Legal Q&A – Equal pay

Q What does equal pay mean?

A Equal pay was a concept introduced under the Equal Pay Act 1970 (EPA). It requires contractual terms and conditions of employment to be no less favourable for men and women in the same employment when employed on work of the same or broadly similar nature, work of equal value, or work rated as equivalent under a job evaluation scheme.

The EPA has two key features:

  • It inserts into every contract of employment an ‘equality clause’ requiring equal pay
  • Where work is of equal value and a male earns more than a female, it presumes the employer to be in breach of the equality clause if it is unable to explain to an employment tribunal that there is a genuine factor that explains the disparity, which is not due to the fact that the advantaged worker and the disadvantaged worker are of a different sex.

Q What can an employee claim?

A An employee can claim arrears of pay dating back six years. An employment tribunal can also equalise contractual terms in the future, meaning that the employer will need to address any future liability for the employee making the claim and rectify the issue going forward for its other employees. There is no time limit for existing employees, but ex-employees must bring a claim within six months of termination of employment.

Q What can employers do to minimise the risk of an equal pay claim?

A While grappling with topical discrimination issues like promotions and flexible working, employers should not forget the fundamental issue of whether female employees are being paid less than male employees.

This is not just an issue for public authorities which have hit the headlines recently. Private sector employers should not ignore pay inequality as it can result in costly and time-consuming litigation. In addition, the publicity that such a claim could bring is something that employers will want to avoid.

Tips for employers include:

  • Have transparent pay structures and grading systems and robust pay and reward policies
  • Appraisals should be well-documented so employees are fully aware of their performance and its effect on their pay
  • Have a working knowledge of the Equal Opportunities Commission Code of Practice on Equal Pay, available from the Commission for Equality and Human Rights. Although this is not legally binding, an employment tribunal may take it into account
  • Carry out equal pay reviews (as recommended by the code) if they are dedicated to tackling the problems which are revealed by the review, otherwise it could be used as evidence against the employer in a tribunal claim
  • Consider red circling/pay protection in certain circumstances. However, you must be able to show that there is a carefully crafted and costed scheme negotiated and that is does not have discriminatory effects
  • Monitor starting and promotional pay rates
  • Train managers on how to make pay decisions using legitimate rationale.

Q What impact has recent case law had on employers defending equal pay claims?

A Recent cases have held that financial considerations can form part of an employer’s defence, but it cannot be the principle basis. Also the European Court of Justice decision in the case of Cadman v Health and Safety Executive it was held that, as a general rule, length of service is an appropriate and lawful criterion for pay decisions as it rewards experience which is a legitimate objective for a pay policy. However, where an employee can provide evidence that raises ‘serious doubts’ as to whether the link between pay and the length of service is rewarding experience, then the employer is required to explain why this general rule applies. The employer then would have to prove that it is not unlawful discrimination.

Q Why has there been such an increase in equal pay claims?

A Figures published recently by the Tribunals Service show an increase of 155% in the number of equal pay cases being lodged in tribunals over the past year. This situation has primarily increased because of the claims against public authorities stemming from agreements for new pay and grading arrangements within local government.

Q What is the future for equal pay?

A The government implemented a Discrimination Law Review and released a consultation paper which sought responses before 4 September 2007. The idea is to create a Single Equality Bill to:

  • Make discrimination law easier to interpret
  • Devise a checklist or certificate that employers can use to show that they treat people fairly and equally
  • Promote public sector consideration of equality in procurement (contracting companies should have a strong equality and diversity record)
  • Consider streamlining sex discrimination law and equal pay law.

At present, however, there is no plan to make equal pay audits compulsory.

Thomas Eggar is one of the UK’s leading regional law firms. It provides innovative and pre-emptive strategies for dealing with HR issues. For more information, mailto: paul.gaff@thomaseggar.com or go to www.thomaseggar.com

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