The ever-changing equal pay landscape

It was hard to miss the coverage of the European Court of Justice (ECJ) ruling in Cadman v Health and Safety Executive. Not so hard to miss was what the ruling actually meant. The headlines ‘EU court throws out gender pay challenge’ and ‘Higher pay for long service ruled illegal’ were contradictory.

Equal pay for equal work is a simple concept that has been embodied in law for more than 30 years. Yet last week’s news confirms the fact that equal pay law is anything but simple.

Changes to equal pay

In recent years, equal pay legislation has been amended, partly to make it easier for individuals to succeed with equal pay claims:

  • In 2003, the Equal Pay Questionnaire was introduced to assist employees in finding out how much their colleagues were paid.

  • In 2004, the Equal Pay Act 1970 was amended to allow an employment tribunal to determine the issue of ‘equal value’ itself or to appoint an independent expert.

  • In 2005, the Equal Pay Act 1970 was amended to remove the need for a male comparator in cases of unequal pay as a result of pregnancy or maternity leave.

And it seems these amendments have done the trick. Employment tribunal statistics show a rapid rise in equal pay claims, with 17,268 claims accepted in 2005-06, compared with just 8,229 in the previous year, and only 4,412 the year before that.

So does the Cadman ruling swing the balance back in favour of the employer, or does it mean the equal pay heyday is only just getting started?

In Cadman, the ECJ ruled that employees may challenge pay systems that reward long service, where they can show that greater length of service does not enable employees to do their jobs better. This provides women with a means of attacking employers’ service-based pay schemes. However, the evidential burden on such women is a tough one to overcome.

More action to come

  • The gender pay gap currently rests at 17%. Tony Blair is reported to have commented that “a massive amount of work” remains to be done. Meanwhile, the Conservatives say they will “do what it takes to stamp out” unequal pay based on sex discrimination.

  • Unions and other employee organisations are calling for the introduction of compulsory pay audits.

  • The Equality Act 2006 received the Royal Assent earlier this year. It imposes a gender equality duty on public authorities. Regulations are awaited, but it is expected that these employers will need to carry out equal pay audits. In turn, private sector employers who wish to contract with public authorities to supply workers are likely to be required by authorities to carry out equal pay audits.

  • The government is currently reviewing all anti-discrimination legislation. A Green Paper is expected next year.

Clearly, equal pay law is not going to stand still for the foreseeable future. In the meantime, the points below may assist employers in assessing whether their service-based pay system could withstand the Cadman test.

Justifying a length-of-service pay system

  • Consider the effect of the pay system in relation to the different job types undertaken within the organisation.

  • Is the job of a nature that employees’ skills plateau over time, so that new recruits can catch up with longer-serving colleagues over months or years?

  • How does the pay scheme take account of relevant experience gained with former employers?

  • Is there evidence that the business has trouble retaining experienced staff?

  • Does the system have a disproportionately adverse impact on women?

  • Consider introducing an equal pay audit to identify and address potential problem areas.

  • Contrary to myths surrounding the Cadman ruling, it is not lawful to subtract maternity leave from overall length of service to justify a lower rate of pay.

By Anne-Marie Balfour, solicitor, Speechly Bircham

For more on how to tackle equal pay disputes, see October’s issue of Employers’ Law.

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