Newcastle upon Tyne Hospitals NHS Foundation Trust v Armstrong

For a genuine material factor defence under section 1(3) of the Equal Pay Act 1970, the employer must identify a genuine and causally relevant explanation for the pay difference and show that it is not tainted by sex. Where the explanation involves indirect discrimination, the employer must establish objective justification.

A factor may be sex-tainted where an employer knowingly adopts depressed market rates resulting from social or economic conditions peculiar to women. Evidence that the relevant labour market is almost exclusively female may support an inference of sex tainting. A long-standing differential is not objectively justified merely by cost, industrial-relations concerns or gradual phasing-out measures.

Female ancillary workers claimed equal pay with male hospital porters who received bonus payments. The Trust relied on a genuine material factor defence under section 1(3) of the Equal Pay Act 1970, arguing that the women’s bonus had been removed during a compulsory competitive tendering exercise and that later restoration was impracticable.

The Court of Appeal remitted the case to the Employment Tribunal to determine whether the tendering decision was discriminatory and, if so, whether the resulting differential was objectively justified: [2006] IRLR 124. The Tribunal rejected the defence. The appeal concerned the proper application of the Ratcliffe principle and the adequacy of the justification for continuing the differential.

1. Appeal dismissed. The Tribunal was entitled to find that the Trust’s explanation was tainted by sex and that the continuing pay differential was not objectively justified.

2. Under section 1(3) of the Equal Pay Act 1970, the employer must establish a genuine, material and causally relevant explanation for the variation. It must then show that the explanation is not tainted by direct or indirect sex discrimination. If it cannot do so, the differential must be objectively justified.

3. The Tribunal was entitled to apply Ratcliffe v North Yorkshire County Council, [1995] ICR 833. The relevant question was not simply whether the market was predominantly female. It was whether management appreciated that the market rates were depressed by social and economic factors peculiar to women and deliberately adopted those rates to make the tender competitive. The evidence that the domestic labour market was almost exclusively female, together with the Tribunal’s knowledge of regional labour conditions, was sufficient to support that inference.

4. The Tribunal was not required expressly to address every factor identified by the Court of Appeal, including the different treatment of catering and laundry staff. Those matters were potentially relevant but did not necessarily undermine the finding of sex tainting.

5. The Trust failed to show objective justification for maintaining the differential after the bonus had ceased to reflect productivity considerations. Financial constraints, apprehended legal or industrial action, a policy closing schemes to new staff and gradual reduction of the disparity did not establish that continuation of the differential was necessary and proportionate.

6. The Tribunal’s discussion of the distinct treatment of Enderby-type indirect discrimination in the postscript was not necessary to the result. The Tribunal remained bound by the Court of Appeal’s analysis of the stages of a section 1(3) defence.

• Employment Appeal Tribunal: The appeal from the remitted Tribunal decision was dismissed.
• Court of Appeal: The earlier Tribunal decision was set aside on the genuine material factor issue and remitted for reconsideration: [2006] IRLR 124.
• Employment Tribunal: On remittal, the Tribunal found that the explanation was gender-tainted and that the differential was not objectively justified.