Sex discrimination goes cross-border

Former Merrill Lynch employee tests new water by comparing her pay with other jurisdictions in record £7.5m claim


Croydon would seem to be an unlikely place for a battle that could shape the future of discrimination cases, but over the past few weeks the London suburb has been the centre of attention for media and employment lawyers alike.

Stephanie Villalba, a 42-year-old investment banker, is suing her former employer Merrill Lynch for sex discrimination, unequal pay and unfair dismissal in one of the most high-profile employment cases the City has seen.

Villalba’s £7.5m claim comes on the back of a raft of cases brought against major City institutions by female employees. On 18 June, banker Arianna McGregor-Mezzotero won a claim against BNP Paribas for discrimination following maternity leave. Earlier this year, law firm Tarlo Lyons settled a claim with former partner Sarah Collins. Even the Law Society has not escaped the spotlight, with Kamlesh Bahl’s sex and race discrimination case still to be decided.

Merrill Lynch, meanwhile, has settled a dispute in the US with 1,000 female brokers, but faces a new claim from former in-house solicitor Elizabeth Weston.

Villalba’s career with Merrill Lynch spanned 17 years before she was dismissed in July 2003. But there is more to her case than another round of accusations of unfair pay and bullying by male colleagues. Uniquely, Villalba’s legal team – Blackstone Chambers’ Dinah Rose and Brian Kennelly, instructed by Lewis Silkin – is using comparisons with foreign jurisdictions as the basis for their argument.

Villalba was one of a very few high-level female executives at Merrill Lynch.
According to her witness statement, she achieved her position through years of hard work and sacrifice, finally being appointed as ‘Market Executive for Europe’ in the firm’s international private client group in May 2002.

As market executive, Villalba was on an equal footing with four others – three men and a woman. Each executive was responsible for a different international region. In its argument for the defence, Merrill Lynch concedes that Villalba was doing comparable work to the other market executives.

But Villalba contends that because she was doing like work and work of equal value as her male colleagues working in other countries, she should have been compensated accordingly. She is directly comparing her work with that of other jurisdictions – a new step forwards in employment law.

The argument of the applicants is that Section 1(6) of the Equal Pay Act 1970 (EPA) is not in line with Article 141 of the EC Treaty. They cite the decision of the European Court of Justice in Defrenne v Sabena (No 2) (1976), where it was held that equal work and equal pay are the only criteria that need to be taken into account when determining discrimination.

In response, Merrill Lynch, represented by Lovells and Fountain Court’s Nicholas Underhill QC, is arguing that the EPA does not provide for a comparison between the UK and other jurisdictions.

“It’s an untested area,” says Sue Ashtiany, head of employment at Nabarro Nathanson. “For this sector of business, it could be really quite important.”
If Villalba wins her case, equal pay claims could no longer be confined to single jurisdictions. In today’s cross-border corporate environment, this could prove a significant development.

The rest of Villalba’s issues are more commonplace. She alleges that her immediate superior, Ausaf Abbas, “bullied and belittled” her over a period of months; that another colleague pressed his hand on her thigh; and that she was treated less favourably than her colleagues because she was a woman.

Like other recent discrimination cases, Villalba could benefit from recent amendments made in 2001 to the Sex Discrimination Act that have put the burden of proof firmly on the employer rather than the employee.

In Barton v Investec Henderson Crosthwaite Securities, the Employment Appeals Tribunal (EAT) said that Investec should have had to prove that there were objective reasons for the salary differences between the appellant and her male colleague.

“The EAT set out a roadmap for applying the burden of proof,” says Alison Wetherfield, an employment partner at McDermott Will & Emery who specialises in discrimination cases.

Hammonds employment partner David Whincup, fresh from the firm’s victory against BNP Paribas on behalf of McGregor-Mezzotero, agrees, adding that it is vital for employers and employees alike to keep full and accurate notes of any meeting or decisions taken.

In this, modern technology can play a vital role. The emails sent to, composed by and written about Villalba are an important part of the evidence in her case. The more controversial messages have already been widely reported in the mainstream media, but even the everyday correspondence between Villalba and her superiors will have a bearing on the result of the claim.

Whatever the outcome of the Villalba case, it will certainly have a bearing on future discrimination claims. The amount that Villalba is claiming – £7.5m – is a record. Add to that the cross-border characteristics, and you have the potential for a landmark ruling.

The tribunal hearing was adjourned on 22 June until 31 August. It will resume with the cross-examination of Villalba. <.>

The legal teams
For Stephanie Villalba:

James Davies, Lewis Silkin

James Davies heads the employment department at Lewis Silkin, where he handles a mixture of contentious and non-contentious employment work. He advises more employers than employees, but, as evidenced by Lewis Silkin’s representation of Stephanie Villalba, Davies’s claimant practice is strong.

He also advised Sarah Collins in her claim against Tarlo Lyons, which settled earlier this year. In the case against Merrill Lynch, Davies is being assisted by associate Rachel Wright, who has done much of the groundwork.

Dinah Rose, Blackstone Chambers

Dinah Rose was called to the bar in 1989 and has built up a practice at Blackstone Chambers specialising in discrimination cases. Most recently Rose supported fellow tenant Paul Goulding QC in defending the Law Society against the claim brought by Kamlesh Bahl. She is lead counsel for Villalba and is supported by Brian Kennelly.

Rose has acted at all levels of the legal system, successfully taking cases to the European Court of Justice. She also has a thriving practice in the area of public law and human rights, acting for clients such as the Human Embryology and Fertilisation Authority (HFEA) in the much-publicised Hashmi case last year, R (Quintavalle) v HFEA.

For Merrill Lynch:

Lisa Mayhew, Lovells

Lovells’ Lisa Mayhew began her career as a trainee at Charles Russell, determined to be a family law expert. But a seat in the employment department, headed by David Green, then a newcomer to Charles Russell from Clifford Chance, changed her outlook. She is now a partner in Lovells’ employment practice, having joined the firm in 2000.

Mayhew acts for corporate employers, with a number of discrimination cases of all types under her belt. She says the combination of employment and corporate clients suits her.

“I have the human story, but in a commercial context,” she told The Lawyer during a break in defending Merrill Lynch against Villalba’s claims.

Nicholas Underhill QC, Fountain Court Chambers

Nicholas Underhill QC acts mainly for employers and has extensive experience in unfair dismissal and equal pay issues. He acted for Barings Bank on the two bonus claims arising from the bank’s collapse – Walz v Barings and Baker v Barings – as well as last year’s Derhalli v Lehman Brothers claim.

Supported by Thomas Linden of Matrix Chambers, Underhill is lead counsel for Merrill Lynch in the bank’s case against Villalba.