The equal pay challenge that refuses to disappear

When it comes to equal pay audits, it is no wonder employers prefer to let sleeping dogs lie. The Equal Pay Act allows up to six years of back pay to be awarded to a successful tribunal claimant (five years in Scotland) and, if for example a substantial group of women has been underpaid, it could be devastating for a business operating on tight margins.

You might argue that employers should not allow a situation of unequal pay for women to develop, but do employers deliberately set out to pay women less than they pay men? Higher pay for men is often the product of historical influences and occupational segregation, which employers may want to break down.

In general, employers simply try to pay more or less the market rate for the job. Individual employers that wish to remain competitive are unlikely to focus on the question of whether the market might undervalue women’s work.

Equal value cases present a particular problem for employers, where two quite different jobs can be found to be equal. In a tribunal case, if a woman (with the help of an independent expert) proves that she is doing work of equal value to that of a man, she is entitled to equal pay, unless the employer proves the pay difference is genuinely due to a material factor other than sex. For example, the employer might say that the rates for a higher-paid manual job are the result of collective bargaining, while the rates for a lower-paid clerical job are not.

However, pointing to this ostensibly gender-neutral factor is not likely to be enough. Where it results in ‘disparate impact’ (men tending to get higher pay and women tending to get lower pay), the employer will have the additional and more difficult task of justifying its reliance on that factor. To do that, it must show that there is, at the date of the tribunal claim, a legitimate objective behind the different pay rates, and that the means chosen to realise that objective are both appropriate and reasonably necessary to achieving it.

There is some controversy over where the burden of proof lies in relation to cases of disparate impact. Is it for the claimant to prove there is disparate impact, or for the employer to prove that there isn’t? For the moment, Nelson v Carillion Services [2003] IRLR 428, CA, says it is for the claimant to prove; but the recent Bailey v Home Office [2005] IRLR 369, CA, doubts that is correct (while accepting it may be binding).
Even if the claimant has the burden, proving disparate impact is not particularly difficult.

For example, they could show the employer applied a requirement or condition for obtaining the higher pay, eg willingness to work unsocial hours, and that the proportion of women who can comply is considerably smaller than the proportion of men. A claimant could also simply point to the fact that the lower-paid group was predominantly female, while the higher-paid group was predominantly male – although the statistics must be significant, and not merely fortuitous.

Bailey v Home Office goes further. Here, the higher-paid group (prison officers) was predominantly male, but the lower-paid group (administrative staff) was evenly split. However, looking at the combined groups, amounting to 2,400 employees, the men in the low pay group made up less than 10% of the total number of men, while the lower-paid women made up more than 50% of the total number of women. On these ‘plainly significant’ figures, the tribunal was entitled to find that the employer was required to justify the pay scheme.

The risk of having to explain and justify pay structures that have simply evolved makes employers reluctant to lift the lid on equal pay, but that is not necessarily the right course of action.

A review conducted privately by the employer may indicate the areas where an equal pay claim might be successful, and the potential cost of rectifying the situation. And a plan to phase out unequal pay may be a preferable alternative to a successful tribunal claim, which could leave the employer exposed to a substantial award of pay arrears.

The law doesn’t allow it today, but perhaps the best solution to the equal pay challenge would be an amnesty from tribunal claims for employers who have adopted a plan to address the problem.

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