Local Government - May 2009
Equal pay in the finance sector
The Equal Pay Act was introduced in 1970 but, nearly 40 years on,
it seems that the gap between men and women's pay has yet to
disappear completely. According to a report recently
published by the Equality and Human Rights Commission, there still
exists a gender pay gap of up to 60% in the finance industry. The
largest gap relates to women working full-time in areas such as
fund management, stock-broking and futures trading. These women
earn on average 60% less annual gross salary than men - a pay gap
of more than twice the national average.
So with a huge surge recently in equal pay
claims in local government and the NHS, is this another fertile
area for equal pay claims? We definitely think so. From our
experience in advising employers in both the private and public
sector, we believe the flurry of equal pay activity in the public
sector will surely find its way in to the private sector.
The report itself was published as the first
stage of the Commission's inquiry into sex discrimination in the
finance industry. It indicated that although there are equal
numbers of men and women working in the finance sector, women are
concentrated in administrative and secretarial jobs and are
significantly under-represented in managerial jobs. It also
stressed there is a strong need for investigation into recruitment
and promotion within the industry.
Chair of the Commission Trevor Phillips
commented that: "The figures...are shocking and indicate just how
serious the pay gap has become in the financial sector, with women
concentrated in lower paid, lower skilled roles and few able to
make it to the top".
Phillips is therefore asking the Government to
take steps to address gender pay discrepancies in the forthcoming
Equality Bill, expected to come into force in 2010. The Bill aims
to modernise existing discrimination legislation and address pay
inequalities between men and women, as well as encouraging
transparency in the workplace in terms of pay by banning ‘gagging'
clauses that traditionally prevent employees discussing what they
earn.
But some argue that the proposed changes do
not go far enough. Following Government consultation with business
leaders, it appears that mandatory pay audits will not be a feature
of the new legislation, much to the disappointment of women's
rights campaigners. Time alone will tell whether such a measure may
be the only realistic way of identifying whether, and to what
extent, gender pay gaps exist within your organisation.
The new Bill will undoubtedly add to the
pressures faced by employers who are trying to cope with the
complexities of employment legislation. But although they may be
wary of carrying out equal pay audits in case they open up a can of
worms, by not doing so they are just brushing the issue under the
carpet. And, as demonstrated by a rising number of claims under the
Equal Pay Act in the public sector, these issues always find a way
of surfacing eventually.
The only real way to rid ourselves of the
gender gap has to be to deal with the issue head on. Open that can
of worms...
Mid Suffolk Mental Health Partnership and NHS Trust v Hurst and
Arnold v Sandwell MBC
The million dollar question – does a grievance
for an equal pay claim need to identify the comparator, or is it
sufficient for the Claimant to simply claim “equal pay?” Finally
resolved…
In the Mid Suffolk Mental Health
Partnership and NHS Trust v Hurst and
Arnold v Sandwell MBC case, the
EAT previously decided that a Claimant only needs to state that
their complaint is about Equal Pay in their grievance letter. The
employers appealed to the Court of Appeal, where their appeal was
dismissed and the issue resolved.
Only the minimum requirement is necessary when
raising a grievance.
- The Claimant does not have to identify
comparators or specify the section of the Equal Pay Act on which
she intends to rely.
- It is enough for the Claimant to state that
the claim is being pursued under the Equal Pay Act. This is
compatible with the definition of a grievance and is sufficient to
satisfy the statutory grievance procedure.
What was the reasoning behind the
decision?
- When an employee submits a grievance under
the Equal Pay Act, it should be obvious to the employer that the
complaint is about a comparable male employee doing like work, but
receiving more pay.
These facts are central to an equal pay claim, and are self
explanatory.
- Over restrictive interpretations of what
constitutes a grievance, could discourage Claimants from pursuing
their claims and would be contrary to the principle of access to
justice.
- Once an employer becomes aware of the
grievance, he has the opportunity to initiate further discussion if
necessary to find out more information about the
complaint.
- This process is protected from potential
abuse by the fact that the Claimant who fails to provide sufficient
details in the grievance letter may have their compensation reduced
by up to 50%.
What does this mean to an employer?
- It is no longer possible to ward off
potential equal pay claims by using the Highland Council argument
that the Claimant included insufficient detail in their
grievance.
- The information given in a grievance can be
minimal and need state no more than that the claim is a claim under
the Equal Pay Act.
However, do note…
The Employment Act 2008 came into force on 6
April 2009. This abolished the statutory dispute resolution
procedures. But transitional rules apply if the act complained of
began before 6th April 2009 but continues after that date. For
equal pay claims, the old statutory grievance procedure applies if
the employee sends a grievance letter, or presents an ET1, by
4th October 2009.
Slack v Cumbria County Council
This time it was Cumbria County Council
appearing in the Court of Appeal. The issue being considered was
when time runs out to bring a claim under the Equal Pay Act.
The Council had already managed to successfully argue in the
Employment Appeal Tribunal, that the claims of the three employees
involved in this appeal had been brought too late. These
three employees appealed against that decision to the Court of
Appeal (Joyce Slack & ors V Cumbria County Council
& Equality & Human Rights Commission [2009] EWCA
Civ 293)
The EPA itself says this:- “In a standard case
the qualifying date is the date falling six months after the last
day on which the woman was employed in the employment.”
(section 2ZA(3) of the EPA). In most cases therefore a
straightforward calculation of 6 months from the end of the
employee’s employment with the employer will determine whether a
claim can be brought in time.
In some cases though, this issue is far from
simple. Recent changes to the EPA introduced the concept of
standard cases. These recent changes note a number of circumstances
that are not “standard cases” One such circumstance is what
is called a “stable employment relationship” case. In these cases,
the 6 months starts to run from the end of the “stable employment
relationship.”
In this Cumbria County Council case, the
employees had agreed changes to their contractual terms during the
course of their employment with the Council. When they did
this, the employees signed up to new contracts which stated that
the old contract was terminated and the new contract took its
place. There was no break in service. One of the council employees
changed her contract when she moved from temporary to permanent
work. The other 2 employees had moved from full time to part time
hours. The work that the employees actually carried out, did
not change.
The Court of Appeal decided that the events of
moving to permanent employment and of moving to part time hours
amounted to the employee’s commencing new contracts of employment.
However, the Court of Appeal also considered the test of stable
employment relationship and decided that these changes did not
cause a break in the employee’s stable employment relationship with
the Council where there had been a change in hours. As for the
issue of a change from temporary to permanent employment, the Court
of Appeal decided that it was appropriate to send that issue back
to the Employment Tribunal to consider whether it amounted to a
break in a stable employment relationship. That issue
therefore remains outstanding.
The circumstances of these employees are of
course far from unusual. A huge number of equal pay claims remain
outstanding in the employment tribunal system and the out of time
point was a potential argument that a large number of local
authorities and other respondents had been hoping to rely on. As
matters now stand, respondents will be able to defend far fewer
cases on the basis of this out of time point.
Hartley v Northumbria Healthcare NHS Trust
In the case of Hartley v Northumbria
Healthcare NHS Trust, the Tribunal has given its judgment
in respect of the introduction of the 'Agenda for Change' pay
system in the NHS.
The Tribunal has rejected the claims that the
job evaluation study (JES) in Agenda for Change (AFC) was invalid
under the Equal Pay Act.
It was also claimed that pay protection
arrangements, which were introduced for employees who would
otherwise have experienced a drop in pay under the new system, had
a disparate impact on women. The Tribunal also rejected this
allegation.
The AFC was introduced across NHS trusts in
October 2004, affecting more than one million employees. Three
different pay protection arrangements were introduced with a view
to cushion any drop in pay for affected employees, once all
employees were moved onto the new pay system: express pay
protection, assimilation and recruitment and retention premiums
(RRPs) for certain jobs.
A test case was brought in respect of claims
under the Equal Pay Act. The Tribunal dealt with a number of
important preliminary issues.
The Claimant questioned the validity of the
Job Evaluation Scheme (JES) on which AFC is based, alleging that
AFC perpetuated historic pay discrimination and that pay protection
arrangements had a discriminatory impact.
The Tribunal rejected the majority of the
Claimants' arguments and found the following:
- There was no evidence of endemic and historic
sex discrimination in the NHS pay system before the AFC was
introduced. Although thousands of equal pay claims were ongoing
against the NHS, there had been no finding of unlawful pay
discrimination within the NHS. Therefore the parties to AFC did not
know, and could not reasonably have been expected to know the
extent of any disparity in pay at the time that AFC was
introduced.
- The challenge to the JES under the Equal Pay
Act failed because there were no reasonable grounds for suspecting
that it was based on a system which discriminates on grounds of sex
or was otherwise unsuitable to be relied upon.
- Further the JES, which matched local jobs
against national profiles instead of requiring them to be evaluated
locally, was a valid and analytical scheme that satisfied the
requirements of the Equal Pay Act.
- The pay protection arrangements applied
equally to men and women who would have suffered a drop in pay
under the new pay scheme. Therefore the pay protection arrangements
were not directly discriminatory.
- Based on the statistics, the pay protection
arrangements did not show a disparate impact on women and were not,
therefore, indirectly discriminatory. The Tribunal went further to
expand that even if disparate impact had been shown, the
Respondents would have been able to objectively justify the
arrangements.
What does this mean for employers?
Questioning the validity of Job Evaluation Schemes has and is
likely to continue to be one of the key areas for challenge from
Claimant Solicitors in the equal pay sector. It is imperative that
any JES is analytical and job matching to profiles is carried out
on a factor by factor basis.
Pay protection is also a significant area of
risk, especially where such protection contains elements of
potentially discriminatory bonus payments. It is essential that
expert legal advice is taken prior to putting in place pay
protection arrangements. This is especially the case in respect of
Single Status within local authorities.
Tim Lang, Mark Leach and Jawaid
Rehman
Weightmans LLP