3 Oct 2016

Many companies will have heaved a collective sigh of relief at the news just before Christmas that Stephanie Villalba, the former Merrill Lynch executive had lost her sex discrimination claim in the Employment Tribunal. Whilst Ms Villalba won her claim for unfair dismissal, this will result in an award of a maximum of £55,000. Several of her complaints of victimisation were also upheld, but compared to the claim for sex discrimination and equal pay, the award relating to these is likely to be relatively limited. A claim for sex discrimination, if successful, could have been potentially unlimited and it was reportedly worth £7.8m. Whilst the Tribunal gave a lengthy judgment it is clear that the crux of the matter was that the Tribunal was not satisfied that there was a “laddish culture” at Merrill Lynch, and found that Ms Villalba was dismissed for performance, rather than sex discriminatory, reasons. She had been dismissed by the same person who had promoted her into that position, and was replaced by a woman.

However, before HR managers get too complacent about the result of the case, there are some important lessons to be learned from the Tribunal’s judgement. Whilst the judgement is not binding on future cases (because it is only at Tribunal level), it does indicate the way the Tribunals are likely to treat other discrimination cases in the future:

• As part of her claim, Ms Villalba used comparators who were situated in other jurisdictions as the basis for one of her arguments. The Tribunal found that geographical location was not a material difference for those of her comparators located outside Great Britain. Merrill Lynch is a global organisation that considers its discretionary pay awards for employees at Ms Villalba’s level on a worldwide basis. The fact that the employees were employed by different companies within the Group was also irrelevant. Whilst the claims for equal pay and sex discrimination were ultimately unsuccessful, this does raise the possibility of employees being able successfully to rely upon comparators who are located in other jurisdictions for the purposes of bringing a discrimination or equal pay claim. The case is not binding authority on the point, but global organisations need to be aware that Tribunals may allow Claimants to rely upon comparators in other jurisdictions, and may therefore want to focus on whether any difference in pay between employees in different jurisdictions can be justified.

• The Tribunal criticised the manner in which the company’s solicitors had conducted some parts of the litigation and suggested that the “Respondents’ solicitors were purposefully seeking to make life difficult and expensive for the claimant and were extremely reluctant to disclose pay data that they would have known she was entitled to, until it became unavoidable”. Whilst this is of course the company’s right (provided that it supplies the information when it is required to do so by the Tribunal – usually during the course of disclosure), the Tribunal found that inferences could be drawn from the company’s reluctance to disclose this information at an earlier stage of the litigation process. Employers who are defending discrimination claims (and their advisers) would do well to bear in mind that they should not necessarily hold out until the last possible moment to disclose information which the Claimant is clearly entitled to receive. To do so could result in the Tribunal drawing inferences about the reasons behind the company’s failure to produce the information earlier. It could also have an adverse consequence in relation to costs.

• The Tribunal also criticised Merrill Lynch’s failure to enforce certain parts of its equal opportunities policy and the Equal Opportunities Commission’s statutory codes. The fact that the company had an equal opportunity policy was not enough to satisfy its obligations – in particular there was no systematic implementation of their equal opportunities policy and no monitoring of it. Appointments to senior positions were made by way of secret soundings and consultation conducted amongst a small group of senior managers – the Tribunal criticised the fact that there was not sufficient training in equal opportunities among the managers making those decisions. Employers would be well advised to look at their own equal opportunities policies and ensure that these are being implemented and monitored in practice – it is not enough simply to have a statement in the Employee Handbook if in practice it is not enforced. The Tribunal also suggested that the equal opportunities statement itself was not sufficient for an organisation the size of Merrill Lynch.

• Another point which the Tribunal touched on in its judgement is the question of transparency of bonus and salary decisions. Tribunals have on a number of occasions made it clear that they do not approve of bonus schemes which are opaque and in which it is difficult for employees to know whether or not they are being fairly paid. In this case, the Tribunal heavily criticised Merrill Lynch for its lack of transparency in the promotion and appointment system, the culture of secrecy and opaqueness regarding pay and the subjective approach to bonuses. These contributed to the Tribunal’s decision that Ms Villalba had established a prima facie case of direct sex discrimination, which meant that the burden of proof shifted to the employer, to show that there was no discrimination. Whilst in this particular case the Tribunal was then satisfied with the explanations given by the company, one can see that in another similar situation an employer may then fail to satisfy a Tribunal that no discrimination has taken place.

Although the company defeated the sex discrimination claim and the equal pay claim – the claims for unfair dismissal and victimisation succeeded. The criticisms which the Tribunal made of Merrill Lynch, whilst not resulting in a finding of sex discrimination or unequal pay in this particular case, should nevertheless ring alarm bells for HR practitioners in other companies where similar criticisms could perhaps be made. Ultimately Ms Villalba’s case may have failed because Merrill Lynch satisfied the Tribunal that she was dismissed for poor performance – not for sex discrimination. However, no doubt they are now looking at some of their internal procedures to avoid another claim on similar grounds succeeding in the future.

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