Mrs C Wilson was employed by the Health & Safety Executive (HSE) as a band 3 inspector. She made an equal pay claim on 1 July 2002. She was paid less than three comparators whose work was rated as equivalent to hers under a job evaluation scheme. Her pay was governed by a pay scheme which, in part, fixed increases in pay according to length of service over 10 years, after which no further increases were awarded.
The employment tribunal held that the length of service criterion had a disparate impact on female employees because they tend to have shorter service than men due to career breaks. However, before the tribunal decided whether the service-related pay was objectively justified, the Employment Appeal Tribunal (EAT) gave its judgment in Cadman v HSE, in which it held that, on the basis of European Court of Justice (ECJ) case law, an employer did not have to provide justification for a pay difference resulting from the application of a length of service criterion. Wilson’s claim therefore had to fail.
Cadman v HSE was subsequently appealed and a reference was made to the ECJ, which held that employers will not always be required to show specific objective justification for using length of service as a pay criterion. However, justification will be required where a claimant provides “evidence capable of raising serious doubts” as to whether that criterion is appropriate “as regards a particular job”. Wilson’s claim proceeded to the EAT, which held that it should be remitted to the tribunal to determine whether she had shown that there were serious doubts whether the 10-year period adopted by the HSE was justified.
On appeal, the Court of Appeal had to determine whether an employer ever has to justify the use, as opposed to the adoption, of a length of service criterion. Second, it had to determine in what circumstances does the onus shift to the employer to provide justification – what is the meaning of the ‘serious doubts’ that the employee must raise regarding whether the service-related criterion is appropriate, to require the employer to justify service-related pay structures.
The Court of Appeal held that an employer may be required to objectively justify not only the adoption of a service-related pay criterion but also its use. To shift the burden of proof to the employer to provide such objective justification, the employee has to show there is evidence from which, if established at trial, it can properly be found that the general rule that no justification is required does not apply. There must be some basis for inferring that the adoption or use of the length of service criterion was disproportionate. In the circumstances, Wilson’s claim succeeded.
The Court of Appeal’s decision re-ignites the debate over service-related pay scales and whether they unfairly discriminate against women. Pay scales, where increases in pay are dependent on years of service, are common, and it is well-established that, as a general rule, an employer does not have to show special justification for adopting service-related pay as the law recognises that employers are entitled to reward experience. But, in this case, the Court of Appeal has made it clear that there is still scope for female employees to challenge service-related pay.
Following the ECJ’s decision in Cadman, it had seemed that employers would rarely be called upon to justify service-related pay, but here the Court of Appeal suggested that the employee 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 will find it hard to defend service-related pay in jobs where employees learn the main skills required relatively quickly and there is little or no evidence that longer service has a positive impact on performance.
Alan Chalmers, employment partner, DLA Piper