The claims were originally heard in 2003 in circumstances where, following a CCT, a group of predominantly female workers were transferred to the private sector. In the process they lost bonus payments whereas comparable male workers retained the payments.  The litigation had been the subject of a previous Court of Appeal decision in 2005 when the matter was remitted to the ET who found that there had been discrimination on grounds of gender. That finding was upheld in the EAT.

In this application, counsel for the Trust argued broadly that; there had not been a full hearing on the remitted issue; that the reason for the difference in treatment was not sex taint but because of the transfer to the private sector; and that, following Armstrong, the claimant needed to establish the sex taint before the need to establish an objective justification arises. Pill LJ, giving the lead judgment, reviews the relevant cases, including the  previous Armstrong decision on the issue of whether statistics alone can create an irrebuttable presumption of prima facie indirect sex discrimination. He concludes that, on the material available, the Armstrong principle could not be relied on and the need for objective justification had arisen. He therefore refused the application.
______________________

Case No: A2/2010/1009

Neutral Citation Number: [2010] EWCA Civ 1203

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL

(MR JUSTICE UNDERHILL)

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: Tuesday 7th September 2010

Before:

**LORD JUSTICE PILL

**and

LORD JUSTICE SULLIVAN

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

Between:

NEWCASTLE UPON TYNE NHS HOSPITALS TRUST (Appellant)

- and -

ARMSTRONG AND ORS (Respondent)

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

(DAR Transcript of WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

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

Mr John Cavanagh QC and Mr Andrew Blake (instructed by Samuel Philips Law Firm) appeared on behalf of the Appellant.

The Respondent did not appear and was not represented.

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

Judgment (As Approved)

Crown Copyright ©

**Lord Justice Pill:
**1. This is an application for permission to appeal against a decision of the Employment Appeal Tribunal ("EAT") of 22 January 2010, Underhill J (President) presiding. They dismissed an appeal from an employment tribunal dated 17 December 2007. The lapse of time between the two hearings was, we understand, because the parties were waiting for a decision of this court in another matter (not the case of Gibson.

1. The case has been in the Court of Appeal before. On 21 December 2005 the court remitted to the employment tribunal three questions, the employment tribunal's decision having been made on 22 December 2003 and upheld by the Employment Appeal Tribunal. At paragraph 129 of Armstrong & Ors v Newcastle Upon Tyne NHS Hospital Trust [2005] EWCA Civ 1608 the remittal to the employment tribunal provided a question, that if the answer to the third question was in the affirmative:

"…the employment tribunal should then consider whether the decision to put the domestic services out to tender, or to discontinue the domestic services' bonus scheme, was an act of discrimination on grounds of gender"

1. In late 2000 a large number of female ancillary workers employed by the Trust commenced proceedings against it under the Equal Pay Act 1970. They were employed at four hospitals maintained by the Trust; they claimed the benefit of bonus payments paid to nominated male comparators. The period covered by the claims extends in principle six years back from the commencement of proceedings.

1. On the remittal, the employment tribunal held that the Trust were in breach of the Act and that finding has been upheld by the Employment Appeal Tribunal. On behalf of the applicant Trust, Mr Cavanagh QC submits that his clients have not received a proper hearing on the remitted issue; that is, whether the reason for the pay differential was unconnected with sex. He submits that the case is different from others which have been considered because in other cases there was a history of inequality. It is, he submits, a nice point of law, the circumstances in which a claimant group is paid the market rate: does that give rise to an inference of sexual discrimination? He put the proposition on behalf of his clients in this way when pressed; women earn less because the pay was reduced as a result of circumstances arising from CCT -- that is the tendering procedure -- which did not apply to men. The reason for the difference was not sex taint but moving to the private sector, and that is what happened. The tendering process occurred. Prior to that there was bonus paid to the claimants, predominantly female, as well as to men doing comparable work. In one case it was a predominantly female workforce; in the other a predominantly male workforce.

1. Obviously a good result was sought on the tender, and a decision was made that, in order to obtain the best result for the claimant group of workers, their bonus should be excluded. It was believed that an appropriate result could be achieved by the male-dominated occupations if the bonus was included, and that, it seems to me, creates the issue. Detailed reference has been made, understandably, to the decision of this court in Armstrong and to the judgment of Buxton LJ. It is not challenged that the statistical evidence in this case shows that men are being paid more than the comparable women. Armstrong establishes, it is submitted, that that in itself does not create discrimination, within the meaning of the Equal Pay Act, when there are differences in pay. Before the need to provide to establish an objective justification arises, it is submitted. The claimant has to go on to establish that the difference is due to a sex taint.

1. This court has recently considered the situation in the case of Gibson v Sheffield City Council [2010] EWCA Civ 63. All members of the court found that Armstrong was not decided per incuriam; there were differences between members of the court as to the circumstances in which the principle stated could apply. The issue has also been considered in other cases to which I will briefly refer.

1. Mr Cavanagh's submission is that, in considering the question remitted to them, the tribunal applied the wrong test. The EAT have made two favourable inferences to uphold the decision of the employment tribunal; further, their own reasoning is defective. The case should again, Mr Cavanagh submits, be remitted so that his clients can have what he would describe as a proper hearing on the Armstrong issue. There is, he submits, in this case a genuine material factor ("GMF") explaining the difference between the male rates and the female rates, that being the one already identified. It is different from the run of cases, he submits, where there is a history of inequality. Here the bonus was lost to make the claimants' work competitive under the CTT provisions. That approach is not tainted by sex. Other female jobs include their bonus because in those cases, as in the case of the males comparable to the complainants, it was thought that a result could be achieved while retaining the bonus.

1. Reference has been made to the decision of the European Court of Justice in Enderby [1994] ICR 112 and to the decision of the House of Lords in Marshall [2009] ICR 196, which were the subject of submissions to this court in Armstrong and also in Gibson and has been considered by the EAT in the decision now complained of.

1. This is a renewed application. On a consideration of the papers, Smith LJ stated:

"On the Radcliffe issue, it appears to me that, having recognised the difficulties created by the terms on which the case was remitted to the ET, the EAT was correct to hold that the ET had been entitled to reach its conclusion. It appears to me that, even if this court were to reconsider the issue, in the end it would be bound to conclude that the ET was justified in holding that the Trust had not shown that the pay differential was not sex-tainted."

1. Smith LJ also rejected the second ground of appeal which had been put forward to establish an objective justification for the difference in pay, which of course the 1970 Act permits. That aspect of the case has not been pursued further in this renewed application.

1. In considering these issues, it can be borne in mind that employers do have a safeguard by way of the opportunity to establish an objective justification. However, the present applicants, having failed on that ground, seek to rely on what I will refer to as the Armstrong point and to show what comes down to quite a narrow point -- though not necessarily an easy one -- that the difference has not arisen through any sex taint.

1. The question whether there is this further stage in the procedures has been considered in the courts since Armstrong, the court and the EAT seeking to apply the principles laid down in Enderby and Marshall. Elias J, as he then was, has been concerned in several cases, including Villalba v Merrill Lynch Inc and Ors [2007] ICR 469. In relation to Armstrong, he stated at paragraph 113:

"In effect, therefore, Enderby establishes that statistics alone may, in a sufficiently powerful case, create an irrebuttable presumption of prima facie indirect sex discrimination. Once there is statistically relevant and material evidence to demonstrate that a group is in fact being adversely affected on sex grounds that will oblige the employer to justify the arrangements. It is not enough in those circumstances for the employer to demonstrate that the arrangements have resulted without any direct sex discrimination being practised of any kind. In effect the court is holding that there must somewhere have been some element of indirect discrimination, in other words there is an assumed indirect consideration. The statistics demonstrate a sufficiently marked adverse impact to constitute a prima facie case requiring not merely an explanation that the difference is not caused directly by sex, but in addition an objective justification."

1. Elias J, as President of the EAT, considered the question again in Middlesbrough Borough Council v Surtees [2007] ICR 1644, where, in a lengthy analysis, he substantially followed that in Surtees, though he did postulate circumstances in which the Armstrong principle might exceptionally apply. Gibson is to a similar effect. The court accepts that there is a principle which may in some circumstances apply to justify an absence of sex taint, even if the statistical difference showing that women are earning less for work of comparable value is established, as it is in this case. Surtees was considered in this court in Redcar & Cleveland Borough Council v Bainbridge [2009] ICR 133. Mummery LJ described the reasoning of the EAT in Surtees in this way:

"Thus although, in theory, it was right to say that an employer could still show that the pay differential was not due to the difference of sex even in the face of evidence of disparate adverse impact, it could only be possible in a case where the statistical evidence was not very strong or convincing."

1. The court did not decide the point, but Mummery LJ stated that it was "inclined to think that that analysis of the decision [Armstrong] is correct". These authorities were set out in Gibson, which was before the EAT but only shortly before its decision was to be handed down. They merely added (and it is an entirely understandable approach) a postscript in which Underhill J stated, at paragraph 73, that the judgments, particularly that of Smith LJ, seem very close to the approach of the EAT followed in the judgment prepared.

1. Clearly the EAT had difficulty with the manner in which the employment tribunal had approached the case. They regarded it as a Radcliffe case ([1995] ICR 833) and reached a conclusion accordingly. In doing so, they posed questions which were the subject of detailed analysis in the EAT, as was the judgment of Buxton LJ in Armstrong. The EAT stated at paragraph 50:

"It is a pity that the Tribunal uses only the gender-neutral phrase "economically vulnerable group of workers"; but it is sufficiently clear that in its context that means "vulnerable because of the kinds of factor peculiar to women identified by the tribunal in Ratcliffe."

1. The evidence in this case, first that the claimants were engaged in predominantly female work and secondly that they were paid less than men doing comparable work, was established. It is submitted that both tribunals have failed sufficiently to analyse the issues arising and have not adequately dealt with the submission that there was no sex taint when the difference had arisen, as the difference in this case had. At paragraph 65 the EAT stated:

"We agree with both Lord Slynn and Arden LJ that the 1970 Act might be expected to give a remedy [to the claimant] in cases of this kind and we see nothing odd in the conclusion that the Trust has failed to justify a differential which has continued for so long after its initial rationale had disappeared."

They also stated:

"We are prepared to say that we do not regard the outcome of the appeal as surprising."

That reflects, or is reflected in, what Smith LJ has said when refusing permission to appeal on paper.

1. The 1970 Act aims to provide equal pay for equal work, and it would be surprising, in the situation found in this case, if the difference in pay between the women and men doing work of equal value were to be upheld. The EAT went on to consider the effect of Marshall and the other cases. They stated:

"We respectfully find the analysis in Surtees cogent and convincing and see little point in trying to gild the lily."

The EAT stated, at paragraph 72:

"Wallace and Marshall were both argued on the simplistic basis that the mere fact that a single individual woman was able to compare herself with a single individual man was enough to impose an obligation on the employer to justify the differential."

They stated that the argument, different from that on the present facts, was only possible because of the peculiar machinery in the 1970 Act. That appears to me to reflect the limited value which can be placed on the sentence in the speech of Lord Nicholls in Marshall on which Buxton LJ placed particular reliance at paragraph 110 of his judgment (Gibson, paragraph 49). It is not, however, necessary in my judgment to go further into the nuances which arise from the earlier cases and from what may arguably be a gloss put upon them in the case of Armstrong. In my judgment, the employment tribunal were entitled to find that the case was a case covered by authority in favour of the claimants. The EAT, in their most detailed consideration of the issues and the decision of the tribunal, were entitled to reach the conclusion they did. They demonstrated, in my respectful view, an understanding of the issues which had arisen in the case. Like Smith LJ, it appears to me inevitable that the Armstrong principle could not be relied on in this case on the material available.

1. This was a case in which the factors necessary to require from the employers an objective justification had arisen. When there is a disparity in pay rates for work of equal value, it is not an answer to a claim under the Equal Pay Act to say that the CCT has made that necessary. In Enderby it was held that one group of workers having a stronger union than the other did not justify a different rate under the Act. In Gibson it was unanimously held that, because the women's work could not properly be made the subject of a bonus (being caring work) and the men's work could be subject to it, the difference by way of bonus was justified. That consideration did not remove the sex taint to the difference in pay; no more, in my judgment, does the situation here which is that the bonus was withdrawn from the women in order to achieve a better result in the CCT process.

1. For those reasons I would refuse this application for permission to appeal.

**Lord Justice Sullivan:
**20. I agree that permission to appeal should be refused. I add these observations out of deference to the very helpful submissions of Mr Cavanagh QC.

1. There is no doubt that the bonus previously paid to the claimants was discontinued because the respondent considered that continuing to pay it would make its bid uncompetitive in the open market. Why would it not be competitive? The answer was because the wages in the open market were significantly less. The statistics show that there was a disparity between those lower rates and the rates for comparable work. When asked the question "who were those lower rates paid to?", the answer is a labour market that was either exclusively or almost exclusively female.

1. In the light of this court's decision in Armstrong, I for my part would accept the submission that those findings of themselves were not sufficient. The employment tribunal had to go one step further and ask itself the question why were those lower rates paid in the open market to the predominantly female workforce? Was it for a Ratcliffe type reason, ie because their work was perceived by the market to be "women's work".

1. The only significant question in this application for permission to appeal is whether the employment tribunal did take that extra step? In my judgment, the employment appeal tribunal was entitled to conclude, in paragraph 50 of its judgment, that the employment tribunal did take that extra step. The employment tribunal had referred in paragraph 41 of its judgment to the submission made on behalf of the Trust that this was not a Ratcliffe type case and that Ratcliffe could be distinguished. The employment tribunal's decision must be read in a common sense way and, on any basis, in paragraphs 42 to 44 of the judgment the tribunal rejected that submission of the Trust and concluded that the predominantly female labour force was paid less in the open market because of the view that what they were doing was women's work, ie for a Ratcliffe-type reason.

1. As the Employment Appeal Tribunal said in paragraph 50 of its judgment in the passage already cited by my Lord Pill LJ:

"It is a pity that the Tribunal uses only the gender-neutral phrase "economically vulnerable group of workers"; but it is sufficiently clear that in its context that means "vulnerable because of the kinds of factor peculiar to women identified by the tribunal in Ratcliffe."

1. In my judgment there is no real prospect of persuading this court that the Employment Appeal Tribunal was not entitled to reach that conclusion, and in these circumstances it is unnecessary to consider the alternative basis on which the Employment Appeal Tribunal considered the remitted question in paragraph 52 of its judgment.

1. I too would dismiss this application for permission to appeal.

Order: Application refused