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The bonus scheme had in effect just become part of the basic wage of the male comparators.

This case was brought under the Equal Pay Act 1970. A group of female workers felt they should have been paid the equivalent to their comparators(1), a group of predominantly male refuse collectors. In 1997 Coventry County Council intended to implement a unified pay and conditions programme for all its workers, both white collar and manual, known as "single status". All jobs would have to be evaluated. The Council entered negotiations with the relevant Unions regarding this process in hope of negotiating mutually beneficial terms.

In 2001 a "pay protection" package was introduced to protect those workers who would inevitably have wage reductions. The package protected their current rate for five years. The programme was introduced in anticipation of agreement being reached with the Trade Unions.

In 2005 the Council imposed "single status" on all its employees, despite reaching no agreement with the Unions. Initially the Council were unaware that this would be lawful but acted after being assured it was.

In 2006 the female workers lodged a claim for Equal Pay as they asserted their work was of "equal value"(2) to that of the refuse collectors. The workers also included claims relating to equal pay extending to the period prior to the 2005 implementation of "single status". The Council accepted this, meaning the women would qualify for equal pay.

The Council adopted the "genuine material factor defence" (GMF hereafter) which explained and justified the difference in pay. A GMF must first be held to be material to the difference in pay, i.e. a real contributing factor, and secondly the employer must be able to prove that it is justifiable. For a GMF to be successful it must be clearly unrelated to the sex of the employee.

At the initial Employment Tribunal hearing the council contended that the pay difference was justifiable based on three GMF's

• Firstly that the refuse collectors enjoyed greater pay because of a productivity arrangement that provided bonuses related to performance. This is referred to as the "bonus GMF" in the hearing transcript.
• Secondly that the refuse workers pay was in fact protected at that amount by the payment protection package implemented in 2001. The female workers did not qualify for this. The Employment Appeal Tribunal referred to this as the "pay protection GMF"
• Thirdly the council argued that because the trade unions had been uncooperative and frustrated the negotiations, this acted as a supervening cause. Even where the pay difference was a result of the sex of the employee, the fact that the Union had failed to successfully negotiate had overtaken the initial discrimination and had become the primary factor for the pay difference. This is named the "supervening cause GMF".

The Employment Tribunal, at first instance, dismissed the "supervening cause GMF". The "bonus GMF" was held to be material by the Tribunal, however they felt it was "tainted by sex" and as such unjustifiable. In terms of the "pay protection GMF" the Tribunal relied on the case Middlesbrough City Council v Surtees [2007]. Here it was held that in assessing whether a pay protection scheme should be extended to those entitled to equal pay, the tribunal can look beyond just the facts of the case in deciding whether to extend it. In using this authority the Tribunal felt that the Council were justified in only extending the protection to those who would suffer a reduction in pay, whereas the female claimants would suffer no such detriment.

The Council appealed against the findings of the Tribunal in relation to the "supervening cause GMF" and also the "bonus GMF", whereas the female claimants sought appeal against the "pay protection GMF".

The Decision of the Employment Appeal Tribunal

The Employment Appeal Tribunal adopted a three pronged analysis of the arguments, taking each genuine material factor in turn.

The Supervening cause GMF

The EAT were scornful of this argument, maintaining that there was "no place in this jurisprudence for a supervening cause of this kind". They also alluded to the fact that the council, in spite of the actions of the Union's, always had the power to rectify the discrimination, as they had proved by acting uni-laterally in 2005. It was felt that if this argument were to succeed then "employers could seek to avoid liability by hiding behind the Unions' skirts".

On this basis the EAT rejected the appeal by the Council.

The Bonus GMF

The EAT first looked to whether the GMF was material before looking to whether it was justifiable or not. Because the "bonuses" were only available to the refuse collectors as being vital in turning the service around, the EAT felt this amounted to indirect discrimination as it excluded the female workers. The basis for this was that historically the refuse workers were strongly linked with union activism and as such the bonus payments were designed to supplement the basic wage. "The nature and amount of these payments could not be divorced from the historical context…the likelihood was that historically the difference in pay was not unrelated to sex"

The EAT examined the motives of the bonus payments. The bonuses were paid for a decrease in absenteeism and an increase in productivity. A further £10 a week was paid on the basis of quality of service, if there were less than 600 complaints per week (there was an average figure of around 30 complaints per week).

In assessing the facts the EAT established that the bonus linked to absenteeism, by 2004, was paid irrespective of attendance. The £10 bonus it was stated was merely an increase in pay for doing what the employee was contractually obliged to do anyway "the link between pay and performance was extremely tenuous". The Tribunal found that the objectives of the bonus payments could have been achieved in a less discriminatory manner, such as proper management, and as such they dismissed the GMF. The EAT endorsed this finding also.

The Pay Protection GMF

The EAT assessed whether the Tribunal had misdirected itself on the previous cases that outlined the law relating to pay protection.
The Tribunal followed Middlesbrough City Council v Surtees [2007], as mentioned above, which stated

"If the purpose of the scheme was to cushion employees from the potentially disastrous effects of a sudden drop in pay, the Council was entitled to the view that it should limit the benefit to those actually in that group and to exclude all others…unless the pay was actually being received, there was nothing to protect."

The decision in Surtees claimed that it was not only the facts that were relevant, but that the court could consider the other issues relating to protecting pay, such as the financial implications.

The Tribunal had followed the ruling of a higher court, which it is duty bound to do. However the legal issues were raised as Surtees was later overturned on Appeal. Because the Council had relied on this case the claimants felt an error had therefore occurred in the initial case as the Tribunal placed much emphasis on the "substantial costs and the risk to any protected pay arrangements" rather than just the facts. The EAT held that following the successful appeal against Surtees, and the substantial reliance of the Tribunal upon the reasoning of that case in its judgement, the issue would have to be reconsidered by another tribunal hearing.

The appeal by the female workers against the pay protection scheme was upheld.

Notes:
(1)Section 1(2) of the Equal Pay Act 1970 requires the woman to be 'employed' and to compare herself with a man in 'the same employment'
(2)Equal Pay Act 1970 s1 (5) work will be rated as equivalent where both jobs have an equal value in terms of demand. This will be assessed under a number of headings such as effort and skill.

The transcript of this case can be found here:  COVENTRY CITY COUNCIL v NICHOLLS