The equal pay claim is one of the least understood sex discrimination claims, but is becoming increasingly common. DTI statistics show a gender pay gap of 18% for full-time workers and 40% for part-time workers. Organisations, particularly in the City, where the statistics show even wider pay discrepancies, should not be complacent. City institutions often operate in an environment which has traditionally been male dominated, and where pay/bonus structures are often opaque.
The Equal Pay Act is an old and, frankly, cumbersome piece of legislation. It was ground breaking in its time (it was implemented in 1975 at the same time as the Sex Discrimination Act, even though Parliament passed the Act in 1970) but is now fraught with complexity for claimant and respondent, alike. It covers discrimination in any contractual right to the payment of money, an area which is specifically excluded from the scope of the Sex Discrimination Act. The two acts are mutually exclusive in that as a matter of law, a claim for a particular sum of money will fall under one or the other.
The Act operates by imposing into a woman’s contract a clause to provide that she will receive equal pay with an actual man whom she has identified and who the Tribunal accept is doing the same work as her, work which has been rated as equivalent, (e.g. in a management consultants’ or pay audit review), or work that is of equal value to the man. In practice, most employees argue that their work is of equal value to a colleague.
“Pay” is very widely interpreted and can include contractual benefits, bonus and other schemes.
Unlike a sex discrimination claim, when an individual presents a claim under the Equal Pay Act, she must choose one or more actual comparators who work within the same workforce, or under the same overall control of the “employer”. It is not open to a claimant under the Equal Pay Act to say that there is no person doing equal work to her own, so the Tribunal should create a hypothetical comparator. This means that a claimant has to identify specific individuals as comparators against whom she is “pegging” her pay and benefits.
In order to assess whether work is of equal value, the Tribunal will require the services of an independent expert. The expert will examine the job description of the claimant and of each of her comparators. The Equal Pay Act is very much designed to assess the work of “blue collar” employees (and in particular relatively low-paid manually based jobs, rather than professional roles).
Genuine Material Factor Defence
If the independent expert considers that any one of the comparators carries out work of equal value to the claimant’s, the next step will be for the employer to present a genuine material factor justifying that difference in pay, which must have nothing to do with gender. The defence must be neither directly nor indirectly discriminatory.
The genuine material factor may be based on a number of complex reasons.
There is some argument that an employer would not only have to show a genuine material factor justifying the difference in pay had nothing to do with gender, but must also prove that this is justifiable and proportionate to the pay differential. This comes close to imposing a universal “fair wage” law. Since a recent case on this point settled just prior to the Court of Appeal hearing, there is no firm law on the point.
Equal pay cases are onerous for employers. Notoriously long and involved, claims force employers to look into their pay practices and reveal sensitive information. At the outset of a claim, claimants can serve equal pay questionnaires, involving employers in a difficult balancing act: responding to the questionnaire (otherwise adverse inferences can be drawn by the Tribunal) and respecting their duty of confidentiality to other employees. Data protection laws can, to an extent, be used as a shield. The financial impact of the claim can be substantial.
Remedies include not only equalising contractual terms for the future but awarding compensation of arrears of pay for up to six years before the date proceedings were instituted.
So what can you do? Steps to reduce exposure include:
having transparent pay structures and grading systems;
well documenting appraisals so employees are aware of their performance and you have evidence to support this;
familiarising yourself with the EOC Code of Practice on Equal Pay (see further: http://www.eoc.org.uk). While the Code is not binding a Tribunal may take into account an employer’s failure to act on its provisions. However beware:
the Code recommends that employers carry out equal pay reviews. Although a Tribunal may look favourably on an employer who has taken this step, it should only be done if you are dedicated to tackling any problem. Otherwise you may just create evidence which may be used against you.