Equal pay

Equal pay is not an issue which comes up every day for HR practitioners.
When it does, however, it has the potential to cause more substantial
ramifications for an employer than almost any other claims. This is because
such claims can quite often attack the very basis of an employer’s remuneration
structure. It is therefore an issue of which employers ought to have a good
understanding, in order to have alarm bells set ringing when situations occur
which might give rise to such a claim.

The legal background

The Equal Pay Act 1970 applies to all contractual terms under which a person
is employed, whether or not those terms are concerned directly with pay.
Therefore, although most equal pay claims will relate to "pay" –
including salary, commission, contractual bonus payments and access to
occupational pension schemes – tribunals can hear non-pay claims such as access
to sport or social facilities or guaranteed overtime working. The issue over
which there is a dispute as to equality must, however, be part of the
claimant’s and the comparator’s contract of employment.

In essence, the Equal Pay Act 1970 – and, separately, what is now article
141 of the Treaty of Rome – give the right to both sexes to receive the same
pay for the same work. The Act covers three scenarios: like work, equivalent
work, and work of equal value.

The Act incorporates an "equality clause" into every contract of
employment so that if any term of, say, a woman’s contract is or becomes less
favourable than a similar term in a contract under which a man is employed,
that term in the woman’s contract is modified to become as favourable as the
corresponding term in the man’s.

Even if a woman does not receive the same pay for like work, equivalent work
or work of equal value, an employer may still escape legal liability if it can
show that it has been able to establish the statutory defence: namely that the
difference in pay is genuinely due to a material factor which is not the
difference of sex. Recent cases have established that to rely on the defence,
the employer simply has to demonstrate that the difference in pay is not
gender-based; it does not need to go on to demonstrate in any way that the
difference in pay is objectively justified as being fair.

The comparator used must be of the opposite sex and cannot be hypothetical.
Although usually current colleagues are used, the comparator may also be a
predecessor or successor to the claimant in certain circumstances. In some
cases, comparators can be adopted from different geographical establishments to
the claimant provided the comparator is employed on common terms and conditions
as the claimant. Clearly, geographical weightings may fall into the category of
genuine material factor defence.

Practical advice

The law therefore encourages employers to keep monitoring their remuneration
systems to ensure there is no breach of this duty to provide equal pay in the
above circumstances. Tribunal claims based on this issue can be protracted and
costly. It is also worth bearing in mind that an employer will come under great
pressure to disclose a lot of confidential information in the course of
defending such proceedings, again giving an employer a great incentive to
settle cases.