Explore the legal position in the UK surrounding equal pay as well as good employment practices
Here we list a selection of key cases on equal pay claims, providing a summary of the decision and implications for employers.
Haq v Audit Commission | Court of Appeal | 6 Dec 2012
 EWCA Civ 1621
Issue: Pay protection
Two different administrative roles in the Audit Commission were amalgamated into a new single role. Following the restructure, all 11 employees mostly retained their previous pay point but the result was that two male employees were paid more than the nine women. This pay protection policy was different from usual ‘red circling’ because the pay point was preserved permanently and there was no intention to phase out the pay differential over time.
The nine women launched equal pay claims in respect of the pay difference. The employer conceded that the women and their male comparators carried out like work following the restructure. The only issue was whether or not the Audit Commission had a material factor defence based on the male employees’ previous senior roles giving them a higher pay point. The Court of Appeal had to decide if this permanent pay protection arrangement was indirectly discriminatory. It decided that the arrangements did amount to indirect sex discrimination but that this was objectively justified because the employer had legitimate aims. Those aims were to prevent the employees suffering a reduction in pay and staff retention following the restructure. The policy was proportionate in this case.
Implications for employers
- This case confirms that pay protection arrangements can be lawful, and that although phasing out pay differentials over a period of time is often advisable it is not always essential.
- Employers should always consider if the pay protection will perpetuate historical discrimination. Pay differential based on past discrimination would be unlawful.
- Pay protection will provide employers with a valid material factor defence in some cases, depending on the precise circumstances.
- Indefinite pay protection arrangements are still best avoided as a less discriminatory means is often to phase out the differential over time. Although it was proportionate not to do this in this case, another court may find that it is proportionate to phase it out.
- Employers may consider undertaking voluntary equal pay audits and reporting gender pay gaps following the EHRC voluntary scheme for reporting on gender pay gaps.
- Employers should comply with their equal pay policies and equal opportunities policies.
- One of the experienced judges in the case (a former president of the Employment Appeal Tribunal) emphasised the expensive and unpredictable nature of equal pay cases and promoting negotiation as a means of saving time, effort and money in equal pay claims. The judge took stock of 30 years of equal pay litigation which has not removed sex discrimination in pay and commented that courts may not be the best places in which to end the injustice of workplace discrimination.
Kenny v Minister for Justice Equality and Law Reform | European Court of Justice | 29 Nov 2012
 EUECJ C-427/11
Issue: The principle of equal pay for male and female workers for equal work or work of equal value must be applied
EU Article 141 of the EC Treaty provides that all member states of the European Community (including the UK) must apply the principle of equal pay for male and female workers for equal work or work of equal value.
A group of female civil servants in the Irish Police Force (Garda) claimed for equal pay, as they were paid less than the male officers who also carried out clerical work. The pay of both groups was following a reorganisation and because of the category of civil servant to which they belonged. The Irish Labour Court found that there was indirect discrimination but that this was justified because there had been a deployment of police officers to perform clerical duties and there was an industrial relations need to have certain clerical roles reserved to the Garda officers.
The Irish High Court eventually referred questions to the European Court of Justice (ECJ). Essentially, the key issues concerned how to approach objective justification in equal pay claims. If there is indirect gender discrimination in pay between two groups of employees who are doing the same job, can objective justification be established by relying just on good industrial relations concerns?
The European court of Justice (ECJ) held that an employer’s industrial relations concerns cannot be the sole reason of justification for indirect sex discrimination. It may, however, be one of the factors which will be considered. The ECJ also stated that it is a matter for the national court to determine to what extent industrial relations concerns may be taken into consideration to justify a prima facie case of indirect pay discrimination.
Implications for employers
Employers should completely avoid discriminating between employees of a different gender with respect to the amount of pay awarded. However, if indirect discrimination still occurs inadvertently, it may be possible for employers to legally defend or justify this in limited situations.
An employer’s actions will not amount to indirect discrimination if there is ‘a proportionate means of achieving a legitimate aim’.
This case shows that employers can use good industrial relations as one of the grounds when considering the issue of justification and showing a proportionate means of achieving a legitimate aim.
However, good industrial relations cannot constitute the only basis for justifying indirect discrimination.
Employers undertaking a reorganisation which will result in one group of employees having higher pay than another should undertake an analysis of whether the aim it is trying to achieve is legitimate, and if the method of achieving the aim is proportionate.
Birmingham City Council v Abdulla | UK Supreme Court | 17 Oct 2012
 UKSC 47
Issue: Time limits
This case is part of a multiple equal pay claim brought by over 170 former employees of Birmingham City Council. The women were employed in roles such as cooks, cleaners and care workers and did not get the bonuses the council paid to employees in traditionally male-dominated jobs such as street cleaners, road workers and grave diggers. Although their basic salaries of £10,000 and £15,000 a year were the same, only the traditionally male jobs attracted bonuses. For example, a male Manual Grade 2 employee earned around £30,500 including bonus whereas a female on the same grade only received around £11,000 without bonus.
Such equal pay claims usually are brought at an employment tribunal. The women presented claims in the county court because many of them had missed the six-month time limit for presenting equal pay claims at an employment tribunal. They therefore brought their claims as breach of contract claims in the county court. A claim for equal pay is always a claim for breach of an employee’s contract, as modified by the statutory equality clause and that claim may be brought like any other contract claim in the civil courts. In such a case, the limitation period is the normal limitation period for breach of contract claims, that is six years.
The Supreme Court agreed the women could present their claims as a breach of contract claim and benefit from the six-year time limit. They were not abusing the court process and would have no other redress available if not permitted to proceed in the civil courts.
Implications for employers
- The case has huge implications for at least 1,000 other Birmingham City Council employees who left in the last six years, as well as for employees of other local authorities.
- The Equal Pay Act 1970 has been replaced by the Equality Act 2010. However, the same time limits and same principles apply.
- The vast majority of other employers will be vulnerable to equal pay claims in the civil courts as breach of contract claims with a six year time limit.
- Employees will have the right to bring claims in the county or High courts if they are too late to pursue their claims in an employment tribunal.
- This case is therefore bad news for other employers faced with a history of possible equal pay claims in cases where the time limit may otherwise have expired.
- It is still open to employers to argue that the more appropriate forum is the employment tribunal. However it appears that this argument may not succeed in many cases.
- Employees still cannot rely with certainty on letting the employment tribunal time limits go by in order to ensure that their equal pay claims are heard in the courts.
- The expiry of the employment tribunal limit is a factor of considerable weight in most cases in favour of allowing claims to proceed in the civil courts.
- An employee’s reasons for not bringing claims in an employment tribunal are unlikely to make any difference if there would be no abuse of process in exercising the right to institute proceedings in the civil courts.
- The reason why the claimants had not brought employment tribunal claims will be relevant only in ‘exceptional cases’ where the employers argue that it would be an abuse of process for a claimant to present an equal pay claim in the civil courts.
- If an employer can show abuse of process the employee may be prevented from benefiting from the longer time limit. However it is not clear what will be serious enough to constitute an abuse of process.
- To prove their equal pay claim employees will still have to demonstrate that the difference in pay is connected to sex. Those with weak claims will be vulnerable to a more punitive costs regime in the civil courts than an employment tribunal.
City of Edinburgh v Wilkinson | Court of Session | 15 Nov 2011
 CSIH 70 CS
Issue: Equal pay comparators
A number of women employed by a council in a range of jobs in schools, hostels, libraries and social work brought equal pay claims. Their comparators were manual workers, including gardeners and refuse collectors.
The Inner House of the Court of Session (CS) had to consider the definition of ‘establishment’ and employment on common terms and conditions for the purposes of the old Equal Pay Act 1970. The CS held that the female claimants could compare themselves with the men employed on common terms and conditions, but working in different locations, even though they were not at the same establishment. The CS said that the two groups were employed on common terms and conditions.
Implications for employers
- Best practice suggests that all employers should consider pay audits to check their organisation’s pay structures are transparent and non discriminatory.
- Employers who avoid audits are increasingly vulnerable to equal pay claims.
- Pay audits must consider the difference in pay between different jobs undertaken by an equivalent male and female.
- Desk-based workers can compare their work with a group of manual workers for the purposes of an equal pay claim.
- Workers based in different locations can compare themselves with workers based in other locations for the purpose of an equal pay claim.
- This case relates to the Equal Pay Act 1970, which has now been replaced by the Equality Act 2010 which uses different wording to the expression ‘same employment’ but the equal pay code of practice still states that the comparator must be in the ‘same employment’ as the claimant, so it is likely that decision is still helpful.
- Employers must show that the amount of any pay differences is proportionate and that the reason for the pay difference is unrelated to sex and appropriate and necessary
- As long as an employer can be identified as a single source responsible for setting the pay terms of both the employees and their chosen comparators, then a valid comparison may be made (this predominantly affects those in the public sector).
Skills Development Scotland Co Ltd v Buchanan | Employment Appeal Tribunal | 25 May 2011
Issue: Equal pay – TUPE transfer
Two female employees made equal pay claims on the basis of a difference of approximately £10,000 between their pay and the pay of a male comparator. These employees and their comparators had over the years been employed by different employers, but as a result of separate TUPE transfers they all ended up being employed by Skills Development Scotland Co Ltd. The TUPE transfers had occurred six years before the claims. It was agreed that the jobs of the female employees and the comparator were of equal value for the purposes of Equal Pay Act 1970 (now section 65 of the Equality Act 2010). The female employees therefore had the right to receive the same contractual terms as their male comparator, in principle. However the employer argued that there was a ‘genuine material factor’ which was nothing to do with gender, namely the TUPE transfer.
The Employment Appeal Tribunal agreed with the employer that the pay differential was permissible because the TUPE transfer was genuine explanation for the difference in contract terms.
Implications for employers
- Employers who inherit employees on different rates of pay following a TUPE transfer will struggle to change the terms and conditions of the new employees they have acquired, unless there is an economic, technical or organisational (ETO) reason for the change.
- Employers should always take expert legal advice if pay disparities arise as a consequence of TUPE.
- An employer who complies with the TUPE legislation and preserves existing contractual terms and conditions which then results in a disparity in pay may raise a ‘genuine material factor’ defence to an equal pay claim.
- If employers can show a genuine explanation which is not a sham, for the difference in contract terms, then this will be a defence to an equal pay claim. As long as there is no sex discrimination then the employer does not have to, for example, freeze the pay of the male comparator.
- If the reason for the pay discrepancy meets the definition of a ‘genuine material factor’ then there will be a defence to an equal pay claim. The passing of time does not change this position.
- Employers should be aware that in other cases there may be indirect discrimination as a result of the pay differential in which case the pay differential would have to be objectively justified.
Gibson v Sheffield City Council | Court of Appeal | 10 Feb 2010
 IRLR 311
Issue: Equal pay – material factor defence
The female claimants who worked as carers, care workers and school meals staff were paid 38% less than male staff working as street cleaners and gardeners. Yet the Council had agreed that the work was comparable (and rated as equivalent within the meaning of the legislation).
The Council argued that the reason for the difference in pay was a productivity bonus introduced 40 years ago and that the predominantly female job roles could not be incentivised in the same way. The claimants argued that the Council had to prove a gender-free reason for the difference in pay.
The Court of Appeal held that the bonuses were discriminatory and referred the case back to the employment tribunal to decide whether the bonuses could be objectively justified by the Council. This will be hard for the employer to show as the probable reason for not paying the women the bonus is financial and European case law says government bodies (including local government) cannot rely on cost as a justification for discrimination.
The Council will seek permission to appeal to the Supreme Court.
Implications for employers
- Employers must keep good records and be clearly able to justify their pay decisions.
- Employers should consider undertaking equal pay reviews.
- Pay systems must always be transparent with clear criteria and process for determining pay awards and bonus payments, otherwise employers are open to costly claims.
- The burden of showing objective justification for the bonus does appear to shift to employers (at least on the facts of this case).
- Local authority employers currently faced with equal pay claims may now be less confident of relying on the Armstrong case as a defence. (The Court of Appeal did not say that Armstrong was definitely wrongly decided, but that it was hard to reconcile with Enderby. Armstrong does not apply where the claimants can show significant evidence of disparate impact on women anyway.)
- If an employer pays a lower salary for work which ‘rated-as-equivalent’ which has a disparate impact on women, the employer must adduce evidence to indicate that the difference in pay is not tainted by sex discrimination, rather than simply having to demonstrate that it can be objectively justified.
Please note: While every care has been taken in compiling these notes, CIPD cannot be held responsible for any errors or omissions. These notes are not intended to be a substitute for specific legal advice.
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