Cash barriers

With the number of equal pay cases growing rapidly, case law is amassing and companies must keep up with developments. Paul Epstein reports

The number of claims for equal pay is rising exponentially. In 2005-06 there were 115,039 claims registered with the Employment Tribunals Service. This compares with 86,181 in 2004-05. The numbers of multiple cases have also soared over the same period from 31,126 to 63,543.

This increase is mainly due to equal pay claims against local authorities and NHS trusts. So concerned is the Employment Tribunals Service that it has set up a special unit to deal with these claims, as it is aware that they will cause significant financial and operational pressures.

Claims brought by women against trade unions for sex discrimination are also on the rise. Those claims allege that the unions under-settled the women’s equal pay claims against their local authority employers. A problem with equal pay claims is their sheer complexity. This affects parties, their representatives and the Employment Tribunals Service.

Equal work, equal payIn simple terms, a claim for equal pay is usually a claim that a woman is employed for equal work with a man and is entitled to the same pay. Equal work means ‘like work’, work that has been ‘rated as equivalent’, or ‘work of equal value’. A woman is employed on ‘like work’ with a man where there are broad similarities between the work they do. A woman’s work is ‘rated as equivalent’ with a man’s work where the employer has rated their jobs in a job-evaluation scheme that considers the demands made on the job-holders under headings such categories as effort, skill or decision-making. ‘Equal value’ is a default category where neither ‘like work’ nor ‘work rated as equivalent’ is in play.

If the woman is employed on equal work with the man, that is not necessarily the end of the story. The Employment Tribunals Service looks at the reason for the difference in pay, to determine whether it is a genuine material factor explaining the difference. If the reason is gender, the defence will fail. If, by contrast, there is a non-discriminatory reason, the defence can succeed, even if the reason is a bad one, such as error or ignorance.

However, one of the real controversies in equal pay law is when the employer, in order to succeed in this defence, needs to go further and not merely provide a non-gender reason for the difference in pay, but a good reason for that difference. This is usually known as the employer having to provide ‘objective justification’.

It is of the utmost significance to an employer whether the burden is on it to provide a reason, as opposed to objective justification. Objective justification requires the employer to satisfy an employment tribunal that the difference in pay is for a legitimate aim, that the means chosen are appropriate, and that they are necessary.

The recent upsurge in equal pay claims has produced an interesting authority on which terms in a woman’s contract and man’s contract ought to be compared with each other. It might be thought that this would be a simple task, but as ever with equal pay, it is more complicated than that.

Appeal interventionIn Degnan v Redcar & Cleveland Borough Council (2005) the female claimants attempted to make a comparison with two main sets of comparators. One set of comparators received the same basic pay as the claimants, but received a considerable bonus on top. The other set of comparators received a lower bonus than the first group, but received an attendance allowance. So the claimants were trying to claim both the same bonus as the high bonus receivers, and they were trying in addition to obtain attendance allowance. If successful, these claimants would have received greater overall pay than any single man.

The Employment Appeal Tribunal (EAT) and the Court of Appeal found that the attendance allowance was the same term in the contracts as pay, preventing the claimants from succeeding on both parts of their claim. They held that the relevant term was “provision for monetary payment for the performance of the contract by employees during normal working hours”.

Objective justificationA lively line of recent cases concerns when exactly an employer is under an obligation to provide objective justification.

There are three traditional paths for a claimant to force objective justification on an employer. One is where the employer imposes on employees an apparently neutral requirement or condition, but which has the effect of producing adverse impact on women as opposed to men. continued #+ continuedThat was the situation in the well-known case of Bilka-Kaufhaus v Weber Von Hartz (1987). That case was concerned with restrictions placed on access to an occupational pension scheme. It affected significantly more men than women. The European Court of Justice (ECJ) decided that the employer had to demonstrate that the policy was objectively justified.

Another route exists where the employer adopts a pay scheme that lacks transparency. That was the situation in the ECJ case of Danfoss (1989). The claimants there said that the system of individual wage increases meant that female workers were not in a position to identify the causes of difference between their pay and that of male workers, so it was decided that there was a burden on the employer to show the reasons they made such increases.

The third gateway is in Enderby v Frenchay Health Authority (1993). Enderby was a test case for a number of female speech therapists who claimed that they suffered discrimination in pay. The ECJ said that a prima-facie case of sex discrimination existed where a predominantly female group was paid less than a predominantly male group. Here objective justification was required as a defence to inequality in pay.

Recently, however, in the long-running saga of the prison officers’ litigation, the case of Bailey v Home Office (2005), the Court of Appeal has shown that there may be other circumstances, outside the previous three gateways, in which an employer is required to provide objective justification. The disadvantaged group containing the female claimants was approximately half female and half male. By contrast, the advantaged group containing the male comparators was predominantly male. The Court of Appeal concluded that these statistics required objective justification of the pay inequality. Nevertheless, this may not be the last word as leave to appeal has been granted to the House of Lords.

Much controversy was generated by Sharp v Caledonia (2006) where the EAT held that in all cases of pay, inequality objective justification was required, even where there was no prima-facie sex discrimination along one of the three gateways above. In doing this it purported to apply the judgment of the ECJ in the case of Brunnhofer (2001). It departed from an earlier EAT decision in Fernandez (2004), which had stated that this was not the meaning of Brunnhofer. The EAT has now had a third opportunity to consider justification in the appeal in Villalba v Merrill Lynch (2006), a highly publicised case of sex discrimination. Mr Justice Elias found that objective justification is required only where there is prima-facie sex discrimination. So for the time being, orthodoxy has been restored.

Finally, no consideration of the recent equal pay cases would be complete without at least some reference to the case of Allen v GMB. In that first-instance case, the employment tribunal was faced with claims by individuals against the union that the union was guilty of sex discrimination in having under-settled their equal pay claims against their local authority employer. To the considerable consternation of the unions, the employment tribunal found in favour of the claimants. There are reverberations from the Allen decision far beyond the area of equal pay. Unions are concerned about being sued for making settlements with employers. Individual officers are concerned that they may be named as individual respondents.

Paul Epstein is a barrister at Cloisters