First among equals – the rise of the least understood Tribunal claim

Thirty years after the introduction of the Sex Discrimination Act and sex discrimination at work is as controversial a topic as ever.  The beginning of 2006 saw a flurry of press comment concerning the treatment of men and women in the workplace, reflecting more than ever the differing views and emotive responses this issue raises.

In the last week of December 2005, the Equal Opportunities Commission published research saying that women working in the private sector are paid 45% less per hour then their full time male colleagues.  The Equal Opportunities Commission (“EOC”) has also reported that at current rates it would take forty years to achieve the same number of women directors as men in FTSE 100 companies.  According to the EOC, equality is still only a “thin veneer” for women and it is calling for a new generation of laws to help narrow the gap between males and females in the workplace.

Morrisons hit the headlines when the GMB Union accused it of sex discrimination regarding the redundancy pay-outs being made to male and female staff.  Meanwhile the Government has been trying to push through its Work and Family Bill, which plans from April 2007, to give women nine months’ paid maternity leave – instead of the current six.  Many, however, are arguing against the proposals on the basis that they will put too high a burden on business and will cause a backlash against women, with employers simply not employing women of childbearing age. In contrast to the British approach, Norway, in a radical initiative, has proposed laws whereby the 500 companies listed on its Stock Exchange face being shut down unless they install women on their boards over the next two years.  In the UK, Civitas, the independent think tank, controversially reported that minorities are hiding behind political correctness in order not to confront truths about themselves.  Accordingly Civitas argues that sex discrimination is put forward as the reason why women’s pay is less than men’s, when in fact the reason is work/life choices, childcare responsibilities.

Whatever your views, discrimination cases make press headlines.  Employers, grappling with topical discrimination issues…promotion prospects, flexible working…should be careful not to forget a fundamental question – what if female employees are being paid less then their male colleagues?

The equal pay claim

The equal pay claim is one of the least understood sex discrimination claims, but is becoming increasingly popular.  City institutions should not be complacent.  They operate in a traditionally male dominated environment, where pay/bonus structures are often opaque.

The Equal Pay Act 1970 outlawed pay discrimination.  It implies an equality clause into every contract of employment in establishments in Great Britain.  This dictates that a woman (or man) is contractually entitled to equal pay with every man (or woman) in the same employment who is doing like work, work rated as equivalent, or work of equal value, unless the difference in pay is genuinely explained by something other than sex.

What is pay?

• Under the Equal Pay Act pay includes wages and other contractual benefits (e.g. allowances, pension benefits).  A claim for non-contractual benefits (e.g. discretionary bonus) should be brought under the Sex Discrimination Act 1975.

Who is protected?

• All workers at any establishment in the UK are covered, including employees, the self employed, partners and contract workers.

The comparator

• To bring a claim an employee must choose one or more comparators of the opposite sex in the same employment.  The comparator must either be employed at the same time, or may be a successor or predecessor.  A hypothetical comparator cannot be used.  Employees often select more than one comparator in order to avoid the claim failing if the comparator turns out to be inappropriate.  However the courts have warned against employees abusing the procedures by choosing too wide a range of comparators.  In practice, the comparative assessment can prove complex (what is a job of equal value?), and an independent expert is frequently instructed.

The meaning of like work, work rated as equivalent, work of equal value

These are key concepts under the Equal Pay Act.

Like work

This is where the work of the claimant and comparator is the same or broadly similar. 

Work rated as equivalent

This is where the jobs have been given equal rating under a job evaluation scheme.

Work of equal value

This is not defined by UK or European legislation.  Whether a job is of equal value is determined by the Tribunal, usually with the assistance of an independent expert.  Unless a job evaluation scheme has clearly rated the respective value of the jobs, claimants will need to prove that they are either doing like work or work of equal value.  Where jobs are very different in nature it can be very difficult to ascertain the relative value of the different occupations.  Experts are generally appointed by the Tribunal in equal value cases to asses the jobs under headings such as effort, skill, decision-making.  However, even for an expert, the exercise is not straightforward. It is also difficult where the claimant and comparator are in a very sophisticated, technical field of work not easily understood by the layman where it may be difficult to appreciate the effort, skill and decision making taken by each.

Genuine material factor defence

An employer can defeat an equal pay claim by showing that the difference in pay is explained by something other than sex – i.e. a genuine material factor not coloured by sex discrimination.  This is a crucial point for employers where the work of claimant and comparator are considered equivalent.

Time limits

There is no time limit for an existing employee to bring equal pay proceedings.  However, where employment is terminated a claim must be brought within six months of termination of employment (this can be extended in certain circumstances, for example, where an employer has deliberately concealed any factor relevant to the claim).

Remedies

If a claim is successful the Tribunal has the power to:

1. make a declaration;
2. equalise contractual terms for the future;
3. award compensation of arrears of pay;
4. award damages if appropriate.

Arrears or damages for equal pay can be awarded for up to six years before the date when the proceedings were instituted.  Therefore the financial impact of an equal pay claim on an employer can be substantial, especially if the comparator was earning a significant sum. 

Equal pay cases in practice and preventative measures

Equal pay cases are usually onerous for employers, being complex and frequently long (for example especially if an independent expert is instructed).   Notoriously long and involved, claims force employers to look into their pay practices and reveal sensitive information.  They are also often linked to a sex discrimination claim, which in itself is a time consuming and costly claim for an employer to defend.  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.  The financial impact of the claim can be substantial. 

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 any 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 it provisions.  However, beware.  The Code recommends that employers carry out equal pay reviews.  Although a Tribunal may look favourably on an employee who has taken this step, it should only be done if you are dedicated to tackling any problems, otherwise you may just create evidence which will just be used against you.