Equal pay reviews: the legal framework
Section 2 of the Personnel Today Management Resources one stop guide on equal pay reviews. Other sections.
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Manage equal pay claims and requests for information from workers Check your organisation's compliance with legal requirements Inform line managers and respond to queries on equal pay issues Make presentations to senior management on compliance Prepare for possible changes to the
law on equal pay |
Q. Where does the right to equal pay come from?
A. The principle that a woman is entitled to equal pay for equal work or work of equal value is enshrined in both European and British law.
Article 141 of the Treaty of Amsterdam, formerly Article 119 of the Treaty of Rome, requires member states to ensure men and women receive equal pay for equal work. It does not confer on women the right to completely equal terms with male comparators - it applies only to "the ordinary basic or minimum wage or salary and any other consideration, whether in cash or kind, which the worker receives directly or indirectly, in respect of his employer or employment." This includes pensions.
The Equal Pay Directive (75/117/EEC) supports and explains the practical application of the principle of equal pay, namely the elimination of sex discrimination in pay systems.
The Equal Pay Act 1970 (EqPA) was passed to implement then Article 119 in the UK, and case law decided under the European Treaty can be used to interpret the EqPA. British workers can bring claims under either piece of legislation. The EqPA entitles a woman doing equal work or work of equal value to that of a man in the same or associated employment to equality in pay and terms and conditions under the terms of her employment contract.
Q. How does the EqPA work?
A. The Act implies an 'equality clause' into every worker's contract. The clause covers all aspects of the contract, including basic pay, bonuses, access to and benefits under pension schemes, hours of work, sick pay, benefits, overtime rates, redundancy pay, and fringe benefits such as company cars. This equality clause entitles the woman to contractual terms and conditions as favourable as those of a comparable man or men (see below), unless the employer can show the difference is due to a "genuine material factor" other than sex.
An complainant can claim that either one or more of her terms is inferior to that in the comparable man's contract, or that the man's contract contains a favourable term that is not in her contract. What is more, she can do this even if she has other terms that are superior to his - the law does not generally allow the employer to offset less favourable terms in the woman's contract with more favourable ones. But the courts have allowed employers to use the superior benefits to establish a "material factor"defence on the grounds that those are the non-discriminatory cause of the unfavourable term in question.
Q. Who can claim a right to equal pay?
A. The right to claim equal pay is not confined to employees. It covers anyone employed at an establishment in Britain under a contract of service, an apprenticeship or a contract to execute any work or labour. This covers consultants, freelancers, independent contractors, temps and other casual workers. Both men and women can claim, although it is usually women who claim the right. This section will assume that it is a woman who is bringing a claim.
Q. What is the time limit for bringing a claim?
A. Individuals can bring a claim under the EqPA any time up to six months after leaving the employment of the employer (not the post in question).
A recent amendment to the Act states that where someone is employed on a series of contracts within a stable employment relationship, the time limit runs from the end of the employment relationship rather than from the end of the relevant individual contract.
It is up to the complainant to ensure she brings her claim within the time limit and this time limit can only be extended where the employer has deliberately concealed the existence of pay inequality from the complainant, or the complainant is a minor or of unsound mind.
Claims under the Sex Discrimination Act 1975 (SDA), such as a claim for indirect sex discrimination, must be made within three months of the act of alleged discrimination, unless the tribunal thinks it is just and equitable in all the circumstances to extend the time limit.
Q. Who can the complainant compare herself with?
A. She can only compare herself with members of the opposite sex. There are two parts to choosing the correct comparator. The first is deciding whether the man (or men) the complainant wants to compare herself with is employed by the same or an associated employer or in the same establishment or service. The second is whether the work they do is comparable.
The complainant can choose a comparator from someone working at the present time, a predecessor, however long ago he did the job, or even her successor. A recent tribunal allowed a complainant to compare herself with a colleague from eight years before.
Q. Does the comparator have to work at the same workplace?
A. No. The comparator can be:
Q. How can work be compared?
A. The second part of finding a comparator is to decide whether the person or people in question are doing either:
It is the third type of comparison that accounts for the notoriously long and complex cases associated with the EqPA.
Deciding if different types of work are of equal value is usually done by an independent expert and it can take years just to get past this preliminary stage. The expert will use an analytical approach similar to that used in a job evaluation scheme, looking at what is actually done in the job day-to-day, and what it demands of the workers, rather than what the job descriptions say. As jobs change over time and job descriptions are often outdated, it is wise to carry out regular updating via staff appraisals to ensure they are accurate.
Equal value comparisons that have succeeded include cooks, carpenters, kitchen assistants and refuse workers.
Q. How can we defend an equal pay claim?
A. The employer can argue:
Q. Can a job evaluation scheme defence be challenged?
A. Yes, the scheme can be challenged as discriminatory in itself if it fails to include or take into account a factor that is an important element in the woman's job, or if it gives unjustifiable weight to an element that is more typical of the man's job, such as heavy lifting or physical demands.
A woman may also challenge the scheme on the grounds that it awards fewer points to a factor in her job than one in his, when it should have awarded the same or more.
Q. How can we prove the genuine material factor defence?
A. The factor put forward as an explanation of the difference in pay must be significant, must be the real reason for the difference, and must not be connected with the sex of the people doing the jobs. The employer would be expected to provide documented evidence on these points - such as to show that it was a genuine reason and not just a sham or a convenient excuse.
Whether a particular defence will succeed depends on all the circumstances of the case. Geographical explanations such as London Weighting are likely to succeed, as are extra payments for night shifts. Arguing there are different market rates of pay for different specialisms or skills has worked in some cases but not in others. Offering more money to attract recruits after a poor advertising response may or may not be accepted. Seniority, qualifications or length of service may be accepted, as may red-circling - salary protection for workers who are redeployed after, say, a redundancy exercise at a lower grade - if it is reasonable, and short term. The important thing is that the reason behind the decision to reward differently should have been documented at the time, so that evidence can be produced to the tribunal.
However, even where the employer produces a genuine material factor, the complainant may argue that the factor is indirectly discriminatory under the SDA - if it is a provision, criterion or practice that acts to the detriment of a considerably larger proportion of one sex than the other, requiring objective justification from the employer. For example, if the employer shows that the difference in pay is due to length of service, it may be open to the complainant to argue that this indirectly discriminates against women if far fewer women than men can accrue the necessary length of service due to their greater caring responsibilities.
Where the applicant establishes a case of indirect discrimination, the employer will have to prove that its provision, criterion or practice was "objectively justifiable". This is a higher standard of proof than the genuine material factor defence. The employer must show not only that its purpose was to meet a real business need, but that the factor was both necessary and an appropriate way of meeting that need - that it did not go beyond what was necessary.
Significantly, the rules on the burden of proof in sex discrimination cases changed under the Burden of Proof Regulations 2001. They say that where the complainant produces evidence from which the tribunal can conclude a prima facie case of discrimination, it is for the employer to prove that there is a non-discriminatory explanation for the treatment. The complainant will be expected to produce facts and figures. Once discrimination has been inferred, the employer must be able to provide cogent evidence to rebut it.
In the case of Barton v Investec Henderson Crosthwaite Securities, the EAT said it was critical for employers to be able to explain their pay structures and practices. Transparency is key - pay and benefits should be capable of being explained to and understood by everyone.
Q. How does the new equal pay questionnaire fit in here?
A. The questionnaire, introduced on the 6 April 2003, is designed to help people find out whether they have an equal pay claim.
It is intended to help establish key facts early on and make it easier to resolve any disputes in the workplace. It should also help, in the event of a tribunal, the complainant to meet the time limits under the EqPA and the SDA if necessary, to present their information in the most effective way and to make proceedings simpler. Copies of the questionnaire and response form are available on the website, www.womenandequalityunit.gov.uk.
In practice, the questionnaire works in much the same way as other discrimination questionnaires. Employers are not under a statutory obligation to provide answers, but an employment tribunal will be entitled to draw inferences from a deliberate refusal to answer or an evasive reply. There is an eight-week time limit for replies.
The EAT in the Barton case emphasised that an employer's failure to respond adequately to a questionnaire could be taken into account by a tribunal deciding if there is a case of discrimination to answer. For example, it would be open for the tribunal to conclude that the employer did not provide a proper explanation for a difference in pay because there was no genuine reason for the difference.
The response form gives space for the employer to explain why it has not answered a particular question. Where the employer gives a reasonable explanation for failing to respond to a particular question, such as the need to keep certain information confidential, the tribunal is not entitled to draw inferences from the refusal to disclose.
The questionnaire contains a small number of standard questions - whether the complainant has received less pay than their comparator and, if so, why; and a question on whether the employer agrees that the people being compared are doing equal work or work of equal value.
There is also space for the complainant's own questions, along with guidance on questions they may want to consider asking.
Q. What sort of information are we likely to be asked for?
A. It is worth considering how you would respond to requests for details of:
Q. What if we are asked to disclose confidential information?
A. The Government and EOC guidance says employers "are expected to answer the questionnaire as fully as possible", and that it is up to the employer to decide how much information they can give.
The questionnaire does not override the common law duty of trust and confidence employers owe to their employees under the contract of employment. Employers must also consider their duties under the Data Protection Act 1998, which would require individual consent before an employer could disclose confidential data on workers. Pay records will usually be classed as personal data under the DPA, and other possible issues such as ethnic origin and medical details are sensitive personal data which is even more highly protected.
In many cases, the guidance suggests, employers should be able to answer questions while maintaining the anonymity and confidence of individual employees - for example, by describing groupings on a pay scale, or confirming that a comparator's pay is above a certain rate. It suggests giving as much general information as possible about the pay system, such as job descriptions, how jobs are graded, and how skills and experience are reflected in the pay system. However, the EOC points out that this is a developing area of law and, if in doubt, an employer should seek advice from a lawyer and/or the Information Commissioner at www.informationcommissioner.gov.uk.
Further guidance and advice on responding to the questionnaire and on equal pay and discrimination generally is available from the EOC website at www.eoc.org.uk.
Q. What happens if a woman succeeds in her equal pay claim?
A. She is entitled to:
Q. How far can compensation for a successful equal pay claim by backdated?
A. In July 2003, the Government amended the EqPA to set a six-year limit for equal pay arrears (except in Scotland, where it is five) instead of the two years previously recoverable. This followed a ruling by the EAT in Levez v TH Jennings (Harlow Park) Ltd. In addition, the tribunal may also award interest on the award.
The House of Lords, following a reference to the ECJ, went even further in relation to access to occupational pension schemes in the group of cases known as Preston v Wolverhampton Healthcare NHS Trust, ruling compensation could be backdated to 1976 - the year that the ECJ first established that equal pay claims could be brought under European law.
However, the new rules also allow that where the employer deliberately concealed relevant facts or that the claimant was subject to a disability at the time of the discrimination, the compensation can be backdated to the date of the contravention - in some cases, this could mean the full length of service.
Some legal experts believe this opens the way for a union challenge to the EqPA in the European courts and the prospect of much longer backdating in many equal pay claims. They say it could be open to the unions to argue that a lack of transparency in pay systems is tantamount to a concealment of gender pay differentials, thereby allowing compensation to exceed the six years laid down in the EqPA.
Q. What other changes to the law can we expect?
A. The Government has long been considering amendments to the procedure in equal value cases to make them less time-consuming and costly.
While amendments were included in the draft Equal Pay (Amendment) Regulations 2003, when these came into force on 19 July 2003, the relevant provisions had been removed. Further consultation is now expected imminently. Proposals could include simplifying the claims procedure in multiple claims; allowing tribunals to appoint an assessor to sit on the tribunal as a formal expert adviser; and removing the unnecessarily detailed separate rules of procedure for equal value claims.
Find out more
EOC Draft Code of Practice on Equal Pay - www.eoc.org.uk
XpertHR Employment Law Reference Manual
Equal Pay Questionnaire and Guidance - www.womenandequalityunit.gov.uk, www.eoc.org.uk
Workplace Guidance on Amendments to the Equal Pay Act and Sex Discrimination Act 2003 - www.womenandequalityunit.gov.uk
