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Employers should take care in implementing new pay structures following recent case ruling

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Employers will have to carefully consider equal pay provisions when implementing new pay structures after a recent case in the Employment Appeals Tribunals.

In October 2004, the NHS implemented a new pay structure as a result of the Agenda For Change (AFC) job evaluation. Subsequently, large numbers of NHS employees brought equal pay claims for work rated as equivalent or work of equal value, naming as their comparators male employees working in NHS jobs occupied predominately by men.

In the case of Brownbill & others vs St Helens & Knowsley Hospital NHS Trust, following the introduction of the AFC, five women brought claims against the respondent in respect of the period prior to the implementation of the evaluation (at which point the claimants and their comparators were put in the same pay bands).

The claims were in respect of unsocial hours payments. The five claimants claimed their terms were less favourable than similar terms in their male comparator’s contracts.  Nevertheless, the claimants still earned more than their comparators if their benefits were considered in the whole.

An employment tribunal considering the matter at a pre-hearing review held the clauses in the claimants and comparators’ contracts regarding unsocial hours pay were distinct provisions with sufficient content to enable them to be compared. However, the tribunal also held that the unsocial hours payments were part of the claimant’s basic pay.  Since the claimants earned more than the comparators on this basis, there was no less favourable term to be modified by the Equal Pay Act. The claimants appealed on the basis that the employment judge had applied the incorrect legal test.

The Employment Appeal Tribunal  (EAT) allowed the appeal. It held that it was possible to compare the distinct terms for enhanced rates benefitting the claimants and comparators; however, the Tribunal Judge had erred in not comparing them. The EAT held there is not a general principle that a broader, overall approach should be taken when comparing terms relating to remuneration. 

The EAT observed that the approach of comparing distinct terms rather than looking at the overall package did not necessarily lead to claimants achieving greater overall pay than their comparators. It remains open to the employer to show that sex was not the reason for the difference in terms.

The EAT also emphasised that equal pay legislation is not a fair wages statute: the legislation is not concerned with whether the outcome in any particular case is fair and equitable.  The only question is whether any term of the claimant’s contract is less favourable than a term of a similar kind in a contract of her comparator.  The policy of the Act and of European legislation is to ensure transparency in pay structures and effective redress for women who consider that they have been discriminated against in respect of any element of their remuneration. 

The message to employers is clear: when assessing equal pay matters, it is important to compare distinct terms on a step-by-step basis and not simply consider remuneration as a whole.

This case arose following the AFC job evaluation in 2004. By 2005 there were around 16,000 women in mainly female-dominated occupations who had brought equal pay claims. Other public-sector employers have performed job evaluation exercises with high levels of claims.

The recent announcement from the Government about its proposals to make public bodies more accountable by requiring them to put data relating to equality in the public domain will encourage public authorities to address areas of the workforce that have not yet been evaluated.

There is no such impetus on private-sector employers who have so far been reluctant to perform similar job evaluation exercises. Any such review may highlight historical areas of inequality within the workplace leading to employment tribunal claims. In particular, those employers with large groupings of traditionally male and female roles may have concerns.

However, there is nothing to prevent employees form bringing equal pay claims against private sector employers who may want to pre-empt such action and address any areas of inequality within their pay structures. In which case, it may be useful for those employers to obtain legal advice on the equal pay legislation, in particular the possibility of showing that any inequality is due to a genuine material factor that is not the difference in sex.    

Vicky Bennett is an associate in the employment team at law firm Weightmans