomes apparent (from paragraph 20.43) that the ET saw it as "fortifying" its previous conclusion that the three bonus schemes had long since ceased to be productivity based. It was not being treated as being akin to a formal admission or raising an estoppel. In my judgment, the ET was entitled to make the use of it which it did.

(4) Hartlepool Borough Council v Dolphin

1. In Dolphin [2009] IRLR 168, the EAT (Judge McMullen QC, Mrs R Chapman and Mrs L Tinsey) set out the familiar extracts from the speech of Lord Nicholls in Marshall and from the judgment of Arden LJ in Armstrong No 1. It then postulated a hypothetical example before stating (at paragraph 30):

"It is right that the Tribunal is not required to pass judgment on whether the scheme introduced by the respondent is a good scheme or a bad scheme, for its task simply is to see whether it is genuine. Were the schemes intended to and do they in fact achieve productivity improvements? (Emphasis added)"

1. Mr Reade submits that this manifested an erroneous approach on behalf of the EAT and that it led the ET in the present case to make the same mistake because it purported to follow Dolphin. To the extent that the passage in Dolphin suggests that, for a bonus scheme to be "genuine" it must be shown to have achieved productivity improvements, I have no difficulty in concluding (as did the EAT in the present case) that that would be a misstatement of the law. I shall return briefly to Dolphin when I come to address "the Armstrong point". In the present context of the perversity challenge, its significance is that it is said by Mr Reade to illustrate the underlying legal error in the findings of fact. He submits that Dolphin set the ET on a course of weighing its assessment of the effectiveness of the bonus schemes against that of the Council's very experienced managers. I simply do not accept this submission. Properly analysed, the finding of the ET was that for many years before and certainly before the relevant period in this case the bonus schemes had been seen "by the workforce and management alike to be a fixed part of salary" (paragraph 21). I have taken that from the composite conclusion in paragraph 21 but it was expressed in similar terms in relation to each of the male comparator groups: see paragraph 20.24 (gardeners), paragraph 20.34 (refuse collectors) and paragraph 20.41 (road sweepers), in each case summarising findings in preceding paragraphs.

(5) Conclusion on perversity

1. In my judgment, the Council needs more than the modest success I have given to it in relation to Mr Charlton if it is to succeed in establishing its perversity challenge to the central finding of a historic break in the link with productivity. Having considered the specific points advanced by Mr Reade, I am totally satisfied that the perversity challenge cannot succeed. Mr Allen robustly submits that the Council is "not within a country mile" of sustaining its perversity challenge. The hyperbole is not misplaced on this occasion.

The Armstrong point

1. This ground of appeal seeks to take issue with the approach of both the ET and the EAT. So far as the ET is concerned, it stated (at paragraph 23):

"… if the bonus schemes had been genuine, we would have found that they were indirectly discriminatory against women …"

1. Mr Reade accepts that, on the face of it, that asks and answers the question posed by Marshall and Armstrong No 1, ie whether the difference in pay as between the predominantly male and the predominantly female groups was attributable to a difference in gender or "sex-tainted". The ET found Enderby-type indirect discrimination, as to which it was "quite satisfied that the … statistics established on the part of the claimants [apart from the leisure centre attendants] a prima facie case of indirect sex discrimination" (paragraph 23). The complaint now is that that finding was infected by the ET's finding that the proffered explanation of an ongoing productivity link was a sham. Mr Reade refers to the short final paragraph of the judgment (paragraph 24) where the ET stated:

"… for the reasons we have given, we came to the conclusion that the bonus schemes were not genuine and thus that they were sex-tainted." (Mr Reade's emphasis in his skeleton argument.)

1. In short, the submission is that, once the element of sham is removed (as it was by the EAT), it becomes necessary to ask and answer the question as to whether there was a prima facie case of indirect sex discrimination anew.

1. So far as the EAT is concerned, the complaint is that, having correctly dispensed with the finding of sham, it ought to have then applied its collective mind to the question whether the Council had established a non-sex discriminatory reason for the pay differentials. However, it omitted that stage and proceeded directly to the later question (which would not arise if the Council had succeeded in establishing a non-sex discriminatory reason) of objective justification. In the words of Mr Reade's skeleton argument, "the EAT erred in law in not identifying that appropriate step and could not properly uphold the ET's finding absent a consideration of that question".

1. Whatever the prospect this ground of appeal might have had if the perversity challenge had succeeded, it seems to me that it is wholly unsustainable now that that logically prior challenge has failed. There is a preserved finding that, during the years under consideration, the productivity link had ceased to exist. The Council had nailed its colours to the mast: such a productivity link was its explanation or reason for the differentials. Once that is taken out of the equation – as it was by the ET in its (now) preserved finding, there could only be one answer to the "missing" question, namely that there was Enderby-type indirect sex discrimination which could only be defended if objectively justified. It is implicit in what I am saying that I do not consider that the removal of the "sham" finding impacts at all on this stage of the analysis. The preserved findings of the ET are clear.

1. In the event, the EAT did not overlook that stage in the structured approach upon which Mr Reade seeks to rely. It stated (at paragraph 48) that, having found that the Council's explanation was the alleged productivity link, "the next question is whether that explanation is 'tainted by sex'. As to this, the claimants' case depends on Enderby-type indirect discrimination" and that was clearly established. This only left the issue of objective justification. As to that, having considered the three comparator work groups, the EAT said (at page 51):

"It is important not to lose sight of the purpose for which the question is being asked. The comparators were being paid more than the claimants for doing work which had been rated as being of the same value. That could only (so far as relevant for present purposes) be justified if the additional amount represented a reward for doing more than the basic work expected of them. The effect of the Tribunal's findings was that that was not the case. The fact that, as a matter of history, the level of work expected reflected what had once been regarded as exceptional does not mean that performance of the relevant tasks was exceptional during the relevant period or that that was what the bonus was being paid for."

I respectfully agree with that analysis.

1. I should not leave this part of the case without referring to one slight oddity in the judgment of the ET. It occurred right at the end of its very long and careful exposition.

In a passage based on the hypothesis that the bonus schemes were genuine and not a sham, the ET stated:

" … if the bonus schemes had been genuine, we would have found that they were indirectly discriminating against women but that justification had been established in relation to all claimants bar Ms Hennessey who was the only cleaner actually before us."

1. It is not easy to understand the ET's approach at this point. It seems to founder on the proposition that the Council could have devised a comparable bonus scheme for cleaners whose work is functionally similar to that of road sweepers but it would have been unable to do the same for carers, cooks and the like because their work is dissimilar and not readily "bonusable". I suspect that in this part of its judgment, the ET was understandably struggling with multiple hypotheses. If one stands back and considers the position now, after the removal of the "sham" finding, it is plain that, as I have explained, there is an unassailable finding of Enderby-type indirect discrimination in relation to each of the claimants' work group (except leisure centre attendants). That inexorably leads to a need for objective justification if the Council is to succeed in resisting the equal pay claims. It cannot discharge that burden, given the preserved findings of fact, for the reasons I have explained by reference to the conclusion of the EAT. What cannot be suggested and it was not suggested in the grounds of appeal – is that in the passage from the judgment of the ET that I have just set out, it was concluding that, in the situation we are now in, the defence of objective justification would avail the Council in relation to all claimants except Ms Hennessey. That would make no sense at all in the light of the central findings.

Conclusion

1. It follows from what I have said that I would dismiss the Council's appeal.

Lord Justice Rimer:

1. I agree.

Lord Justice Tomlinson:

1. I also agree.