17 December 2007

In the last year the number of equal pay claims submitted to the Tribunal Service more than doubled. These claims are mainly attributed to the public sector, which now has a statutory duty to address pay inequalities. However, statistics show that the gender pay gap across all sectors stands at around 17% and the private employer is just as likely to be at risk. Could you defend a claim?   

Under the Equal Pay Act 1970 there are three types of claim, like work, work rated as equivalent or work of equal value. Provided the Claimant has established that the work they do is “equal” to an actual comparator under one of these categories, the burden then shifts to the employer who must, in all cases, establish that the difference in pay is genuinely due to a material factor that is not the difference of sex.

Genuine material factors that employers have used in the past to successfully defend a claim include:

• Market forces – i.e. the need to pay a going rate for a particular type of work in order to fill a vacancy.
• Performance related pay.
• Skills, qualifications and experience – provided these attributes are pertinent to the job in question.
• Red circling – i.e. the comparator has been demoted but his pay has not been reduced.
• Seniority and length of service – provided the employer can show that the greater length of service amounts to experience which enables the employee to perform better. Essentially this means that there will come a point when length of service no longer justifies a difference in pay!

However, once a factor other than sex has been identified it is not necessarily the end of the matter. The employer will also be required to objectively justify any factor relied on which indirectly discriminates. The test for objective justification is the same as that under the Sex Discrimination Act and requires the employer to show that the factor is a "proportionate means of achieving a legitimate aim". This means that it must:

• Correspond to a real need on the part of the employer;
• Be appropriate with a view to achieving objectives pursued; and
• Must be necessary to that end.

The Employment Appeal Tribunal (EAT) recently overturned the decision in Chief Constable of West Midlands Police v Blackburn and Manley (2007), a case which concerned the objective justification of additional payments to night workers. The Claimants, two female police officers, were not required to work the usual 3 shift rota pattern providing 24 hour cover 7 days a week as they were excused from the night shift on the grounds of childcare commitments. Consequently, they did not receive the special priority payment which was paid to all officers, male or female, who regularly worked at least 4 hours between midnight and 6 pm. The tribunal accepted that the difference in pay was due to a general material factor which was not the difference in sex, namely the fact that the claimants did not work at night, but that the requirement to work at night had a disparate impact on women, and as it was indirectly discriminatory, also needed to be objectively justified.

Rather worryingly for employers the tribunal originally held that the additional payments could not be objectively justified. They decided that whilst it was a legitimate aim for the police authority to reward officers for night work, that objective could have been achieved by less discriminatory means. The tribunal felt that, given the size of the undertaking and the modest sums involved, the employer could have eliminated the discriminatory impact by paying the female officers the same amount. Essentially, the Claimants should have been rewarded on the premise that they had undertaken the work which they were prevented from actually doing for childcare reasons.

Thankfully the EAT rejected this argument as, if it were correct, it would effectively have meant that a woman working part time for the same reasons could claim that she should be paid on a full time basis to take into account the hours that she was prevented from undertaking. The EAT said that the right approach to the test of objective justification required the tribunal to consider whether the additional payment was a proportionate means of achieving a legitimate aim. Since the legitimate aim of the special priority payment in this particular case was to reward those officers working nights it made sense that it was also necessary not to reward those who did not work nights. The employer’s aim could not be achieved at all if both sets of workers were entitled to receive the same amount. In their judgement the EAT stated:

“the Equal Pay Act does not require the payment of money to compensate for the economic disadvantages suffered by those who have childcare responsibilities. Nor are tribunals expected to make assessments of the ability of employers to pay sums of this kind.”

Although not compulsory in the private sector, an employers’ first line of defence to an equal pay claim should be to carry out an equal pay audit. It will highlight any areas of risk, which can then be investigated to ensure there is a genuine material factor for the difference and to establish an action plan to tackle unjustified pay practices.

Early in the New Year, two important cases on equal pay are to be heard together by the Court of Appeal.  Redcar & Cleveland Borough Council v Bainbridge and Middlesbrough Borough Council v Surtees concern the issue of pay protection, in which the pay of employees who have been found to be receiving more pay than their job deserves under a Job Evaluation Study (usually men), have their pay level preserved for a few years until the lower paid (female) employees’ pay falls into line with their higher paid (male) counterparts (i.e. via annual increases).  There is a risk however, that pay protection preserves historic inequalities in pay.  Thus the issue of whether pay protection can be justified under the Equal Pay Act will be considered by the Court of Appeal in the above cases, in January 2008.  So, watch this space!