Some reassurance for employers in key equal pay decision

Published: 30th July 2008

The increasing importance of equal pay has been highlighted by ACAS statistics published this week, which show that it has overtaken unfair dismissal as being the most popular ground of Employment Tribunal claim and that almost 60,000 equal pay claims were entered last year. In this context, the Court of Appeal's decision in the equal pay claims against Middlesbrough and Redcar Borough Councils has important implications for employers. The complex decision (in the case of Bainbridge) actually provides some reassurance for employers (despite the headlines which have followed), but will also result in it being harder for employers to defend equal pay claims in practice on some key issues.

What can an employer do if it wishes to re-assess pay structures within its organisation? The "good" equal opportunities answer is to undertake a full job evaluation of all roles and then put in place a new structure which implements that evaluation. However, we would advise employers to tread with caution and take advice before doing so. An evaluation which identifies a need for changes raises the risk of equal pay claims and the problems illustrated by this decision.

This case determines some key issues which arise if two jobs are now evaluated as being the same, when historically one of those jobs (which is predominantly filled by female employees) was paid less than the other (which is mainly filled by men):

• Does that mean that the previously lower paid group can claim and automatically recover 6 years back pay in an equal pay claim, relying upon the new evaluation? Thankfully, the Court of Appeal has decided that it does not automatically follow from the new job evaluation scheme that their claims must succeed. This is very good news for employers. However, those employees will still be able to argue that their work was "like work" or work of equal value, based upon evidence about the work undertaken during that six year period (and with the Tribunal being fully aware of the new evaluation).
• Can you pay protect the higher paid group on a transitional basis, so that when the two groups' pay are brought into line it is not simply a requirement to increase the lower groups pay? Positively, the Court say yes you can because it is possible to "justify" the difference in pay between the groups during the protection period based upon factors such as: the need to reach a collective agreement with the Unions to reduce pay; the need to provide a "soft landing" to those losing the pay; and the fact that the employer has introduced "a carefully crafted and costed scheme". However, on the facts of these claims, the Councils had not justified their pay protection approach which the Court decided simply continued historic discrimination for a further 3 years.

It is the way in which the Court talk about this pay protection test which is the biggest problem for employers. The decision says that where an employer reorganises his pay structure and has "no reason to think" his old arrangements were discriminatory he is entitled to bring in the new arrangements by transitional provisions. If it should later transpire that the old arrangements were discriminatory, the employer may find it "easier for him" to justify the arrangements. In the light of the waves of equal pay claims being faced by employers, this sets the test rather high. The Court held that tribunals should look at the underlying historic reason for the pay protection being introduced and, if this is simply because women have been historically underpaid, the pay protection will not be justified.

The decision includes some other positive points for employers:

• no up-lift was awarded for the Councils' failure to follow the statutory grievance procedures, because it would have been pointless for them to hold meetings with the individuals. This resulted from the individuals' conditional fee arrangements entered into with Stefan Cross (the solicitor representing many equal pay claimants) which meant that they were unable to settle claims without his involvement, without incurring significant additional costs. In these circumstances it was a technical breach of the statutory procedures not to hold a meeting with the individual, but as there was "no prospect" of settling any of the grievances with them directly it was right not to make an uplift to the award for failing to go through what was "merely a ritual dance"; and
• where differences in pay between different groups result from different outcomes to past collective pay negotiations, that can be the basis for a justification argument by an employer for the difference in pay (although the Tribunal in these cases was able to decide that these Councils were not justified in these circumstances).

Whilst these are positive elements of this decision for employers, the underlying tenor of the Court of Appeal's Judgment is broadly in favour of claimants. It is also notable that the Court was very keen to highlight that decisions on these points are for the Employment Tribunal and will rarely be interfered with on appeal, trying to avoid the likely deluge of equal pay appeals. In doing so, they have reduced the ambit for employers to appeal cases where they lose in the Tribunal.

This is a very complicated decision and, if it is important to your organisation, we would suggest talking to your usual contact in the Mace & Jones Employment and Human Resources Department about its potential implications.