Market rates

Armstrong and ors v Newcastle upon Tyne NHS Hospital Trust

To defend an equal pay claim, employers have to show that there is a material factor (or reason) that accounts for the difference in pay, and which has nothing to do with sex. In Armstrong and ors v Newcastle upon Tyne NHS Hospital Trust, the Employment Appeal Tribunal (EAT) said that as the Trust knew and took advantage of the fact that the market rate for domestics was low and that the job was done primarily by women, it could not rely on market forces as a defence to justify removing the bonus from the domestics.

Basic facts

In 1985, the mainly female domestic ancillary workers at Newcastle Royal Victoria Infirmary lost their right to bonus payments when their work was subjected to compulsory competitive tendering (CCT) and the in-house bid won.

The porters’ work was not put out to tender because CCT did not automatically apply to them and the Trust said opposition would be “more voluble”. The porters did not lose their bonus (although new starters after 1998 did).

The Trust argued that it had no option but to remove the bonus to compete in a compulsory competitive tender, and the difference in pay was therefore due to a genuine material factor other than sex.

Various court decisions

The tribunal said (among other things) that the Trust’s justification for the difference in pay was tainted by sex, as did the employment appeal tribunal.

The Court of Appeal (LELR 109, March 2006), however, said that the tribunal’s reasoning was inadequate. It therefore remitted the issue to the tribunal to decide whether the bonus arrangements had a disparate impact on women; if so whether the decision to tender out their work was discriminatory; and if so, whether the Trust had established a valid defence.

The tribunal then reheard the case but decided again that the Trust’s defence was “tainted by sex" because the decision to contract out the work had had a disparate impact on women and that the decision to put the domestic services out to tender was discriminatory. 
It could not therefore be objectively justified.

The Trust appealed yet again.

EAT decision (second time around)

The EAT has now rejected that appeal. It said that the fact that the Trust knew that the market rate for domestics was low because they were mainly women meant that their reason for the difference in pay was tainted by sex discrimination.

It also looked in detail at the decision of the House of Lords in North Yorkshire County Council v Ratcliffe which held that employers could not use the argument that they had to reduce the pay of the dinner ladies to compete in a compulsory competitive tender exercise as a defence against an equal pay claim when they knew that the market rate was low because the job was done by women who need part time work in the middle of the day.

However, the Court of Appeal also said in this case that the fact that a market rate is affected by the gender of people doing certain types of jobs did not necessarily mean that market rates were inherently sex discriminatory. They said “something more” was required to prove discrimination. The EAT decided that “additional element” was “the mental process of individual decision-makers”. In other words, that tribunals also had to consider whether the employer knew and was willing to take advantage of lower market rates for women when they entered the competitive tendering process.

In this case, the EAT said, on the evidence, the tribunal was entitled to conclude that the Trust was aware that competitive tendering would lower the women’s wages and ”were willing” to take advantage of that fact.

The Trust therefore had to objectively justify their decision to remove the bonus from the domestics but keep it for the porters, but the tribunal found that the Trust had not proved any objective justification.