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APPEAL BY GLASGOW CITY COUNCIL AGAINST (FIRST) UNISON CLAIMANTS; (SECOND) HBJ CLAIMANTS (FORMERLY "FOX CROSS"); AND (THIRD) GMB CLAIMANTS


Submitted: 30 May 2017

Web Blue CoS

SECOND DIVISION, INNER HOUSE, COURT OF SESSION

[2017] CSIH 34

XA61/16

Lord Justice Clerk

Lady Paton

Lord Menzies

OPINION OF THE COURT

delivered by LADY DORRIAN the LORD JUSTICE CLERK

in the Appeal by

GLASGOW CITY COUNCIL

Appellant

against

(FIRST) UNISON CLAIMANTS; (SECOND) HBJ CLAIMANTS (FORMERLY “FOX CROSS”); AND (THIRD) GMB CLAIMANTS

Respondents

against

a decision of The Employment Appeal Tribunal dated 15 March 2016

Appellant: Napier QC, Miller (sol adv); Clyde & Co LLP

First Respondents: Dalgleish; Unison

Second Respondents: J J Mitchell QC; HBJ Gateley

Third Respondents: MacNeill QC, Parratt; GMB, Thompsons

 

30 May 2017

Introduction
[1]        The issues in this appeal arise out of the delayed implementation of a national agreement, dated 1999, to bring about a move to single status for local authority employees.  To effect the move the appellant conducted a Workforce Pay and Benefits Review (WPBR).  The Review involved bringing staff and manual workers together under one pay scheme and extended to around 30,000 employees with 3,000 different jobs.  Whereas prior to the Review the appellant operated separate pay agreements for APT&C (Administrative, Professional, Technical and Clerical) staff and manual workers, the Review involved bringing all APT&C staff and manual workers together under one pay scheme.

[2]        To achieve this, a job evaluation scheme (“JES”) required to be carried out in order that the local authority could introduce a new, unified pay and grading structure.  That process involved creating job “families”, developing role profiles, evaluating role profiles, and allocating role profiles to job families.  That process enabled each job to be given a grade score.  The appellant then assessed Work Context Demand (WCD) and each job was also given a score under that heading.

[3]        It is recognised that when a JES of the kind described is carried out, some jobs might reduce in value with the result that the individuals in those jobs would be subject to a reduction in pay.  Such employees are described as being “in detriment”.  It is common practice to take steps by means of a Pay Protection Scheme (“PPS”) to protect the pay of such employees on a time limited basis, in the anticipation that any detriment would by the end of that period be ironed out by cost of living increases and the like.  In the present case, a PPS was applied to employees in detriment for a period of three years.

[4]        Three groups of the appellant’s employees brought claims under the Equal Pay Act 1970 (“EQP”).  For convenience, they are referred to as the Unison, GMB or HBJ claimants. The fact that the methodology of the JES generated two different scoring mechanisms was an issue before the ET and EAT, and is the subject of a separate appeal.  The employees also challenged pay protection provisions employed by the council, and it is the decision of the EAT in that regard with which this appeal is concerned. 

[5]        The ET found that the pay protection provisions used by the appelant were “tainted for sex” but that the arrangements were objectively justified.  The claimants appealed to the EAT, which found that the ET had erred in law in its decision in relation to the pay protection provisions.

[6]        In light of the decisions of the ET and EAT, the issues before this court are restricted to those elements of the PPS which related to transitional payments and assimilation.  However, senior counsel for the appellant agreed with the EAT that these issues went together so he advanced no specific arguments in relation to the latter.

 

The Pay Protection Scheme
[7]        Under the scheme, the relevant comparison was between pre-WPBR contractual earnings as at 1 April 2006 and WPBR earnings, the latter of which included grade pay, WCD pay and NSWP (non-standard working pattern) pay.  The pre-WPBR contractual pay arrangements had included provision for various additional payments and allowances, including certain bonuses.  Taken into account as part of the pre-WPBR earnings therefore were bonus payments, contractual overtime, contractual allowances and conditional overtime. Casual or irregular overtime and other payments were excluded. 

[8]        The issue arising in these appeals relates to the question of the pre WPBR bonus elements of pay earned by certain manual, mostly male, workers.  These bonuses were lost as a result of the JES, with the consequence that the employees so affected were treated as “in detriment” and given the benefit of pay protection.  They are referred to as being “red circled”.  The appellant’s PPS consisted of three elements: transitional protection payments; assimilation, whereby a worker in detriment would be assimilated to a new pay grade that would at least match the pre-WPBR reckonable earnings and thus minimise his notional reduction in pay; and third, steps whereby employees would be assisted by the appellant to increase their skills and move up the grades using Employee Development Commitment (EDC).  The latter is designed to allow “maintenance of their earnings in the long-term”.  Employees who have been assessed, under the JES, as doing equivalent work as the “red circled” ones, but to whom the benefit of the PPS has not been extended are described as “green circled”.

[9]        The adoption of such a PPS involving these three elements was not per se objected to. An argument relating to alleged discrimination in the application of the EDC is not repeated in the present appeal.  The remaining arguments related to the issues of transitional payments and assimilation.

 

The decision of the ET
[10]      The ET found that the payment of pre-WPBR bonuses gave rise to discrimination and that, in the case of those who received such bonuses, the loss of bonus led to pay protection.

[11]      The findings made by the ET included the following:

“861.    The [appellant] has made concessions in relation to the payment of bonus.  We concluded that we cannot go behind those concessions, and therefore proceeded on the basis that the [appellant] has no defence in justification to the pre-WPBR bonus payments.  … ..

862.      The Tribunal concluded that some employees fell into protection by reason of the withdrawal of unjustified and discriminatory bonus payments.  Some employees fell into pay protection for unidentified reasons that were not connected with bonus or any other reason shown to be tainted by discrimination.  Not less than two-thirds of all those who fell into pay protection … were in the latter category.

...

881.      On the facts found, the payment of an unjustified bonus was the reason why some employees received transitional payment.  The majority – at least two to one – fell into protection for some reason other than the payment of bonus and the ground has not been laid for a finding that the reason for others falling into protection was tainted by sex”.

[12]      The ET found at paragraph 883 that the appellant’s payment of bonus pre-WPBR gave rise to discrimination and at paragraph 885 that the appellant was fixed with constructive knowledge that its bonus schemes could not be justified at the time it took its decision on pay protection.  It considered whether the payment of pay protection could be justified and found at paragraph 895 that:

“There is nothing to suggest that the [appellant’s] thinking in 2006 went beyond offering pay protection to the pre WPBR earnings of those who would otherwise have suffered an immediate loss of income.  The [appellant] did not consider for a moment offering anything by way of pay protection to those employees who would not suffer an immediate drop in earnings.  ... To put it simply, the [appellant] was interested in protecting the pay of the “losers”, that is those who would otherwise see an immediate cash reduction in their pay packets, and not add to the pay of those perceived as ‘gainers’.”

 

Having made that finding the ET then considered whether the appellant’s actions were objectively justified.  An attempt to justify on the basis of cost was rejected by the ET (para 897):

“The [appellant] is in some difficulty in seeking to justify its position on cost grounds as the Tribunal has not been shown any evidence as to even an approximate cost of extending transitional payments or the cost of extending transitional payments on a range of possible premises and, of equal importance, the resources that might have been made available to meet those costs.  As much as the Tribunal has heard is that the costs would have been ‘enormous’.  That really is not sufficient to mount an attempt at justification based on cost.”

 

The ET then found at paragraph 900, as follows:

“Recognising that the [appellant] continued the discriminatory effect of the former bonus payments by the use of the transitional payment (sic).  The Tribunal concluded that the [appellant’s] actions to meet their legitimate objectives pass the test of proportionality for these reasons.”

 

The reasons were first, the effect of the WPBR.  The ET stated that the effect of the WPBR (para 901):

“... was to put in place pay arrangements that resulted in only some of those who previously were paid bonus falling into pay protection.  .”

 

On this basis the Tribunal concluded that the consequence of the WPBR had been immediately to reduce the discriminatory effect of the former bonus arrangements.

[13]      Second, in respect of proportionality, at least two-thirds of those who fell into protection were from the APT&C sector, where bonus was not an issue.  Protection of former discriminatory bonus payments was probably an issue in less than a third of all cases of pay protection.  The Tribunal balanced that “against the advantage of a rule that treated alike all of those whose reckonable pre WPBR earnings exceeded reckonable WPBR earning”(para 902)- meaning, in other words, irrespective of whether bonus had been a component in placing them in detriment. This was a proportionate response.

[14]      The third reason was the transitional nature of pay protection, which was limited to three years and in some cases (for reasons which need not concern us) to an even shorter period.  Any pay advantage accruing from the payment of discriminatory bonus would leave the system on the expiry of the three-year period.  The effect of back-dating reduced that period further.

[15]      The final reason was that the appellant had tried to eliminate detriment, and hence the transitional payment, through the Employee Development Commitment.  

[16]      On the issue of assimilation, the ET found (para 904) that assimilation was by reference to length of service.  There was thus an explanation for the assimilation arrangements which was not sex tainted, and there was insufficient evidence to allow a conclusion that the assimilation arrangements gave rise to unlawful discrimination.  Employees whose pre-WPBR basic pay included a bonus and who were assimilated to a higher pay point did not enjoy any permanent pay protection by this means.

 

The decision of the EAT
[17]      The EAT concluded that the ET erred in law in finding that pay protection was brought in to fulfil a legitimate aim, and was implemented in a proportionate manner.  The EAT considered that the aims found by the ET were to provide a soft landing for bonus earners, and to avoid being unable to make competitive tenders.

[18]      Although the first of these was unobjectionable, it failed to engage with the key point which the EAT expressed thus (paragraph 183):

“why should those who have been discriminated against and therefore underpaid, perhaps for years, not enjoy the same payments?”

 

[19]      The reasoning of the ET did not accord with the law as set out in Redcar and Cleveland Borough Council v Bainbridge and Others [2009] ICR 133 and Bury Metropolitan Borough Council v Hamilton and others [2011] ICR 655.  The ET found as fact that the appellant did not consider extending protection because it regarded the women as “gainers”.  The appellant had been interested only in protecting the pay of the “losers”.

[20]      The second aim was of a different character.  Had it been costed, considered and compared with payments to those previously discriminated against, it might have provided objective justification.  The test of proportionality might have been met if it had been shown that the scheme was designed to meet the aim, and was a reasonably necessary way of doing so.  However, there was no such evidence. There had been no proper consideration of proportionality by the ET, which had no factual basis upon which to make its finding in law that the continuation of discrimination was justified. 

 

Submissions for the appellant
[21]      Senior counsel for the appellant accepted that the effect of the WPBR was that there was a difference between two comparable groups of employees; that the difference was one “tainted by” sex; and that it had been incumbent upon the appellant to show an objective justification for that. 

[22]      The nub of the appellant’s argument was that the EAT had not been entitled to interfere with the decision of the ET.  The assessment of objective justification, namely legitimate aim and proportionality, were matters of fact and degree for the ET to determine, on which they could only be overturned on grounds analogous to perversity:

The final decision on justification is essentially one of judgment and evaluation for the employment tribunal and should not be overturned unless there has been an error of approach or the conclusion is plainly wrong.  The findings of fact which underlie the evaluation are matters for the tribunal and can be overturned only on conventional perversity grounds.”

(Bainbridge, para. 152).

 

[23]      No such grounds existed.  The reasons which the ET provided for its conclusion that justification for the discriminatory impact of pay protection was made out were cogent and unobjectionable and reflected the evidence they had heard.

[24]      The EAT had erred in law in stating (para 183) that the ET had found that the aims of the employer “were to provide a soft landing for bonus earners, and to avoid being unable to make competitive tenders”.  What the ET had found to be the aims were stated in para 890:

“In the Tribunal's judgment, the [appellant’s] principal objective in bringing in new pay arrangements was to take out of the payment system whatever  unfairness as well as unlawful discrimination that existed.  That objective was of high importance to the [appellant].  Further importance attached to that objective because it allowed the [appellant] to fulfil its obligations under the national Single Status agreement.  A subsidiary objective was to achieve its principal objective without placing itself in a position in which its in-house workforce could not compete with private sector contractors for work across a broad range of the [appellant’s] activities. In the Tribunal's judgment, they are legitimate objectives.”

 

The ET concluded that the aims of the scheme, which it identified at para 890, were legitimate aims, and met the test of proportionality.  The ET found that it was legitimate for the appellant to seek to take out of the pre WPBR payment system whatever unfairness existed as well as to put right unlawful discrimination. Once that legitimate aim was recognised and accepted, the ET was entitled to and did find that the indirect discrimination arising from pay protection could be justified as being a proportionate means of achieving that aim, and that it was justified on the facts. The "subsidiary objective" of retaining competitiveness of the in-house workforce (mentioned at para. 890) was a recognition of the "needs of the business", which is an aspect of proportionality that a tribunal has to take into account: Hardy & Hansons plc v Lax [2005J ICR 1565, para 32, per Pill LJ.  The EAT’s conclusion is flawed because of the misidentification of the principal aim that was being pursued by the employer and the EAT’s mistaken belief that pay protection was principally concerned with protecting bonus earners.

[25]      The question whether the employer had established an objective justification was one for the ET, whose findings in this regard should have been respected by the EAT: see Bury.  The ET required to determine whether or not the rule applied by council to determine detriment was objectively justified.  It is not the difference in pay but the rule which brought it about which required to be justified.  The rule requires a comparison with pre- and post WPBR contractual earnings.  In the absence of a finding or concession, prior to the introduction of the WPBR, that the claimants were entitled to the bonus payments, the claimants had no entitlement to the benefit of the equality clause arising under the Equal Pay Act 1970. The JES had no retrospective effect.  In describing the point at issue in para 183 as being:

why should those who have been discriminated against and therefore underpaid, perhaps for years, not enjoy the same payments?”

 

the EAT wrongly took the JES to have retrospective effect, assuming that the claimants had an established claim for equal pay for a period prior to the WPBR.  This case concerns the “taint of discrimination”, it is not a case of pre-WPBR contractual entitlement.  Their view that there was a pre WPBR breach of the equality clause seems to have been one of the factors which led to their decision that there was no objective justification.

[26]      The ET, at paras 898 and 899, considered whether the appellant might have adopted a differently structured PPS: declining to offer protection to former bonus-earners whilst offering it to those who lost out for reasons unconnected with a bonus would have carried a risk of industrial strife.  The EAT had failed to give any or sufficient weight to these considerations, which justified not structuring transitional payments in ways that would have lessened or eliminated their discriminatory effect.  The EAT had ignored or failed to take these into consideration.  The decision in Bury shows that even if there has been past discrimination, pay arrangements which continue that can be justified by cogent and serious reasons.  In Naeem v Secretary of State for Justice [2017] UKSC 27, the court stated (para 47):

“… we are here concerned with a system which is in transition.  The question was not whether the original pay scheme could be justified but whether the steps being taken to move towards the new system were proportionate.  Where part of the aim is to move towards a system which will reduce or even eliminate the disadvantage suffered by a group sharing a protected characteristic, it is necessary to consider whether there were other ways of proceeding which would eliminate or reduce the disadvantage more quickly.  Otherwise it cannot be said that the means used are ‘no more than necessary’ to meet the employer’s need for an orderly transition.  This is a particular and perhaps unusual category of case. … Where alternative means are suggested or are obvious, it is incumbent upon the Tribunal to consider them.  But this is a question of fact, not of law, and if it was not fully explored before the Employment Tribunal it is not for the EAT or this Court to do so.”

 

This, too, was a system in transition, and it was for the Tribunal to consider and decide upon any alternative means which might arise.  If the employer is faced with a payment system which involves indirect discrimination and is trying to improve that, it is a factor to be borne in mind: it is easier to explain a disadvantage which is essentially transient.

[27]      The circumstances were similar to those which existed in Bainbridge No 2 where the court, describing the history said (para 106):

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

 

However, the case could be distinguished on its facts, because in Bainbridge there had been an earlier, established or conceded equal pay case, making it a stronger case than the present.

[28]      The employer’s knowledge of any prior discrimination will also be relevant: Bainbridge para 133:

“… where the old indirect discrimination has been recognised and attempts are being made to correct it for the future, the employer will have great difficulty in justifying the continuation of any discriminatory element ...  Where an employer is reorganising his pay structures and there is no reason to think that the old arrangements were directly or indirectly discriminatory, he will be entitled to bring in the new arrangements by transitional provisions.  And, if it should later transpire that the old arrangements had been indirectly discriminatory and that the new arrangements are tainted by that historic discrimination, it will be easier for him to justify that discrimination by reference to his other reasons for wanting to reorganise the structures.  There will, of course, be many gradations of knowledge between, on the one hand, knowing that the old arrangements were and the new ones will still be discriminatory and, on the other hand, having no reason to think that they might have been.  In such intermediate positions, the employer's knowledge of the circumstances will be relevant to the issue of justification.”

 

Here the employer was fixed only with “constructive knowledge that its bonus schemes could not be justified at the time it took its decisions on the pay protection rules”; that is not the same as facing equal pay claims which were bound to succeed.

[29]      In relation to the aim “to avoid being unable to make competitive tenders” it was not necessary for the employers to calibrate the cost in order for this to be a legitimate aim.  The EAT had failed to consider properly the ET’s decision on the second aim.      At para 179, the EAT concluded:

“179.    We have decided that the reasoning of the employment tribunal does not accord with the law as set out in the cases of Bainbridge and Bury.  The ET found as a fact that the employer did not consider extending protection because it regarded the women as ‘gainers’.  It was interested only in protecting the pay of the ‘losers’.  We do not find that the respondent led evidence from which a legitimate aim could be found; and no proper consideration of proportionality of the scheme was made by the ET.”

 

That was a perverse finding, equivalent to saying that because the ET found that the appellant had not considered extending the scheme to the women there was no evidence from which either a legitimate aim or a decision on proportionality could follow.  It is elevating evidence of such a consideration to a requirement which must be met before a finding of objective justification could be made.

 

Submissions for the GMB claimants
[30]      It was accepted that indirect discrimination may be objectively justified, but to discharge the burden of doing so, the employer requires to provide strong and cogent reasons (Bury, para 57).  However,

“where the old indirect discrimination has been recognised and attempts are being made to correct it for the future, the employer will have great difficulty in justifying the continuation of any discriminatory element.” (Bainbridge, para 133)

 

It was accepted that there was a scale of knowledge from full awareness at one end, to having no reason to suspect discrimination at the other.  However, the appellant was fixed with constructive knowledge and were nowhere near the lower end of that scale.

[31]      It was not a matter of material distinction that in Bainbridge some claims based on discrimination prior to the introduction of the new arrangements had either been established or conceded.  As a matter of fact the women had been doing jobs with like work or work of equal value, and were being paid less than their predominantly male counterparts: the claim was there, it simply had not been established by evidence.  This was not a system “in transition” as described in Naeem: these arrangement might have been time-limited, but the system had already changed.

[32]      The legitimate aim to which the appellant’s actions require to be a proportionate and reasonable response, has to be, in the circumstances of this case, one which involves not paying the differential to green circled employees.  The approach of the ET had missed the point.  The question was not whether the paying of transitional payments to protect the income of red-circled employees was a proportionate means to a legitimate end.  The question was whether the non-payment of transitional payments to green-circled employees during the period of protection was proportionate, and whether it was acceptable for the pay protection arrangements to perpetuate a pay differential between employees whose work had been rated as equivalent.

[33]      At para 890, the Tribunal stated that the principal objective in bringing in new pay arrangements was to take out of the payment system whatever unfairness as well as unlawful discrimination that existed.  However, that would be an objective relating to bringing in the new system – it is not the objective of bringing in the transitional payments.  Making the payments would not prevent them bringing in a new payment structure.  The ET essentially addressed the legitimate aim as being to introduce the WPBR: that was the wrong focus, and as a result addressed the wrong issues in respect of proportionality.

[34]      The Tribunal went on to say:

“891.    An attendant consequence of a large-scale job evaluation, especially one bringing together a large diverse workforce whose work had never previously been rated under a single job evaluation is that some jobs will emerge from the evaluation at a lower level in the pay hierarchy than had previously enjoyed.  Mr Kirby, the senior Unison full-time official in Scotland, expected those who would otherwise face an immediate reduction in earnings on implementation of WPBR to be protected to some extent.  The expression ‘soft landing’ was used during the hearing.  That sums up the concept: you will fall, but with not too great a bump.”

 

An aim of providing a soft landing does not engage with the point at issue, because providing transitional payments to the claimants would not preclude the provision of a soft landing for the others, unless there was a justification based on cost.  The failure to make those payments requires objective justification because the arrangement is tainted by historical sex discrimination.  There was no evidence that the aim of not being uncompetitive was met by not making the payments to the claimants.

[35]      The appellant had not even considered the position of female workers who had not been in receipt of bonus and who should have had equal pay with men who were in receipt of bonus.  

[36]      The appellant had responded to the claims by saying that:

“... its payment of pay protection was a proportionate means to a legitimate end (the Introduction of a Job evaluation study in compliance with its obligations in the Red Book).”

 

That had no bearing on the decision not to make the additional payments to the claimants.

[37]      At the EAT (para 135), counsel for the appellant had submitted that the ET’s findings were that the legitimate aims had been:

(a)        To fulfil obligations under single status agreement

(b)        To take out unfairness

(c)        Not to place itself so as to be unable to compete with private sector

(d)        To produce a soft landing for employees who would lose money.

The first two of these would not have been prevented by making the additional payments to the appellant, and (c) is mere assertion in the absence of at least some information on costs to enable a tribunal to reach a finding that this was a relevant factor.

[38]      The EAT was correct in saying (para 177) that there was no evidence to show even an approximate cost of extending the transitional payments to green-circled employees.  The reasons given by the ET in paras 900 – 903 on proportionality relate in part to the justification for protecting the pay of red-circled employees and were made in a vacuum when not set against the costs of matching red- and green-circled employees’ pay for the three year period in question.

[39]      A “soft landing” was nothing to the point when it came to considering the position of green-circled employees.  In the absence of costings, there was no basis upon which the ET could come to a view on the effect including the green-circled employees would have on the ability of the in-house workforce to compete with external contractors.

[40]      The reasons set out in paragraphs 898 and 899 relating to a “differently structured pay protection scheme” miss the point, at least in relation to the GMB claimants.  The GMB claimants seek pay equal with that of male comparators whose work has been rated as equivalent to theirs for the three year period in question.  In the absence of evidence of the financial impact of paying these claimants accordingly, the potential answers to the rhetorical questions in paragraph 898 are of no assistance in reaching a conclusion on proportionality.  The risk of industrial action, such as it was, was attendant on not protecting the pay of red-circled employees.  The granting of that protection had never been in issue.

[41]      While being unable to make competitive tenders may have been a legitimate consideration, the financial consequences of including or excluding green-circled employees from the pay protection scheme was never demonstrated to have had any effect on it.  There was no evidence as to the financial impact of extending pay protection to the green-circled employees.  A case of unaffordability could not be proved by mere assertion (Bury, para 78).

[42]      Without properly identifying the measure which had to be justified, or any legitimate aim to which such a measure was addressed, the ET could not properly measure proportionality.  This can be seen from the reasons which they gave.  The first reason was that an immediate effect of the WPBR was to reduce the discriminatory effect of the former bonus payments.  However, it is not a good argument simply to say that the degree of discrimination is less than it might have been.  The second reason was that two-thirds of those in detriment had not previously been in receipt of bonuses, a factor which the ET weighed against the benefits of one rule treating all those in detriment alike.  These are not issues which can be balanced against each other: there may be benefit in treating alike all those in detriment, but that takes the appellant nowhere in respect of reducing or eliminating discrimination.  It ignores those who were not in detriment but were nevertheless adversely affected by the rule’s perpetuation of former discrimination.  What the ET did was to confine their consideration to the effect on green circled employees, and to ignore red circled ones.  If the appellant had the will to eliminate discrimination entirely it could do so.

[43]      The Tribunal’s third reason was that the payments were time limited.  This was allied to their final reason, namely that through the introduction of the EDC the appellant strove to eliminate detriment.  Yet again, the ET considered only one side of the equation – the red circled employees.  The EDC was a benefit available only to those employees.

[44]      The situation which existed here was similar to that which had existed in Bury where the court noted (para 54) that, when provided in response to loss of unjustifiable bonus:

“.....‘pay protection’ is in fact simply a continuation of the previous discrimination, albeit on a diminishing basis, and it is hard to see why the claimants should not be entitled to whatever their comparators receive.”

 

The court went on to observed that, in such circumstances, (para 57):

“... employers will not be able to justify withholding pay protection from claimants without advancing cogent and specific reasons for what is in effect a continuation (albeit limited) of past discrimination.”

 

As in the present case, no evidence was put before the tribunal seeking to quantify the cost of extending pay protection to the claimants or, explaining why such a cost was unaffordable.  The evidence was simply that it was something which the council could “ill afford”.  The court considered (paras 77 & 78) that:

“It would clearly have been possible ... to produce illustrative calculations, on different bases, which would have enabled the tribunal to assess the scale of the costs in the result ...  In our judgment, both as a matter of principle and in accordance with the trend of the observations in Bainbridge, a local authority cannot prove unaffordability by mere assertion.  A case of justification on this basis can only be proved by adducing sufficiently detailed evidence, both of the costs themselves and of the financial context, to enable the tribunal to reach an informed view.  As we observed in Pulham, that need not involve an exhaustive review of the council’s finances, but the tribunal must be put in a position where it can assess the broad picture.  That was not done here.”

 

The position in the present case is the same.  The exercise of proportionality was no more than saying it could have been worse: there was no justification based on cost or otherwise for not eliminating the discrimination from day one.

 

Submissions for HBJ and Unison Claimants
[45]      The submissions made on behalf of the GMB claimants were adopted.  In addition senior counsel for HBJ claimants suggested that the appellant’s approach before the Tribunals had coloured the way this issue was considered.  The appellant’s primary position had been that there was no discrimination and the justification argument was a fall-back position.  The argument was that:

“Pay protection here was only implemented for employees who were red circled.  The Council would if needed seek to justify not giving protection to groups not subject to detriment on grounds of cost plus potential industrial relations problems.

The Council did not actively consider extending pay protection to any other groups or to making a payment of a sum equivalent to pay protection to green circled employees.”

 

[46]      The claimants always accepted that a cost plus promoting good industrial relations argument could be a relevant one.  However, both these issues were rejected by the ET.  It makes no sense to say that one had to avoid problems with unions by not paying more money to green circled employees.  Since both grounds advanced for the employers were rejected, one should look with some scepticism at the conclusion by the ET that one can tease out objective justification in matters which were never squarely placed before it at the beginning.  This is what the ET did in paras 900-903 which contain the totality of its reasoning.  The first reason given is a red herring, amounting to no more than saying not everything the appellants did was discriminatory.  As to the time limitation, employers were given 5 years after the introduction of the1970 Act to eliminate discrimination.  There is nothing in logic which allows a further period of deferment of equal pay.  In the document introducing EDC, the appellant clearly stated that:

“The Council is committed to assisting all employees with protected status who are in a detrimental position following the implementation of the Workforce Pay and Benefits review to develop the skills that will provide them with the opportunity to move to a higher level post, thus allowing maintenance of their earnings in the long-term.”

 

This is not “striving to eliminate discrimination”, it is fast-tracking certain employees rather than others to a better post.

[47]      The reasons adopted by the ET as justifying pay protection simply do not engage with this aspect at all; they do not explain why the differential treatment that pre-existed WPBR should be continued post 1st April 2006.  They simply explain, irrelevantly, that the former pay discrimination was not universal (thus this was a case of indirect not direct discrimination) and that its effects continued for a certain length of time rather than a longer length.

 

Analysis and decision

[48]      A considerable part of the submissions for the appellant was taken up in seeking to persuade us that the case of Bainbridge could be distinguished materially on its facts on the basis that it concerned claimants whose claims for equal pay relating to a period prior to the introduction of the Single Status Agreement (“SSA”), had either been conceded or established by an earlier JES or Tribunal finding.  We are unable to accept that submission.  Bainbridge concerned claims of several different types.  However, it is clear that some related to those who were in a similar position to the claimants in the present case and whose claim related only to post-SSA arrangements (no distinction was made according to whether pre-SSA discrimination had been “proven or conceded or alleged” (paras 17 and 69)).  The question of whether the claimants had established or maintained equal pay claims prior to the introduction of new arrangements is relevant only to the question of the employer’s knowledge and motivation in the context of objective justification (Bainbridge, paras 112 to 113; 122; 133 to 135; 144).  An employer with full knowledge of the discriminatory effect which might be perpetuated by new agreements, would be in a more difficult situation relating to justification than one who had no such knowledge, as noted in para 133 of Bainbridge, noted above. To that extent, the fact that a successful claim had been made under the old arrangements, will be relevant. 

[49]      The issue is of little moment in the present case, because the ET found that: (a) the former payments of bonus had given rise to discrimination (para 883); and (b) that the appellant was fixed with constructive knowledge that the bonus schemes could not be justified at the time it took its decision on the PPS (para 885).This reflected a concession on the part of the appellant, which was in the following terms (ET, para 816):

“(1)      The [appellant] had known for ‘some considerable time’ prior to 2005 that it potentially had an exposure to equal pay liabilities;

(2)        The same equal pay issues that the [appellant] was facing were being experienced throughout local government and beyond;

(3)        The pre-WPBR pay and grading structure was convoluted, old-fashioned and lacked transparency;

(4)        There were pockets of indirect pay discrimination within the pre-WPBR pay and grading structure; and

(5)        The [appellant] will make no positive case that there was no discrimination in the pay of seven sample claimants and comparators or that any GMF defences would have succeeded in their cases.”

 

Furthermore, whilst accepting that this question of knowledge was relevant to the question of justification, at para 159, the court in Bainbridge observed that too much should not turn on the distinction between actual knowledge and suspicion.  In the circumstances, we consider that the position of the claimants in the present case is directly analogous to those claimants referred to inter alia at paras 17 and 69 of Bainbridge

[50]      We do not accept the submission that the EAT simply proceeded on the assumption that the claimants had an established pre-WPBR equal pay claim.  To suggest that is to take the EAT’s reference to past discrimination, and prior under-payment, out of context.  We do not think the EAT was doing any more than reflecting the findings of the ET at paras 881 and 883, noted above; and the observations in Bainbridge (para 106) that the reason for the continuing pay differential was causally related to the historic discrimination.

[51]      We do not accept the submission that the EAT fell into the error of thinking that the PPS as a whole was principally concerned with protecting bonus earners.  In referring to giving a “soft landing” to bonus earners, the EAT was merely addressing the issue which was the focus of this part of the appeal.  It is clear from paras 156, 157 and 179 that the EAT was well aware that the PPS extended beyond only those in detriment through loss of bonus.

[52]      A further issue in dispute before us was what it was in the present case which required to be objectively justified.  Senior counsel for the appellant submitted that it was the rule contained within the WPBR, that protected pay was only given to those in detriment, a factor to be determined by reference to contractual earnings, which required to be justified.  Counsel for the respondents submitted that what required to be justified was the decision not to extend protection to the green-circled claimants.  We are satisfied that, on this matter, the respondents’ submissions are correct.  What is to be justified is not the WPBR, or even the PPS as a whole, but the reasons for excluding the claimants from the PPS.  That was clearly the approach taken in Bainbridge (paras 97; 105; 107; 117; and 153) and, in our view, it is correct.  As the matter was put by one of the Employment Tribunals in the Bainbridge case:

“The matter which had to be justified was not the introduction of a Pay Protection Scheme but the exclusion of the women from it.” (para 97)

 

This approach was endorsed by the Court of Appeal, which noted that:

“The employer had to justify its reason for excluding the women from Pay Protection on objective ... grounds.”  (para 107)

 

Under reference to the other Employment Tribunal in Bainbridge, the court noted that:

“The Appeal Tribunal correctly reminded itself that it was not the Pay Protection Scheme itself which had to be justified but the exclusion of the women claimants from it.”  (para 153)

 

[53]      At para 888, the ET referred to evidence that the respondents’ objective was “to produce a modern pay structure that eliminated a range of allowances of one kind or another that had found their way into the respondents’ pay arrangements.”  The ET concluded (para 890) that:

“the [appellant’s] principal objective in bringing in new pay arrangements was to take out of the payment system whatever unfairness, as well as unlawful discrimination that existed ...  A subsidiary objective was to achieve its principal objective without placing itself in a position in which its in-house workforce could not compete with private sector contractors for work across a broad range of the [appellant’s] activities.”

 

The ET stated that it considered these to be legitimate objectives.

[54]      We accept that the first of these would constitute a legitimate aim for introducing the WPBR as a whole.  In relation to the PPS, the EAT considered that what the ET’s decision reflected was that the legitimate aim thereof was to provide a soft landing for those in detriment.  That is a fair reading of the ET’s conclusion at para 895 that “To put it simply, the [appellant] was interested in protecting the pay of the “losers”, that is those who would otherwise see an immediate cash reduction in their pay packets, and not add to the pay of those perceived as “gainers”.”  This reflected the submission made and recorded at para 786, that the basic idea behind protection was to give those who lose out a soft landing.  As the EAT correctly noted, this too, is a legitimate aim, and the subsidiary aim of seeking to avoid being uncompetitive can also constitute a legitimate aim.  

[55]      However, the difficulty which arises in respect of the approach taken by the ET is that, whether the legitimate aim be identified as relating to the WPBR as a whole, or the PPS, or even one aspect of the PPS, the ET did not focus on the issue which required to be justified.  The question was not whether these aims might be legitimate ones; rather the question was whether the exclusion of the claimants was a reasonably necessary means of achieving these aims.  By failing to address that fundamental question, and focusing instead on whether affording payment protection to those in detriment could be justified, the ET fell into error in a way which vitiated its judgement on proportionality.  The ET required to carry out a critical assessment of whether the means of excluding the claimants was reasonably necessary to meet a legitimate aim, and to state reasons which reflected such an assessment.  The reasons advanced in justification must be balanced against the discriminatory effect of the means in question: addressing the question whether it was necessary to afford pay protection to those in detriment failed to engage with this balancing exercise.  The ET required to address the impact on those excluded from the PPS, not the benefit to those included. The ET’s approach was effectively one-sided. 

[56]      The ET’s reasons on proportionality, contained between paras 901 and 903, do not carry out that balancing exercise.  We agree with the submissions of senior counsel for the claimants that the issue was addressed from the question whether it was reasonably necessary to offer transitional payments to those in detriment, rather than from the point of view of the necessity for exclusion of the claimants.  The fact that some bonus earners did not fall into protection at all, might have meant that a smaller number of men were advantaged; it had no effect on the cohort of women who were disadvantaged. 

[57]      The fact that some of those in detriment were there as a result of the loss of discriminatory bonus payments does not provide a reason for not paying the claimants, whose work was equally rated, the same amount.  The virtue of treating as alike all those in detriment fails entirely to engage with the position of the claimants.  The issue is not whether all red circled employees should be treated alike; the question is whether treating differently red circled employees and green circled employees whose work has been rated as equivalent can be justified.

[58]      That a PPS is time-limited may be a relevant factor, at least when taken along with other factors which might provide cogent justification, but in our view it is one of very little weight. (As to which, see Bainbridge paras 175-177).  In any event, the ET’s conclusions that any continuing effect accruing from the payment of formerly discriminatory bonuses would leave the system after 3 years is a highly debatable one, when one takes into account assimilation and EDC.  The stated intention of the latter is to achieve a long-term and permanent improvement and earnings for those employees given this advantage.  This point is also destructive of the ET’s conclusion that the application of the EDC was designed to eliminate the duration and effect of the transitional payments.  The fact that the transitional allowance was time-limited is of little importance, unless it is addressed in a context which is allied to issues which properly address the rationale for excluding the claimants from pay protection.  Any risk of industrial strife would have arisen from failing to give PPS to all those in detriment (para 899) but there was no evidence to suggest any such risk would have arisen from extending the payments to the claimants. The reasons given by the ET simply do not engage with the central question, and the EAT were entitled to conclude that this was so.

[59]      The appellant gave no consideration at all to the effect on the claimants of  giving protection to those formerly in receipt of bonuses, far less did they consider extending that protection to the claimants. It is not the case that the EAT elevated this – a relevant consideration – to the status of a requirement before justification could be shown.  What the EAT said was that the reasoning of the ET did not accord with the approach taken in Bainbridge and Bury.  Accepting entirely (as did the EAT) that a justification may be made out ex post facto, the fact that a matter was given no consideration at the time of a decision is highly relevant to consideration of whether that decision can be justified and considered proportionate.  We bear in mind the observations in O’Brien v Ministry of Justice at para 48 that:

“... in this as in any other human rights context, this court is likely to treat with greater respect a justification for a policy which was carefully thought through by reference to the relevant principles at the time when it was adopted … it is difficult for the ministry to justify the proportionality of the means chosen to carry out their aims if they did not conduct the exercise of examining the alternatives or gather the necessary evidence to inform the choice at that time.”

 

[60]      There was no evidence before the ET that the appellant had even considered the position of the claimants.  No consideration was given to the possibility of offering pay protection to the claimants and no material placed before the ET to attempt a justification of the exclusion on the basis of cost was advanced (not surprisingly since the issue had not even been considered).  As to the subsidiary reason of avoiding becoming uncompetitive, it appears that little in the way of evidence or submissions was advanced to the tribunal in support of this point.  In so far as it was addressed, it appears to be out of concern for losing the skills and experience of the employees who were granted pay protection (para 788).  Again, that is directed towards the basis for giving pay protection to those in detriment.  As the EAT noted, this might have provided objective justification if it could be shown on the basis of evidence that to extend the pay protection to the claimants would have rendered the appellant uncompetitive across the range of its operations.  In suggesting that such an assertion could have been costed and argued, we do not think that the EAT was suggesting that any particularly detailed analysis of finances might have been required.  At the very least, however, consideration could have been given to the likely number of claimants who would have had to be included in the scheme; the approximate financial cost of doing so;  any “knock on” effect this might have had;  and the effect that might be expected to have on the way in which the appellants required to conduct its business and so on.  As was observed in Bury, at para 78:

“... a local authority cannot prove unaffordability by mere assertion.  A case of justification on this basis can only be proved by adducing sufficiently detailed evidence, both of the costs themselves and of the financial context, to enable the Tribunal to reach an informed view ...  That need not involve an exhaustive review of the Council’s finances, but the Tribunal must be put in a position where it can assess the broad picture.”

 

[61]      Those observations are equally relevant to an argument based on competitiveness.  The ET’s consideration (para 898) of the potential knock-on effects of granting pay protection to the claimants appears to be entirely speculative, without foundation in either evidence or submission.

[62]      The EAT considered the question of assimilation (para 185): however, senior counsel for the appellant accepted that the issue of assimilation was intricately bound up with the primary issue: if the primary argument failed, so would the assimilation argument, and vice versa.  We will therefore say no more about assimilation which was not the subject of argument before us.

[63]      For the foregoing reasons, the appeal will be refused.