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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Walker v Co-Operative Group Ltd & Anor [2020] EWCA Civ 1075 (14 August 2020) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2020/1075.html Cite as: [2020] WLR(D) 476, [2020] ICR 1450, [2020] IRLR 896, [2020] EWCA Civ 1075 |
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[New search] [Printable PDF version] [View ICLR summary: [2020] WLR(D) 476] [Buy ICLR report: [2020] ICR 1450] [Help]
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HON LORD SUMMERS
UKEAT/0087/19, [2019] UKEAT 0087_19_2509
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE MALES
and
LORD JUSTICE PHILLIPS
____________________
| SAMANTHA WALKER |
Appellant |
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| - and - |
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| (1)CO-OPERATIVE GROUP LIMITED (2) RICHARD PENNYCOOK |
Respondent |
____________________
Andrew Burns QC and Alice Carse (instructed by Addleshaw Goddard LLP) for the Respondents
Hearing date: 23 July 2020
____________________
Crown Copyright ©
Lord Justice Bean:
a) Equal pay;
b) "Ordinary" unfair dismissal;
c) Automatic unfair dismissal within s 103A of the Employment Rights Act ("ERA") 1996 (relating to protected disclosures);
d) Detriments on the grounds of protected disclosures within s 47B of the ERA 1996;
e) Victimisation because of protected disclosures: s 27 of the Equality Act ("EA") 2010;
f) Direct sex discrimination;
g) Indirect sex discrimination;
h) Associative indirect disability discrimination: s 19 of the EA 2010;
i) Associative discrimination arising from disability: s 15 of the EA 2010.
1. The Claimant was unfairly dismissed by the first respondent (this was "ordinary" unfair dismissal under s 98 of the ERA 1996).
2. The Claimant's work was, from a date to be determined, equal to that of her named comparators, having been rated as equivalent in a job evaluation study ("JES"). The defence of material factors failed.
3. The Respondents directly discriminated against the Claimant on the ground of sex in relation to the decision to grade the Claimant's performance as only "partially achieved" for 2015 without an adequate year end appraisal.
4. All other claims were dismissed against both Respondents.
The facts
"The executive agenda was said to be possibly the most complex one facing a large business in the country at that time involving fixing a business on the verge of financial collapse, turning around the food business after years of neglect, re-forming a membership system that was faltering from a fundamental disconnect, effecting a major governance change, rediscovering the purpose of the mutual sector's largest contributor, redefining the social goals agenda to create a forceful campaigning organisation, balancing the highly sensitive political agenda across all of Westminster, removing the taint of scandal and refreshing an iconic national brand. The objectives of the remuneration proposals were:
- Retention of continuing executives through the transformation period (the next 3-4 years);
- Reflection of increased roles and responsibilities in the remuneration packages where appropriate;
- Standardisation of the packages and terms for new executives;
- Bringing consistency to executive packages and contractual terms."
a) Vital roles –the Co-op saw AA and NF as vital to the immediate survival of the Co-op. They were part of the core team who with RP refinanced the Bank and reformed governance so that the Co-op was not regarded as ungovernable and bound to fail. The Claimant and a strong HR function were important but not regarded as vital, as was AA and NF's core work.
b) Executive experience –Remco considered that both the Claimant and Paula Kerrigan were newly promoted to the Executive and unproven at that level, unlike everyone else on the team at that time. The proposed increase from £215,000 to £500,000 seemed excessive for individuals who had no experience at executive level. Remco did not feel there was any justification for more than doubling their salaries in those circumstances.
c) Flight risk –it was crucial in the eye of the storm to maintain stability and the top team of people and support the interim CEO. Euan Sutherland had recruited NF as his Chief of Staff and AA as his corporate lawyer, but then left abruptly. There was an understandable concern that they might consider following him out. Had either of them followed him then that could have brought down the Co-op.
d) Market forces –AA was on a higher pay package as he was a top corporate lawyer with particular expertise in the Co-op Bank separation and was paid at the high market rate for top general counsel. This exceeds the market rate for CHROs.
"We have spoken over the last three months about the changes that we want to make to the HR function. As indicated to you and for the reasons that I explained, we are now at the point where those changes have to be implemented and so I am writing, formally, to give you 12 months' notice to terminate your employment with the Group, as required under your service agreement with the Group. Unless you accept a new role with the Group, your employment will terminate on 2 April 2017 when your notice expires."
"In our judgment the reason for the dismissal was that set out in Mr Pennycook's 1 April 2016 letter, to the effect that the first respondent needed to make changes to the HR function and they were now at the point where the changes had to be implemented and so she was formally given 12 months' notice to terminate employment as required under the service agreement, but with the opportunity for the employment to continue after the end of the period of notice should the claimant accept a new role on different terms within the Group."
The equal pay provisions of the EA 2010
"64. Relevant types of work
(1) Sections 66 to 70 apply where—
(a) a person (A) is employed on work that is equal to the work that a comparator of the opposite sex (B) does;…….
65. Equal work
(1) For the purposes of this Chapter, A's work is equal to that of B if it is—
(a) like B's work,
(b) rated as equivalent to B's work, or
(c) of equal value to B's work.
…………..
(4) A's work is rated as equivalent to B's work if a job evaluation study—
(a) gives an equal value to A's job and B's job in terms of the demands made on a worker……
(6) A's work is of equal value to B's work if it is—
(a) neither like B's work nor rated as equivalent to B's work, but
(b) nevertheless equal to B's work in terms of the demands made on A by reference to factors such as effort, skill and decision-making.
66. Sex equality clause
(1) If the terms of A's work do not (by whatever means) include a sex equality clause, they are to be treated as including one.
(2) A sex equality clause is a provision that has the following effect—
(a) if a term of A's is less favourable to A than a corresponding term of B's is to B, A's term is modified so as not to be less favourable;
(b) if A does not have a term which corresponds to a term of B's that benefits B, A's terms are modified so as to include such a term……
…
69. Defence of material factor
(1) The sex equality clause in A's terms has no effect in relation to a difference between A's terms and B's terms if the responsible person shows that the difference is because of a material factor reliance on which—
(a) does not involve treating A less favourably because of A's sex than the responsible person treats B, and
(b) if the factor is within subsection (2), is a proportionate means of achieving a legitimate aim.
(2) A factor is within this subsection if A shows that, as a result of the factor, A and persons of the same sex doing work equal to A's are put at a particular disadvantage when compared with persons of the opposite sex doing work equal to A's.
(3) For the purposes of subsection (1), the long-term objective of reducing inequality between men's and women's terms of work is always to be regarded as a legitimate aim……..
(6) For the purposes of this section, a factor is not material unless it is a material difference between A's case and B's."
The equal pay claim in the ET and EAT
"315. The Tribunal is prepared to accept that when the Remuneration Committee fixed the salaries of the claimant and her comparators in February and March 2014 the four material factors referred to above applied to the claimant and to her comparators. Those factors do not seem to the Tribunal to be in any way related to sex. There is no reason why the roles fulfilled by any of the relevant people could not have been fulfilled by people of the other gender.
316. Having accepted that there were material factors justifying the pay differentials between the claimant and her comparators at the time of their salary increases in February and March 2014, we have also found that by February 2015 their work had been rated by a job evaluation study with the role performed by the claimant scoring higher than the roles of her comparators.
317. We are aware that the important roles carried out by the claimant's comparators in connection with the saving of the Co-op were reducing in importance up to the time of the salaries being fixed and thereafter. We are aware that what was referred to as the rescue phase finished at the end of the third quarter of 2014 and that the recovery phase started from October 2014. At some stage between February 2014 and February 2015 in our judgment the importance to the respondent of the roles carried out by the claimant's comparators declined relative to the importance to the respondent of the work being done by the claimant, particularly in respect of the recovery phase. In our judgment the value of the claimant's job had on the basis of the job evaluation study, albeit by slim margins, overtaken those of her comparators by the time of the study.
318. In these circumstances we find that the historical explanations for the pay differential given at the time the pay was set were no longer material at the time of the Hay job evaluation study and that value of the claimant's work was equal to that of her comparators.
319. The point at which the claimant gained the right to equal pay with her comparators is a matter that falls to be determined as part of a remedy hearing as set out in the List of Issues."
The direct discrimination claim in the ET and EAT
"296. In our judgment the reason for the dismissal was that set out in Mr Pennycook's 1 April 2016 letter, to the effect that the first respondent needed to make changes to the HR function and they were now at the point where the changes had to be implemented and so she was formally given 12 months' notice to terminate employment as required under the service agreement, but with the opportunity for the employment to continue after the end of the period of notice should the claimant accept a new role on different terms within the Group.
297. This is consistent with the view expressed by Mr Pennycook as long ago as October 2015 when he proposed to the Remuneration Committee making an immediate change to have the claimant report in to the COO to allow her to continue to pursue the operational HR agenda whilst Pippa Wicks will pick up Exec level HR and the interactions with the Remuneration Committee. The changes to the HR function following the giving of notice to the claimant were consistent with the stated intention.
298. We find that the reasons set out in writing by the respondent when giving notice to the claimant under her service agreement, which were the only reasons for dismissal given to the claimant in the absence of any formal process, were the reasons for the dismissal and that they amounted to substantial reasons justifying the termination of the employment of the claimant holding the CHRO position that she held."
"368. The fifth matter is the decision to give the claimant notice on 1 April 2016. In this regard the claimant compares herself with a hypothetical and/or Messrs Folland, Asher, Bulmer and Murrells. We know that Messrs Folland and Asher were given notice where Messrs Bulmer and Murrells were not. The circumstances in which Messrs Folland and Asher left were different from the claimant because when they were given notice it was with a view to them leaving, whereas with respect to the claimant contractual notice was given with the possibility of her, during the notice period, agreeing a new role to take effect at the end of the period of notice. As things transpired there was no such agreement.
369. We remind ourselves of the letter of notice referred to above at paragraph 228 to the effect that the company wanted to make changes to the HR function and they needed to be implemented. On this basis we are satisfied that the claimant and/or the hypothetical comparator holding the CHRO position would both have been given contractual notice to terminate their roles together with an invitation to find a new role during the notice period failing which they would leave at the end of it. We do not therefore conclude that the giving of notice was an act of direct discrimination against the claimant because of her sex."
"24. I am not satisfied that the Respondent have [sic.] demonstrated any error of law in connection with the ET's decision that the notice of termination and the termination of employment were not acts of direct sex discrimination. In my view the ET was entitled to conclude that the Appellants' reason for dismissal was their wish to make changes in its HR function (paras. 296-298; 369). While there is a competing narrative, it is for the ET to evaluate the reasons for the notice and subsequent termination. I am unable to conclude that the ET's view was perverse and note that there was material to support its conclusions; see e.g. the Note of proposed changes in October 2015 (para 297); the dismissal letter (para 228) and Mr Pennycook's note to non-executive directors of October 2015 (paras 175-6). I am satisfied that the conclusion reached was one that was open to the ET; I am further satisfied that no sufficient basis has been laid with which to challenge the ET conclusion."
Grounds of appeal
The parties' submissions: equal pay
The parties' submissions: the direct discrimination appeal
Discussion
The equal pay appeal
"The case was argued on the basis that the 1981 constraints came to an end at the end of that year or of that academic year. In my judgment, therefore, the material difference between the Applicant's case and the case of the comparators evaporated when the financial constraints were removed."[Emphasis added]
"The scheme of the Act is that a rebuttable presumption of sex discrimination arises once the gender-based comparison shows that a woman, doing like work or work rated as equivalent or work of equal value to that of a man, is being paid or treated less favourably than the man. The variation between her contract and the man's contract is presumed to be due to the difference of sex. The burden passes to the employer to show that the explanation for the variation is not tainted with sex. In order to discharge this burden the employer must satisfy the tribunal on several matters. First, that the proffered explanation, or reason, is genuine, and not a sham or pretence. Second, that the less favourable treatment is due to this reason. The factor relied upon must be the cause of the disparity. In this regard, and in this sense, the factor must be a 'material' factor, that is, a significant and relevant factor. Third, that the reason is not 'the difference of sex'. This phrase is apt to embrace any form of sex discrimination, whether direct or indirect. Fourth, that the factor relied upon is or, in a case within section 1(2)(c), may be a 'material' difference, that is, a significant and relevant difference, between the woman's case and the man's case.
When section 1 is thus analysed, it is apparent that an employer who satisfies the third of these requirements is under no obligation to prove a 'good' reason for the pay disparity. In order to fulfil the third requirement he must prove the absence of sex discrimination, direct or indirect. If there is any evidence of sex discrimination, such as evidence that the difference in pay has a disparately adverse impact on women, the employer will be called upon to satisfy the tribunal that the difference in pay is objectively justifiable. But if the employer proves the absence of sex discrimination he is not obliged to justify the pay disparity.
Some of the confusion which has arisen on this point stems from an ambiguity in the expression 'material factor'. A material factor is to be contrasted with an immaterial factor. Following the observations of Lord Keith of Kinkel in Rainey v Greater Glasgow Health Board [1987] AC 224, 235, the accepted synonym for 'material' is 'significant and relevant'. This leaves open the question of what is the yardstick to be used in measuring materiality, or significance and relevance. One possibility is that the factor must be material in a causative sense. The factor relied on must have been the cause of the pay disparity. Another possibility is that the factor must be material in a justificatory sense. The factor must be one which justifies the pay disparity. As already indicated, I prefer the former of these two interpretations. It accords better with the purpose of the Act….."
"To label [an explanation for a difference in pay] as "historical" is not helpful. All causes are, in one sense, historic in that they occur in the past: the real question is whether they have ceased to operate as an explanation for the differential complained of as at the date under consideration."
Thus in the Bowling case an incremental pay scale had been the original cause of the differential in pay between the claimant and her comparators, and it remained the cause at the time of her claim.
The direct discrimination appeal
Conclusion
Lord Justice Males:
Lord Justice Phillips:
UPON hearing Counsel for the Appellant and the Respondents
IT IS ORDERED THAT:
14 August 2020
