Equal Pay Law and Discrimination Claims

art 5, Chapter 3 of the Equality Act 2010 (EqA), which replaced the Equal Pay Act 1970, ensures that both women and men within the same employment receive equal pay for equal work. The principles of equal pay are derived from the European Equal Pay Directive.

The concept of ‘pay’ normally connotes some tangible benefit, whether expressed in financial terms or otherwise. It does not extend to non-economic loss, such as injury to feelings. It can include under occupational pension schemes, severance payments, and one-off payments made by employers in recognition of special events.

Section 66 of the EqA incorporates a ‘sex equality clause’ into an employee’s contract, which applies equally for the benefit of women and men. Any term in a contract that purports to exclude or limit any provision of the EqA is unenforceable.

To bring an equal pay claim a wo/man must be (or have been) “employed” under:

• a contract of service;
• a contract of apprenticeship; or
• a contract personally to do work.

Occupational pensions are deemed to include a ‘sex equality rule’ between men and women.

What does the EqA cover?

Discrimination

Where a fe/male employee receives less pay purely due to the fact of her/his sex, this will amount to direct discrimination. Even if a material factor is established the employer’s defence (see below) to an equal pay claim will fail in this instance.

Victimisation

This occurs where an individual is treated less favourably than another individual whose circumstances are the same because s/he has taken action to assert his/her statutory right under the EqA or assisted a colleague with information in that regard and that individual suffers a detriment in that:

• s/he brought proceedings against the discriminator under the EqA; or
• gave evidence or information in connection with proceedings brought by any person against the discriminator under the EqA; or
• alleged that the discriminator or any other person has committed an act that (whether or not the allegation so states) would amount to a contravention of the EqA.

Detriment means that the treatment is of a kind that a reasonable person would or might take the view that in all the circumstances s/he had been disadvantaged. An unjustified sense of grievance cannot amount to a detriment. It is not necessary to demonstrate some physical or economic consequence.

When does the EqA apply?

The EqA applies to:

• women and men of any age, including children;
• people who are “employees” in the sense required for some other employment rights, such as the right not to be unfairly dismissed, but also to other people who are engaged under a contract personally to execute work or labour; and
• those employees employed in Great Britain, though not necessarily work in Great Britain, in order for the EqA to apply.

The EqA will imply an equality clause into a wo/man’s employment contract where the wo/man is employed on:

• “like work” with a wo/man in the same employment, i.e. work that is the same or broadly similar in nature; or
• “work rated as equivalent” with that of a wo/man in the same employment, i.e. different but graded as equivalent under a job evaluation scheme; or
• “work of equal value” to that of a wo/man in the same employment, i.e. different but equal in terms of demands such as effort, skill and decision-making.

If one of the above conditions applies to a fe/male employee, the ‘sex equality clause’ will modify the employee’s contract of employment to ensure that it is no less favourable than an employee of the opposite sex with a similar contract.

A wo/man cannot use the ‘sex equality clause’ to claim that s/he is entitled to be paid more than an employee of the opposite sex, as it only applies to any less favourable terms.

Permitted comparator

The comparator must be:

• an actual fe/male and not a hypothetical fe/male;
• employed at the same time – this can be a current or previous employee, including a predecessor nor successor in the wo/man’s job; and
• a common employer (or an associated employer) and either a common workplace or, where the fe/male comparator is at a different workplace, common terms and conditions of employment, which means that the terms and conditions must be substantially comparable on a broad basis.

European law allows a comparator to be made between employees who do not work for the same employer but only where the differences in pay are attributable to a ‘common source’ and where a single body is responsible for and capable or remedying.

“Like work”

When considering like work a 2 stage test must be applied:

• whether or not the work the fe/male employee does is the same or broadly similar to the work her/his comparator does;
• whether the differences between the work they do are of any practical importance in relation to terms and conditions of employment. If the differences are insignificant, then the fe/male employee will be regarded as being employed on like work for the purposes of the EqA.

The employee must prove that s/he does the same work or work of a broadly similar nature. Conversely, the employer must show that the differences in terms and conditions of employment have practical importance.

Same or broadly similar work

In deciding whether or not the work of a wo/man and her/his comparator is the same or broadly similar there has to be a consideration of the type of work involved and the skill and knowledge required to do it.

In comparing the work of a wo/man and her/his comparator, the relevant test is to examine what they do in practice. It is irrelevant that the nature of their work is defined differently in their employment contracts or job descriptions if there is no real difference in what they do in practice.

“Work rated as equivalent”

Under the EqA, a wo/man is regarded as being employed on work of equivalent value to her/his comparator if their jobs have been given equal value under a job evaluation scheme. The scheme is adequate if it is analytical and completed, it does not have to be acted upon by the employer.

In order for a wo/man to rely on a job evaluation scheme to make an equal pay claim, the scheme must be a valid one. A valid scheme is one that has been accepted as a valid scheme by the parties to it.

Under the EqA, a wo/man can also make an equal pay claim on the grounds that her/his work is rated as equivalent if her/his job would have been given an equal value with that of a member of the opposite sex but for the fact that the job evaluation scheme was discriminatory.

“Work of equal value”

The key point about equal value is that jobs, which at first sight may be very different, can turn out to be of equal value when analysed in terms of the demands made on the employee. The key is not to assume that jobs that are of different types (eg manual and administrative) cannot be of equal value.

Comparing jobs on the basis of equal value means jobs that are entirely different in their nature can be used as the basis for equal pay claims. Job comparisons can be made both within a particular pay/grading structure and between different structures or departments. Equal value is likely to be relevant where men and women are in the same employment but do different types of work.

An employee can only bring a claim for equal pay on the ground that her/his work is of equal value to her/his comparator provided that her/his chosen comparator is not employed on like work or work rated as equivalent.

A wo/man is also effectively debarred from bringing an equal value claim where her/his work and that of her/his comparator have been given different values under a valid non-discriminatory job evaluation scheme.

The employee must demonstrate that s/he has reasonable grounds for claiming that her/his work is of equal value. If an employer seeks to defend the employee’s claim, a tribunal will normally commission an independent expert who will evaluate the jobs, and the tribunal will make a decision based on this. However, the tribunal can now determine whether the comparable jobs are of equal value without first obtaining a report where that decision is supported by a job evaluation study. The parties are free to commission their own independent reports.

Employer’s defence

If an employee establishes that s/he is paid less than a person of the opposite sex employed on like work, work rated as equivalent, or work of equal value, there is a presumption of discrimination.

Once there is a presumption of discrimination, the employer will have a defence to an equal pay claim and the sex equality clause will have no effect, if it can establish that the difference in pay is due to a ‘material factor’ other than sex in that:

• does not involve treating wo/man less favourably because of the wo/man’s sex than the employer treats a person of the opposite sex, and
• if the factor shows that, as a result of the factor, the wo/man and persons of the same sex doing work equal to the wo/man’s are put at a particular disadvantage when compared with persons of the opposite sex doing work equal to wo/man’s is a proportionate means of achieving a legitimate aim.

Examples of a material factor defence:

• 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 re-grading exercise; and
• historical reasons.

Legitimate aim

To be legitimate the aim must be legal and non-discriminatory and represent a real objective consideration.

Even if the aim is legitimate the means of achieving it must be proportionate. Proportionate means ‘appropriate and necessary’, but ‘necessary’ does not mean it is the only possible way of achieving the legitimate aim.

The long-term objective of reducing inequality between wo/men’s terms of work is always to be regarded as a legitimate aim.

Remedies

Employees can claim for arrears of remuneration or damages. Normally an individual is not entitled to be awarded any payment in respect of a time earlier than 6 years before the date on which the proceedings were commenced. However, in certain circumstances the period can be longer.

Jurisdiction of employment tribunals

A claim arising out of, or related to, a contravention of an equality clause can be brought in an employment tribunal (section 127(1) of the EqA).

An employer can also ask a tribunal to make a declaration as to the rights of the parties in any dispute about the operation of an equality clause.

Jurisdiction of civil courts

The High Court and county courts in England and Wales, and the Court of Session and sheriff courts in Scotland (the civil courts), have an inherent jurisdiction to hear breach of contract claims, subject to limitation periods of 6 years in England and Wales and 5 years in Scotland. Since equal pay law operates by way of equality clauses that amend the contract of employment, a breach of equal pay law is a breach of contract, and can therefore be the subject of a civil action. There are specific provisions in the equal pay legislation dealing with this overlap of jurisdiction:

• where it appears to a court that a claim or counterclaim relating to an equality clause could more conveniently be disposed of separately by an employment tribunal, the court may direct that the claim shall be struck out; and
• where in proceedings before a court a question arises as to the operation of an equality clause, the court may refer that question to an employment tribunal for determination, and may stay the court proceedings.

Time limits

Any claim under the EqA must be brought before an employment tribunal during the wo/man’s employment or within 6 months (i.e. 6 months less 1 day) after the ‘qualifying date’ (section 129 of the EqA). The time limit is a strict one and there is no discretion to extend time.

Ascertaining the correct qualifying date is not only necessary to ensure that the tribunal has jurisdiction to determine a claim, but can have significant consequences for the amount of compensation recovered by a successful claimant.

The determination of the qualifying date is dependent on the type of case being pursued and there are 5 different types:

• a standard case – the period of 6 months beginning with the last day of the employment or appointment;
• a stable work case (but not if it is also a concealment or incapacity case (or both)) – the period of 6 months beginning with the day on which the stable working relationship ended;
• a concealment case (but not if it is also an incapacity case) – the period of 6 months beginning with the day on which the worker discovered (or could with reasonable diligence have discovered) the qualifying fact;
• an incapacity case (but not if it is also a concealment case) – the period of 6 months beginning with the day on which the worker ceased to have the incapacity; and
• a case which is a concealment case and an incapacity case – the period of 6 months beginning with the later of the days on which the period would begin if the case were merely a concealment or incapacity case.

If the complaint or application relates to terms of service in the armed forces then the time limit for the above cases is extended to 9 months.

The time limit for bringing an equal pay claim in the civil courts is 6 years.

Codes of practice

The Equality and Human Rights Commission’s Equal Pay Statutory Code of Practice provides guidance and recommends good practice to employers with regard to pay practices.

The Code recommends that employers should identify and eliminate any discriminatory elements in its pay systems and provides guidance on adopting an equal pay policy.

The Code is not compulsory. However, it is advisable to follow the Code, as it is admissible as evidence in equal pay claims.

Contact our employment law solicitors for advice

If you have any questions about anything related to equal pay discrimination claims, or for advice about employment law generally, please contact us on 03456 381381, or email enquiries@ibblaw.co.uk.