My company recently acquired a business which included some employees doing the same job as my staff, but on higher salaries. Now my existing staff are demanding the same money. Do I have to give it to them?
Once you agree that your existing staff and those you imported under TUPE with the new business are doing the same job, it is very likely that the equal pay provisions of the Equality Act 2010 will be engaged. These give women and men the right to claim equal pay with each other under their contracts of employment.
However, the provisions allow a discrepancy in pay, even between people doing the same job, if there is a material, non-discriminatory factor that justifies that difference. It is long established that the obligation to respect the former terms and conditions of employees inherited through TUPE can constitute such a factor. However, although that gets you off the equal pay hook at the point of transfer, the traditional view is also that this protection only lasts for so long as it should reasonably take for the existing employees’ salaries to catch up. A freeze on the new employees’ package to allow them to do so has generally been thought to be required. Otherwise the discrepancy will be being maintained, or at the very least prolonged.
A new Employment Appeal Tribunal (EAT) case, Skills Development Scotland v Buchanan, offers some relief for employers. The case draws a careful line between pay that is discriminatory, and that which is merely unfair. Discrimination is unlawful and unfairness is not. If the employer can show a causal link from a material and non-discriminatory factor to the inequality in pay, then it is safe, even if that factor is unfair in its effect. However, can the employer still show that to be the case if the better paid employee’s salary is increased still further?
Potentially, according to Buchanan, yes, so long as there is a reason for those further increases that is not tainted by discrimination. In this case, the EAT heavily criticised the employment tribunal for upholding the claimants’ equal pay claims because of the employer’s failure to freeze their comparator’s higher salary.
The EAT found that, provided that the employer’s decision to award across-the-board pay increases was not itself tainted in that way (which it was not, since everyone got one), the original non-discriminatory reason (which was TUPE) remained valid. It also poured cold water on the view that the passage of time by itself would necessarily cause a gender neutral explanation to lose its “non-sex” character.
Be warned: this was, to some extent, a case on its own facts. Although it suggests that your ability to resist claims for pay parity has been strengthened – at least in the short-term – and that there is certainly no need to get to parity in one jump, it remains likely that your doing anything other than working perceptibly towards that point (however justifiable the initial discrepancy) will lead to a legal challenge.
David Whincup, partner, Squire Sanders Hammonds, London
Get answers to more questions on equal pay: