Recent Equal Pay Developments
Notwithstanding the announcement by the Government Equalities Office and the Equality and Human Rights Commission (EHRC) on 24 March 2020 that due to the COVID-19 pandemic, enforcement of gender pay gap reporting for the reporting year 2019/20 would be suspended, the profile of equal pay issues has not diminished over recent months, not least in view of a number of recent developments that have attracted considerable publicity.
In January 2020, BBC presenter Samira Ahmed won her high profile equal pay claim that she was doing work of equal value to that of her colleague Jeremy Vine and that there were no material factors on which the BBC could rely to defend his significantly higher pay.
The long running litigation concerning the supermarket Asda on the question of whether its predominantly female supermarket retail employees can compare themselves with predominantly male distribution depot employees for the purposes of an equal pay claim also continues. This litigation reached the Supreme Court in July 2020 and judgment is expected later this year.
The Fawcett Society, which campaigns for gender equality and women’s rights at work, at home and in public life, is currently supporting a private member’s bill in Parliament, the key proposal of which is to give women who suspect they are not getting equal pay the ‘Right to Know’ what a male colleague doing the same work is paid. Currently if a woman suspects that she is being paid less than a male colleague for doing the same work, she has no legal right to obtain information about that colleague’s pay until she has started employment tribunal proceedings. The proposed bill creates a new legal obligation on employers to provide certain information about a comparator colleague’s pay to an employee who requests this information in relation to a suspected equal pay issue. The bill is currently moving through the legislative stages in Parliament – it was introduced in the House of Commons by Stella Creasy MP on 20 October 2020 and its second reading in Parliament is scheduled for 15 January 2021.
Equal pay overview
By way of brief overview, to bring an equal pay claim a woman must establish that she is doing like work, work rated as equivalent or work of equal value to a man, and that she is being paid or treated less favourably than the man. The employer must then show that there is an explanation for the difference which is not related to sex either directly or indirectly. If it can show such a reason, called a material factor, then it has a defence to the equal pay claim. In order to rely on this defence the employer must show that the material factor is genuine, and it must be material in the sense of being significant and relevant. The material factor does not have to justify the difference in pay – the employer merely has to show that the material factor relied upon is the reason for the difference in pay and is not related to the sex of the claimant or those with whom she seeks to compare herself.
Guidance from the Court of Appeal - Walker v Co-operative Group Limited
In August 2020, in Walker v Co-operative Group Limited, the Court of Appeal gave useful guidance on how equal pay cases should be approached, finding that an employment tribunal (ET) had wrongly approached the question of when an employer may rely on the material factor defence.
Ms Walker was promoted to the position of Group Chief HR Officer for the Co-operative Group Limited in February 2014. At the time the Co-op was in financial crisis, and the executive team was appointed to deliver a critical transformation of the business, and remunerated accordingly.
Ms Walker was in Tier 4 of the executive team. Two male colleagues in Tier 4, the Chief External Affairs Officer and the Group General Counsel were paid more than her. The Co-op’s material factor defence to Ms Walker’s equal pay claim was based on four reasons on which it relied for the pay differentials in question. These were that:
- the roles of the two male colleagues were seen as vital to the immediate survival of the Co-op;
- Ms Walker was a newly appointed executive whereas her male colleagues had many years of experience at that level;
- the two male executives were a “flight risk” because they had been appointed by someone who had left the Co-op and it was crucial in a time of crisis that they were retained; and
- the General Counsel was a highly experienced City lawyer and the market rate for his salary was higher than that of his colleagues.
In February 2015, with the Co-op restructured and the financial crisis averted, a Job Evaluation Study (JES) scored Ms Walker’s role more highly than that of her two male Tier 4 colleagues. In October 2015, the Co-op began discussions with Ms Walker about her future role. In March 2016, she went on sick leave. She was given notice of termination of her employment in April 2016 and left her employment in April 2017 having served her period of 12 months’ notice. Ms Walker brought a number of claims against the Co-op including for equal pay, unfair dismissal, sex discrimination and whistleblowing. In her equal pay claim she relied on the two male Tier 4 executives as her comparators.
Ms Walker won her equal pay claim at the ET stage, but this was overturned in the Employment Appeal Tribunal (EAT) and her subsequent appeal to the Court of Appeal failed.
The ET found that, when the Co-op fixed the salaries of Ms Walker and her two comparators in February 2014, the four material factors relied upon by the Co-op did apply, that they were not related to sex and that each of those factors was at the time a reason for the difference in the pay between Ms Walker and her comparators. However, the ET went on to find that, by February 2015, the Co-op had been saved, the role of the two comparators had declined relative to the role of Ms Walker, and the JES had rated the work of the comparators below the work of Ms Walker. Consequently, the factors relied upon by the Co-op to explain the pay differential between Ms Walker and her comparators were no longer material, and the value of Ms Walker’s work was equal to that of her comparators. The ET considered that the point between March 2014 and February 2015 at which Ms Walker gained the right to equal pay with her comparators was a matter to be determined at the remedy hearing.
The EAT allowed the Co-op’s appeal. It held that there had been no new decision about pay since March 2014 and therefore no basis for finding that the material factors explaining the differences in pay accepted by the ET had ceased to be operative. In addition, it considered that there was inadequate evidence to support the decision that the material factors relied upon by the Co-op had ceased to apply.
In considering and rejecting Ms Walker’s appeal, the Court of Appeal made some observations about the relevance of the JES that had been conducted. It rejected the argument that the JES could not be relied upon because it had not been widely circulated internally and particularly that it had not been sent to the Co-op’s Remuneration and Appointments Committee. It had been received and accepted by the CEO of the Co-op and could therefore in principle found the basis of an equal pay claim under the Equality Act 2010. However the Court of Appeal noted that a JES cannot be relied upon with retrospective effect. Consequently, the JES could not assist Ms Walker’s claim for the period prior to the date on which it was provided to the Co-op, which was February 2015.
The Court of Appeal also considered each of the Co-op’s material factors in turn. There was no evidence that the market forces which explained why a commercial lawyer of the General Counsel’s experience had to be paid at a certain level had changed. It was true that the roles of the comparators may not have been as vital by February 2015 as they were in 2014, and that they had declined in importance relative to Ms Walker’s role. It was also likely that the “flight risk” relied upon by the Co-op was no longer a material factor by March 2015. However, the much greater executive experience of the two comparators was still a relevant factor in March 2015. The Co-op therefore could rely on at least two of its material factors as at March 2015 and this was enough for its defence to succeed.
Lord Justice Males added some useful commentary on how an equal pay claim should be approached generally. The starting point is to establish whether the claimant is employed on work that is “equal” as defined by the legislation, to that of a comparator of the opposite sex. Only if that is the case, should the ET consider whether the statutory sex equality clause (which is the mechanism by which the claimant’s pay is equalised with her comparators’ pay) and the possibility of a material factor defence are relevant. He considered it to be unsatisfactory that the ET had not determined specifically the point at which the work of Ms Walker had become equal to that of her comparators, finding only that it had become so at some point before March 2015 and leaving the issue to be determined at the remedy stage. The ET should have either established the date on which Ms Walker started doing work of equal value to her comparators, which would have been the starting point for her claim, or, that she had failed to prove this. Only if she could prove that she was doing equal work to the comparators would the material factor defence become relevant.
On the basis of the ET’s findings, the identified comparators were not doing work which was equal to that of Ms Walker in March 2014 - they were not therefore valid comparators and her claim should have failed at that point. If the ET had asked itself why Ms Walker was paid less than the comparators at March 2015 the reason was clearly market forces and the comparators’ greater experience which was a valid material factor defence for the employer.
Whilst this decision does demonstrate how employers may be able to defend equal pay claims by reference to market forces and other material factors not related to an employees’ sex it also serves as a reminder of the potential value of fair and transparent processes for determining pay, including regular job evaluations and equal pay audits.
Guidance for employers
Equality Act 2010 Code of Practice - Equal Pay
Guidance for employers on equal pay good practice is contained in the statutory code of practice on equal pay issued by the Equality and Human Rights Commission (EHRC) (the Code). The Code does not itself impose legal obligations. However it is intended to explain the legal obligations under the Equality Act 2010. Tribunals and courts considering an equal pay claim are obliged to take the Code into account if it appears to be relevant to the proceedings. If an employer follows the guidance in the Code, it may help to prevent or reduce the risk of equal pay issues in its organisation, and avoid an adverse decision by a tribunal or court in such proceedings.
The Code is described by the EHRC as an “authoritative, comprehensive and technical guide to the [Equality] Act’s provisions intended to ensure that women and men receive the same pay and other contractual benefits when they are doing equal work.” Part 1 of the Code is intended to help employers, advisers, trade union representatives, human resources departments and others who need to understand and apply the law on equal pay, and to assist courts and tribunals when interpreting the law. Part 2 of the Code sets out good equal pay practice, including guidance on how to prevent or eliminate discriminatory pay practices and ensure that there are no unjustifiable pay inequalities, with the hope that this will avoid the need for litigation. The key recommendation (although not a legal requirement) is that all employers regularly review and monitor their pay practices by way of equal pay audits. No timescale is given for these, but the Code suggests that an employer should keep its pay systems under review with regular monitoring.
In May 2020, Acas published new guidance. The guidance covers a summary of the law concerning equal pay, a section for employers on how to prevent equal pay issues, and guidance for employees who may have an equal pay claim. There are a number of key points for employers to note as they seek to reduce and manage the risk of equal pay claims. The Acas guidance indicates that employers can prevent or reduce the risk of equal pay issues by being clear and open with staff about pay and contractual terms and conditions and should consider the following best practice advice. Employers should:
- have an equal pay policy, which should state how an employer will try to achieve equal pay, will check whether the policy is working, will deal with any complaints about equal pay, and should confirm that the employer is committed to resolving any unequal pay issues in its workplace. A policy should be agreed with a recognised trade union or employee representatives;
- have accurate, up to date job descriptions;
- make sure that men and women who do the same work do not have different job titles;
- be consistent when deciding workers’ pay and contractual terms and conditions, for example by having a single pay structure for the business;
- as advised in the EHRC Code, carry out an equal pay audit (or a simpler equal pay review for employers with fewer than 50 employees) to check for equal pay issues. This would involve gathering details on pay and contractual terms and conditions for people doing equal work to see if there are any differences between men and women; and if there are differences, checking the reasons for them. If the reasons are potentially unlawful (broadly, if they are directly or indirectly related to the sex of the employees involved) decide on an action plan to resolve any cases of unequal pay as soon as possible.
Equal pay claims may historically have been seen as the preserve of the public sector. This is no longer the case and the number of equal pay claims brought in the private sector appears to have increased. Employers need to review their pay review systems to ensure that they do as much as they reasonably can to avoid equal pay disputes arising.