Employers must act on equality

Tackling equal pay issues before they reach the courts just became an even

Caroline Carter

The gender pay gap is now 15 per cent. Is the Supreme Court’s decision that out-of-time equal pay claims can proceed as breach of contract claims in the High Court a step too far for employers?

The ruling goes to the heart of employers’ risk management strategies and budgets for equal pay claims. Not only will employees now have much longer to bring their claims (six years as opposed to six months), but crucially it appears to open the gates to ‘forum shopping’ for opportunistic employees.

According to the Supreme Court, the reasons a claimant has failed to bring the claim in time at a tribunal are irrelevant to assessing whether that claim can be “more conveniently disposed of” by an Employment Tribunal under section 2(3) of the Equal Pay Act 1970.

This is controversial. Tactically, claimants can rely on letting the six-month tribunal time limit pass, whether or not they have acted reasonably in doing so. Yet employees bringing sex discrimination claims have to claim within three months of termination of employment, and time can only be extended to the amount the tribunal considers just.

What is the justification for this difference?

There is still a lot of secrecy surrounding pay. It is not uncommon for individuals to find out, after termination of employment or a TUPE transfer, that former colleagues in similar roles have been paid differently or been successful with equal pay claims. But a time limit of six years means employers may face claims long after employment has ended, making gathering evidence difficult – particularly where decision-makers and alleged comparators have left employment.

The fear is that the floodgates will open – in particular, claims piggy-backing on successful tribunal claims made “in-time” by peers or claimants using confidential information gained through the disclosure process in tribunal sex discrimination actions to gauge future High Court equal pay success.

One factor that deters claimants from the High Court is the cost involved. Whereas in the tribunal each side pays its own legal costs, in the High Court the losing party also bears the winner’s costs. Equal pay cases are notoriously cumbersome, complex and long, meaning both sides’ costs are usually substantial. However, these could be the very reasons why employees choose the High Court. In the public sector class action equal pay claims are common and often ‘no win, no fee’ arrangements apply. So employees will have nothing to lose by bringing High Court actions – they do not bear the costs risk and potential exposure for the employer is significantly increased.

Similarly, although the battleground for the surge in equal pay claims in recent years has been the public sector, they are becoming increasingly popular in the private sector. A complex High Court claim from a high-earning female employee brought nearly six years after she left employment may prove a powerful negotiating tool.

The Government has stated that it does not intend to introduce the controversial mandatory gender pay reporting provisions in the Equality Act. Although that is welcome news for many employers, this ruling shows that tackling equal pay issues before claims arise must always be the best policy.