EQUAL PAY & DISCRIMINATION

MAY 2014

EQUAL PAY AND DISCRIMINATION

Bruce Frew

St Philips Chambers

My name is Bruce Frew and I am an Employment Barrister at St. Philips Chambers. We have

Chambers in Leeds, London and Birmingham. I am part of a team of twenty six Barristers who

specialise in employment law and by virtue of my area of specialisation I come across equal pay

claims on a regular basis. The area of equal pay is complicated and wide. This Webinar is limited

to thirty minutes of an explanation of the way in which discrimination acts as a factor in equal pay

claims.

SUMMARY OF EQUAL PAY LAW

The Principle of Equal Pay

The Equality Act 2010 (before 1 October 2010 the Equal Pay Act 1970) implements the principle

that men and women should receive equal pay for equal work, as set out in Article 157 of the

Treaty on the Functioning of the European Union (TFEU), into the law of Great Britain.

Equal Work

Anyone employed under a contract personally to do work is entitled to enjoy contractual terms that

are as favourable as those of a male comparator in the “same employment”, if they are employed

on equal work (that is, like work, work rated as equivalent or work of equal value).

Sex Equality Clause

The Law achieves this by implying a “sex equality clause” into a woman’s contract of employment,

which operates so as to place her less favourable term(s) with the equivalent of more favourable

term(s) of a man’s contract. Under the Equal Pay Act 1970 this was referred to simply as the

“equality clause”. Each term of the contract must be considered separately for comparison

purposes.

Material Factor Defence

The sex equality clause does not operate if the employer shows that the difference in contractual

terms is due to a material factor which is neither directly nor indirectly sex discriminatory. A factor

that is ostensibly gender neutral which, in practice, has a disproportionate adverse impact on

women will need to be objectively justified by the employer.

Maternity and Equal Pay

There are specific provisions aimed at protecting women’s pay during pregnancy and maternity

leave. A woman who has taken maternity leave must not lose the benefit of any pay rise that she

would otherwise have had, in calculating either her maternity pay or her pay on return to work.

Furthermore, she does not lose out on any bonus that she would otherwise have received during

her maternity leave, to the extent that it relates to the period before her maternity leave, any period

of compulsory leave, or the period after she returns to work. Again, these provisions operate by

way of an implied equality clause to amend the woman’s contract, but there is no need in such

cases for a male comparator to be identified. Under the Equality Act 2010 this is referred to as the

“maternity equality clause”.

Claims

Equal pay claims are usually brought in an Employment Tribunal, which can make a declaration of

the claimant’s rights and require payment of any arrears of pay or damages for breach of a non-

pay term. However, in some circumstances a claim can be brought in the Civil Courts.

Equal Pay or Sex Discrimination Claim

On the initial analysis of a problem which is brought to me one of the first questions to consider is

whether or not an equal pay claim should be brought as opposed to a sex discrimination claim.

It is important for a potential claimant to establish at an early stage whether to bring a claim under

equal pay law or under discrimination law. The following factors should be considered:

(i) Treatment that consists of an offer of employment on terms which, if accepted, would

contravene an equality clause is actionable under discrimination law not equal pay law.

(ii) Contractual terms which, in the absence of a material factor defence or other exception,

would be modified or inserted by an equality clause are not actionable under the sex

discrimination provisions.

(iii) Pre-October 2010, treatment that concerned “benefits consisting of the payment of money

when the provision of those benefits is regulated by the woman’s contract of employment”

was not actionable under the Sex Discrimination Act 1975.

(iv) Post-October 2010, treatment that concerns “a term of a person’s work that relates to pay

but in relation to which an equality clause has no effect” is not actionable under the Equality

Act 2010 unless it amounts to direct discrimination under Section 13. The purpose of this

provision is to permit hypothetical comparators in direct discrimination claims relating to

pay.

Guidance has been provided to us by the Employment Appeal Tribunal in the case of Peake v

Automotive Products Ltd. [1977] ICR 480 as follows.

Examples of Matters covered by Equal Pay Law

• Basic pay.

• Automatic pay progression.

• Paid holiday entitlement.

• Sick pay.

• Hours of work.

• Performance-related pay and benefits, overtime rates and allowances.

• Non-discretionary bonuses.

• Contractual benefits in kind such as company cars.

• Pension benefits and access to pension schemes.

Examples of Matters covered by Sex Discrimination law

• The terms of a job offer.

• Promotions.

• Discretionary pay rises.

• Discretionary bonuses.

The Employment Appeal Tribunal’s guidance in Peake identifies that Employment Tribunals

should start by considering whether the claim is an equal pay claim. The guidance in Peake,

which referred to the Equal Pay Act 1970 and the Sex Discrimination Act 1975 as opposed to the

Equality Act 2010, was as follows.

Equal Pay Claims

The case had to be brought under the Equal Pay Act 1970 where the less favourable treatment

related to

• the payment of money regulated by a contract of employment;

• Some other matter regulated by the contract of employment, where the comparator was an

employee of the opposite sex who was doing like work, work rated as equivalent or work of

equal value.

Sex Discrimination Claims – a claim could only be brought under the Sex Discrimination Act

1975 if the less favourable treatment related to

• matters which were not included in the contract (either expressly or by virtue of the Equal

Pay Act 1970);

• matters in a contract, other than the payment of money, where the comparison was not

with workers doing like work, work rated as equivalent or work of equal value;

• matters, other than the payment of money, which were regulated by a contract of

employment but where the comparison was with a hypothetical comparator.

It is noteworthy that since the Equality Act 2010 a fourth bullet point should be added under Sex

Discrimination Claims as follows:

• contractual terms relating to pay where no equality clause applies and the comparison is

with a hypothetical comparator.

The Material Factor Defence

An employer can pay a man more than a woman for doing equal work, but only if it can prove that

the variation in pay is due to a material factor which is not directly or indirectly discriminatory. The

Equality Act 2010 refers to this defence as the material factor defence.

Of course, every defence will depend upon the facts of the case. Factors that have succeeded in

some claims have failed in others. Whatever the defence raised, the burden is on the employer to

prove that the material factor relied on is the real reason for the difference in pay, that it is

significant and that it is not related to sex.

Examples of material factors that might establish a defence depending on the circumstances are

as follows:-

• past performance

• seniority/length of service

• differences in the work (where they do not already render the work not “equal work”)

• different hours of work

• geographical reasons

• mistake

• different grades or points on a pay scale

• different collectively agreed pay scales for the jobs

• market forces and skills shortages

• pay protection arrangements following a job regarding exercise

• historical reasons

Establishing that the reason is material is not the end of the process. Often the hardest part of the

material factor defence is establishing that the factor is non- discriminatory. This is often referred

to in the case law as the question of whether the factor is “tainted by sex”.

In this respect the Equality Act 2010 and the Equal Pay Act 1970 have significant differences in

their wording. The Equal Pay Act 1970 merely required that the factor was “not the difference of

sex”. This was interpreted by case law as including in some circumstances an obligation to

objectively justify the material factors. The Equality Act 2010 attempts to codify the broad

principles of that case law and provides that:

• the factor must not involve treating the claimant less favourably because of her sex than

the comparator

• if the factor results in the claimant and other women doing work equal to hers being put at

a particular disadvantage when compared with men doing work equal to theirs, the factor

must be objectively justified as a “proportionate means of achieving a legitimate aim”.

The principles with regard to sex taint are summarised below.

Is the Factor tainted by Sex?

The burden of showing that the factor is not sex tainted is on the employer.

The Employment Appeal Tribunal has identified the following scenarios in which a factor may be

sex tainted.

• It is directly discriminatory – in other words, where gender played a role in the mind of the

decision maker.

• It is indirectly discriminatory – in other words the difference in pay results from the

employer applying a provision, criterion or practice that puts women at a particular

disadvantage compared to men.

• There are statistics which show “an appreciable difference in pay between two jobs of

equal value, one of which is carried out almost exclusively by women and the other

predominantly by men.”

If there is on the face of it indirect discrimination arising from a provision, criterion or practice, the

employer will lose unless it shows that the provision, criterion or practice is objectively justified.

Examples of Sex Taint

A causative link between the claimant’s sex and the difference in pay can be established in a

variety of ways, for example, as a result of job segregation or pay structures which disadvantage

women more than men because they generally work shorter hours or have shorter service.

Often, grading systems and pay scales, market forces, pay protection schemes and other

historical factors are themselves affected by the ingrained systematic inequalities that equal pay

law was intended to address. For example, a pay protection scheme put in place to smooth the

transition into a fairer pay structure may be held to be tainted by sex if its effect is to perpetuate,

albeit temporarily, existing sex inequality.

SUMMARY AND CONCLUSION

We are enabled to consider a small part of a large and complicated area of law. In doing so I

have identified the factors to take into consideration when considering a set of facts and identifying

whether a claim should be brought under equal pay legislation or discrimination legislation.

A primary factor to consider by any employer is the genuine material factor defence. I have

outlined how this can be established only in summary but with the important element of a

consideration as to whether there is a sex taint.

In the time that we have it is impossible to provide anything other than a brief summary which can

be used to springboard further detailed advice or indeed to refresh those of us amongst us who

have a certain knowledge of the areas of law.

Of course, I hope that this time has been of assistance and invite any of those who seek further

clarification of the areas of law or indeed any area of employment law to contact me outside of the

time constraints of this Webinar.

Good afternoon to you all.

© BRUCE FREW

MAY 2014

ST PHILIPS CHAMBERS

55 TEMPLE ROW

BIRMINGHAM B2 5LS

bfrew@st-philips.com

Bruce Frew

Call: 2005 Telephone the practice team: 0121 246 7015

Employment

Bruce has an extensive practise specialising in Employment Law. He is widely experienced

in all areas of employment law: Unfair and Wrongful Dismissal; TUPE; Breach of Contract;

Restrictive Covenants; Working Time Regulations; Victimisation and Redundancy (individual

and collective) as well as all types of discrimination, including: sex, race, pregnancy, sexual

orientation, religion or belief, age, and disability.

Bruce represents both Claimants and Respondents in equal measure and is instructed from

a variety of sources, including individuals, small undertakings, regional and nationwide

companies, trade unions and the public sector extending to Universities, Local Authorities,

and solicitors practices. He regularly appears in the Employment Tribunal, on matters

ranging from application hearings to multi day, multi-party, complex cases, and he has

appeared in the Employment Appeal Tribunal on numerous matters also. In recent years a

number of his EAT cases have been reported.

In addition to representation in tribunals Bruce undertakes both advisory and drafting work.

He has drafted and advised on a number of settlements, service agreements and

commercial agency agreements and has been involved in the negotiation on a direct access

basis of terms of settlement on the termination of employment. Bruce has also represented

parties in employment mediations, both judicial and non-judicial.

Bruce is accredited to take instructions on a public access basis and is happy to do so where

cases are suitable for instruction on this basis. Recently he has seen significant growth in his

direct access instructions.