Equal pay

In
this series, we delve into the XpertHR reference manual to find essential
information relating to one of our features. This month’s topic…

Future developments

To date there have been no substantive amendments to equal pay legislation.
The only major piece of legislation to have an impact has been the Employment
Act 2002. Section 42 of the 2002 Act inserts section 7B into the Equal Pay Act
1970. This gives the Secretary of State for the Department of Trade and
Industry the power to make regulations introducing a new questionnaire enabling
claimants to obtain key information on pay from their employer at an early
stage. The regulations will also set time limits for employers when responding
to any such request for information and lay down penalties for non-compliance.

Other proposed developments aimed at making equal pay claims easier, quicker
and fairer are:

– Groups of workers will be allowed to use one application form, rather than
each claimant being required to use a separate one

– The ‘no reasonable grounds’ defence will be abolished

– The two-year limitation on back pay contained in the Equal Pay Act 1970 is
to be removed following a ruling by the European Court of Justice (ECJ). The
limit applied by the ECJ is now six years

The right to equal pay

Domestic legislation: The Equal Pay Act 1970 (EPA) gives women and
men the right to claim equal pay under their contract of employment. The right
is not limited to employees, but extends to independent contractors,
consultants and other workers. Employees have a six-month time limit from the
end of their contract in which to present their claim.

Women who are on maternity leave may not claim equal pay under the EPA. They
should claim under the Employment Rights Act 1996, which contains at sections
66 to 70 extensive provisions protecting their rights.

European legislation: Article 141 (formerly Article 119) of the
European Treaty provides that member states shall ensure men and women receive
equal pay for equal work. The EPA was passed in order to implement this
provision, and the courts will look to case law decided under Article 141 in
interpreting it.

Unlike the EPA, which applies to contractual rights in general, Article 141
applies only to basic pay and other considerations such as benefits paid either
directly or indirectly from the employer. It does however include pensions,
which are not included in the EPA.

The Equal Pay Directive supports Article 141, and it can be relied upon
directly by employees of public authorities.

The equality clause

The EPA works by implying an ‘equality clause’ into every worker’s contract.
There are three steps to determining whether an equality clause should be
implied in a contract of employment. The first is to determine whether the man
and woman are employed by the same employer or by an associated employer. The
second is to ascertain if:

– A particular term of a woman’s contract of employment is less favourable
than that of a man’s contract – she receives less basic pay than him, for
instance, or

– A man’s contract contains a beneficial term which is not in the woman’s
contract – he is entitled to a contractual bonus to which she is not entitled,
for example

The third step is to determine if the man and woman are strictly comparable,
by assessing whether the woman is doing:

– "Like work" to the man, or

– "Work rated as equivalent", or

– Work of "equal value" to the man’s work.

However, no equality clause will be implied if the employer can justify the
difference between the man’s contract and woman’s contract by showing that it
is due to a "material difference other than sex".

The equality clause operates to:

– Modify the less favourable term in the woman’s contract so it is the same
as the equivalent clause in the man’s contract, or

– Include in the woman’s contract the beneficial term contained in the man’s

The correct comparator

A woman who wishes to rely on the EPA must compare herself with a man
employed:

– By the same employer as her or by an associated employer

– At the same establishment as her, or at a different establishment
belonging to the same or to an associated employer

An employer is an associated employer when one company is controlled by
another company which is the employer, or when both are owned by a third
company.

This includes public sector bodies receiving funding from the same source.

If the man is employed at a different establishment, she must show there are
common terms and conditions of employment at both for the class of employee in
question. Terms and conditions governed by the same collective agreement will
satisfy the test.

Possible claims

Like work

A woman and man do ‘like’ work if the following conditions are satisfied:

– Their work is of the same or a broadly similar nature. The test here is the
nature of the job, not the specific tasks undertaken, so that a cleaner in a
kitchen for instance will probably do work of a broadly similar nature to a
cleaner on the factory floor. Various factors should be taken into account with
reference to the responsibilities, knowledge and skill required to undertake
the work

– There is no important difference in the tasks they perform. If there are
any differences these should be assessed with reference to the frequency with
which they occur, and to the nature and extent of the differences. If the man
has a much wider range of duties than the woman, this will constitute a
significant difference

Work rated as equivalent

If a job evaluation scheme commissioned or carried out by the
employer has shown that a woman’s and man’s work have been rated as equivalent,
the woman will be able to compare herself to the man for the purposes of the
EPA. These schemes, if carried out properly, will serve as conclusive evidence
in any legal challenge brought under the EPA.

Work of equal value

Whether a complainant’s work is of equal value to that of a comparator will
usually be decided by an independent expert, although employment tribunals
always hold a preliminary hearing before an expert is appointed, to eliminate
claims that have little or no chance of success.

Equal value cases are notoriously complicated, long and expensive. The best
way to avoid a challenge of this sort is to have properly carried out and
implemented job evaluation schemes in operation, agreed by employees or their
representatives.

Material difference

In any claim under the EPA, it is open to the employer to show the
difference between the woman’s and man’s pay is due to a material factor other
than sex. The employment tribunal will ask two questions:

– Is there a material difference between the two employees, other than sex?

– Is the difference in pay genuinely due to that material difference? It is
enough for the employer to show that it genuinely believed the difference to be
material even if it was not reasonable to treat the difference as material

Examples of material factors are:

– Seniority, length of service, merit or skill

– Economic factors or administrative efficiency – where a particular type of
employee is in high demand, for example, and the employer offers vacancies at a
higher rate of pay than existing employees earn. However, there are significant
problems with this type of argument

– The fact the two employees have been appointed to different grades,
although if this reason is simply a cloak for unlawful discrimination it will
fail

– Where employees who have been redeployed to a lower-paid position after a
redundancy exercise have maintained their former salary. Again, this is a
difficult argument and decisions should always be considered for the equal pay
implications.

Action point checklist

– Wherever possible, carry out and
implement a job evaluation scheme. This will provide a framework for planning,
monitoring and justifying pay differentials, and will be conclusive evidence in
any equal pay challenge

– Approach each term in the contract of employment separately.
For instance, do not try to compensate a woman who receives lower pay than a
man with some other kind of benefit, or vice versa

– When devising criteria for levels of pay, avoid things which
are harder for one sex to comply with than the other. If such criteria are
included ina pay structure, they must be relevant to the job

– Check implications of protecting a redeployed employee’s
salary

Questions and answers

How does the law interpret "like work" between a
man and a woman?

A woman may claim equivalence with a man who does the same or
broadly the same job as her. The nature of the job must be the same. There must
be no important difference between the tasks they both perform. So, if the man
has many more duties than the woman, or a higher level of responsibility, this
may constitute a significant difference, meaning there cannot be a valid claim
for ‘like work’.

If a woman does a different job to a male colleague but both
jobs are rated as equivalent, has she any grounds to argue equal pay?

Yes, a woman can claim she should be paid as much as a man
whose job has been rated as equivalent to hers in the employer’s job evaluation
scheme. Indeed, a well thought out and properly implemented job evaluation
scheme is the best way for employers to justify the pay structure in the
organisation. Acas has produced a guide to help employers set up job evaluation
schemes (www.acas.org.uk).

Are we liable for an equal pay claim if we have not carried
out a job evaluation scheme?

Even if a woman does not perform like work to a male comparator
and there is no job evaluation scheme, she can still claim her work is of equal
value. An independent expert will usually be appointed to carry out assessment
of the value of the jobs. However, because this is a time consuming and
expensive route, a tribunal will usually carry out a preliminary hearing before
appointing an expert.

How can we demonstrate that the difference between a woman’s
and man’s pay is for reasons other than their sex?

You can argue the difference is due to factors unrelated to
gender, including seniority, length of service, merit or skill. However, if you
argue market forces dictate the levels of pay on offer for men and women, this
in itself could be interpreted as indirect sex discrimination depending on the
market forces in question.

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