Equal Pay and Wilson Equality At Last

There has been a rapid increase in equal pay claims over the past five years, and it remains the single most significant development for practice in general. The number of equal pay cases reaching the appellate courts has subsequently proliferated. [1] The landmark case of Wilson v Health & Safety Executive [2009] [2] is likely to add to this magnitude of litigation.

Equal pay legislation is ultimately derived from Article 141 of the European Union Treaty. [3] It is a fundamental principle that there should be equal pay for equal work, or work of equal value, for men and women. [4] This principle was exemplified in the case of Lawrence v Regent Office Care Ltd [2003] [5] , and in Defrenne v Sabena (N02) [1976] [6] the European Court of Justice held for the first time that Article 141 has direct effect, which confers rights on individuals which they can invoke before the national and community courts. [7]

The legislation which governs equal pay in the United Kingdom is the Equal Pay Act 1970, which came into force on the 29th December 1975. This has an implied equality clause via s.1(1) which states that a woman can claim equal pay with a man, where she works in the same employment as he does or that their employment is regulated by a single source [8] , and either:

She does like work, which is essentially work of the same or broadly similar nature (s 1(2)(a)); this can be interpreted widely, as emphasised in the case of Capper Pass v Lawton where a sole female cook who cooked for ten to twenty people per day, was deemed to be doing like work as two assistant male chefs preparing three hundred and fifty meals per day ;

She does work rated as equivalent with a man under a job evaluation scheme (s 1(2)(b)). In Bromley v H K Quick it was held that only an analytical job evaluation would be sufficient, based on objective factors.

OR

She does work of equal value with a man (s.1(2)(c)), this additional amendment was implemented following the decision in E.C. Commission v United Kingdom, this means that a woman’s job can be compared with that of a man who is doing completely different work, as long as she works in the same company as him. If the woman’s job is found to be of equal value to his, then her pay must also be equal.

The Equal Pay Act 1970 also covers men who want to bring an equal pay claim; thus, it is not limited to women. The claimant must identify a comparator, who is of the opposite sex and is paid more than them; the claimant has discretion to choose their comparator, as decided in Ainsworth v Glass Tubes [1977]. [9] Pay is construed widely and covers all aspects and conditions of remuneration, including travel concessions, [10] as recognised in Garland v British Rail [1983]. [11]

The employer may have a defence if they can show that the difference in pay is genuinely due to a material factor which is not related to sex. Both of these elements must be satisfied for the defence to be sufficient, as set out in section 1(3). A frequently used justification for pay disparities between employees is the length of service at the establishment. [12] In Danfoss it was assumed that service-related benefits were justified and that they did not have to justify any pay differences between men and women in any event. [13] The theory was that length of service accompanied experience, which in turn enabled employees to perform their jobs to a higher standard than those with a shorter service history.

When the European Court of Justice gave judgment in Cadman v HSE they left open an important point on the controversial question regarding the status of length of service payments in equal pay law. Conforming with previous case law, they held that usually such payments are justified, but added the qualification that the employer may have to show objective justification if the claimant provides “evidence capable of giving rise to serious doubts as to whether recourse to the criterion of length of service is, in the circumstances, appropriate to attain the objective”. [14] This created a high hurdle for claimants attempting to bring equal pay claims; they could only use the exception if they could show that the service related pay increments truly reflected the experience of the comparator, and that they were rewarded for this accordingly. [15] However, the landmark case of Wilson v Health and safety significantly altered the existing law in this area. This ultimately means that it will be easier for claimants to question length of service as a justification for pay schemes.

The facts of the case are as follows: The claimant, Mrs Wilson, was employed as a band 3 inspector by the appellant, the Health & Safety Executive. She made her initial claim for equal pay in July 2002. Her pay was governed by a pay scheme which fixed increases in pay according to length of service over ten years, after which no further increases were awarded. She was paid less than three male Band 3 inspectors at the company; these were used as comparators and their work was rated as equivalent to hers under a job evaluation scheme for the purposes of s 1(2) (b) of the Equal Pay Act 1970. Mrs Wilson argued that the pay scheme was not objectively justified.

The Court of Appeal identified three legal issues which would need to be addressed:

1. Whether the employer has to justify the use (as opposed to the adoption) of a length of service criterion; [16]
2. When must an employer justify the use of service criterion and what amounts to serious doubts? [17]
3. Whether a service related criterion falls under the Equal Pay Act 1970 so that the onus is on the employer to prove proportionality? [18]

In relation to the first legal issue, the Court of Appeal stated that an employer can be required to provide objective justification not only for the initial adoption of length of service as a criterion in setting pay, but also for the particular way in which an employer uses or applies that criterion. [19] They reiterated that the concept of proportionality is an integral part of objective justification in community law and the right to pay is a fundamental right under the Treaty of Rome and should be given effective protection. If employees were unable to challenge the particular use of a length of service criterion (as opposed to its initial adoption) then this would be illogical and unfair, it would produce inadequate protection for women who are disadvantaged by the disproportionate use of such a criterion.

In relation to issue two, the Court of Appeal was concerned that the Court of Justice in Cadman was using the serious doubts test as a filter on claims, because it was set at a high level. Thus, they decided that the serious doubts test should be lowered and only applied before the trial, not whilst it was commencing. [20] Therefore, the test will be satisfied if the employee can show that there is evidence from which, it could properly be found that the general rule in Danfoss and Cadman does not apply.

Finally, in relation to the third issue, the Court of Appeal specified that the onus of showing objective justification, which entails proportionality, is on the employer and there is no additional hurdle or onus on the employee in a case involving a challenge to length of service criterion, to show serious doubts. [21] However, there is no reason under the Equal Pay Act why an employee should not be required to satisfy the low evidential burden identified by the Court of Appeal as being the correct interpretation of the serious doubts test in Cadman. That burden does not amount to a switch of the burden of proof, but is no more than a sensible evidential requirement on the employee to show that the complaint has some prospect of success. Overall, the appeal was dismissed and Mrs Wilson was triumphant in her claim. [22]

The decision in Wilson re-ignites the whole debate over service related pay scales and whether they unfairly discriminate against women who may have family commitments disenabling them to gain a lengthy service history on par with their male comparators, thus, highlighting a variety of implications for practising employment lawyers in future, equal pay litigation.

As with any case which alters the existing law, it could inevitably lead to unpredictability within the field of equal pay. It leaves unanswered questions, which will only be answered by the next tide of litigation. For example, once a requirement of justification arises, just how interventionist should a tribunal be in deciding how long a pay spine an employer is permitted to have? If it was twenty years long and the tribunal recognised that it would only take five years maximum to gain optimum experience, fair enough; but what if the spine in such a case was only six or seven years long. Should the tribunal strike it down? In European terminology, what margin of appreciation is the employer to be given? [23]

Practising employment lawyers will need to alter the way in which they advise employers about implementing service-related pay schemes. They will need to advise them prudently, because the Court of Appeal suggested that the employee now only needs to cross a lower threshold to require the employer to justify not only the existence of the service-related pay scheme, but its application. Employers must be warned that they will find it problematic to defend this type of pay in jobs where employees learn the main skills required relatively quickly and there is minimal evidence that longer service has a beneficial impact upon the job performance. [24] They must astute to ensure that the general rule does actually apply in their particular circumstances, and that any use of length of service as a pay determinant is proportionate to the value of the additional experience, which their particular employees gain with a longer service record.

Employers must be advised to modernise and simplify their pay structures with the need to protect the pay and conditions of their workforce as a whole, or review existing pay schemes which reward length of service and consider whether they genuinely reflect experience-related performance improvements, to try and alleviate discrimination. [25]

The decision in Wilson is important for employment lawyers because it reiterates the principle that Community law cannot be used to restrict the meaning or effect of domestic legislation, where the latter offers the greatest protection to employees than the former does. Community law does not set the ceiling, for protection in relation to equal pay. In North Cumbria Acute Hospitals NHS Trust v Potter [2009] an employer attempted to use Community law to restrict the protection provided form the Equal Pay Act 1970, however, this recent Judgment in Wilson is likely to prevent such attempts in the future. [26]

In conclusion, although the case of Wilson has made it easier to challenge the injustices which may be experienced by women in service related pay schemes; there still remains a capacious gap in equal pay cases between men and women. This led the Equality and Human Rights Commission to conclude that the Equal Pay Act is archaic, no longer fit for purpose and in need of a radical reform. [27] The Equality Bill was therefore introduced to alleviate these problems, and if it does become an Act in 2010, it will have implications on financial institutions with obligations of openness in pay schemes. [28] To promote transparency, employers could be forced to publish figures in their annual accounts, thus enabling people to ask questions about the gender pay gap, [29] and if the employers refuse to contribute, they could be named and shamed in an annual report. [30] Baroness Morris believes this Bill will give the current legislation some teeth by forcing a much needed culture change within companies, which will benefit many female employees across the United Kingdom. [31] As Trades Union Council General Secretary Brendan Barber states: “Until employers are made to show why they pay different workers at different rates, and justify any discrepancies based on gender, the pay gap will never close.” [32]