Employment: Rights on the money

­The Court of Appeal’s rulings in a series of recent equal pay cases may force the Government and other employers to rewrite their policy documents.

Employment special report: Rights on the money The decision of the Court of Appeal in Redcar & Cleveland Borough Council v Bainbridge and Ors (2008) and Surtees and Ors v Middlesbrough Council (2008) (The Lawyer, 29 July) has sent equal pay into a state of flux. The somewhat mixed ­judgment left employees feeling victorious after the court’s rejection of the justification defence in both of these cases. However, employers will feel relieved by its confirmation that discriminatory pay ­protection arrangements may still be ­justified in principle.

In recent times equal pay has increasingly become a hot topic. According to Equal Opportunities Commission figures (July 2007), the pay gap between men and women working full-time remains around 17 per cent. In September 2007 the Chartered ­Management Institute found that male ­managers were paid an average of £6,076 a year more than their female equivalents, while male directors earned £49,233 more. The rise in group litigation in particular has been felt up and down the country against public sector employers such as local ­authorities, with voluminous, expensive and protracted litigation being brought.

A case in point is the one being brought by Stefan Cross against the NHS, which is ­currently being heard in the High Court. The case challenges the very basis of the Agenda for Change (AfC), the equal pay deal agreed in the NHS.

This group action aims to prove that the implementation of AfC was flawed on a regional level. The consequences could be serious in that it could lead to up to 800,000 NHS staff whose salaries were affected by the AfC scheme bringing back-pay claims against the Department of Health.

Bainbridge and Surtees concerned equal pay litigation against councils in the North East. The councils in question, Redcar & Cleveland and Middlesbrough, had both conducted job evaluation schemes. They fell into difficulty when the evaluations led to the downgrading of predominantly male jobs and they introduced pay protection for such staff for a specified period.

The claimants were female staff who ­contended that they had an entitlement to pay protection too as, if they had been given their right to equal pay, they would have qualified for pay protection. The cases involved the consideration of two conflicting judgments by the Employment Appeal ­Tribunal (EAT). In Bainbridge the EAT upheld the Employment Tribunal’s (ET) finding that the pay protection ­arrangements effected by Redcar were ­discriminatory and could not be justified. But in Surtees the EAT overturned the ET’s judgment that Middlesbrough’s pay ­arrangements could not be justified, holding that justification had been established on the part of the employer.

Discriminatory arrangements

The Court of Appeal (CA), in addressing the conflicting views of the EAT, ­emphasised that it is essential to consider the legality of such arrangements with a two-stage approach.

First, a tribunal must ask whether the arrangements are discriminatory – that is, do they directly or indirectly treat women less favourably than men? If the answer is yes, then the tribunal should go on to consider whether any indirect discrimination can nevertheless be objectively justified. ­Contrary to the EAT’s approach in Surtees, it was not appropriate to consider an ­employer’s knowledge of any pay inequality when considering the first question. This is because discriminatory effect must be ­measured objectively; knowledge, intention and motive are factors to be considered only as part of justification.

The CA accepted in principle that ­discriminatory pay protection arrangements could be justified, particularly so when the employer was unaware of past discrimination when it entered into the arrangements. However, the CA found that the actions of neither Redcar nor Middlesbrough councils could be justified on the facts of these cases.

Redcar, at the time it entered into the arrangements, had already settled a number of equal pay claims by women in the ­affected roles and so should have been conscious that the arrangements were continuing to be discriminatory. While Middlesbrough did not have knowledge of pay discrimination when the arrangements were put in place, it had to be aware of the potential for such claims, particularly as the claimants had already been successful in Bainbridge.

In Surtees, the CA held, the EAT had ­concluded that, because the tribunal had not given enough weight to the need to ­cushion staff from potentially drastic ­reductions in pay, nor the difficulties of establishing the number of equal pay claims the council might face, its findings on ­justifications should be overturned. The CA conversely found that the ET’s reasoning as a whole contained no error of law and should not have been interfered with.

Furthermore, the EAT was wrong to advocate a general rule that arrangements intended to cushion the blow of job downgrading will always be justified; the question of justification should be decided on a case-by-case basis, ­depending on the particular facts and ­circumstances.

Following Bainbridge and Surtees ­employers are likely to be more cautious about agreeing pay protection arrangements with their staff, especially in light of the CA decision in Allen & Ors v GMB (2008). As a further development, the litigation being brought by Cross concerning the AfC could lead to Unison, the Royal College of Nursing and the Royal College of Midwives facing discrimination claims from their own ­members, for whom they negotiated the AfC deal. And the Government may have to ­revisit the AfC policy generally.

The implications of such cases in the equal pay arena may worsen relations between trade unions, employers and ­government agencies, with trade unions becoming even more cautious about ­agreeing settlements with employers. Employers and those conducting pay audits or implementing job evaluation schemes may have to seriously consider amending their policies on equal pay and pay reviews. The guidance given in Bainbridge and ­Surtees on justification will be essential.

Elaine Banton is a barrister at 7 Bedford Row, treasurer of the Discrimination Law Association, a member of the equality panel for Justice and a panel barrister for the Equality and Human Rights Commission