Equal Pay and the problem of the higher paid worker
All that is required for an equal pay claim is a direct comparison of pay between two individuals of the opposite sex
To be able to bring an equal pay claim, one of your employees needs to be able to compare themselves to someone else you employ of the opposite gender and who is paid more than they are. The two must do like work or work that is of equivalent value. However, while recent high profile and headline-grabbing equal pay claims involve comparisons across large numbers of employees, all that is actually required for a claim is one woman identifying one man earning more than she does (or vice versa).
Mrs James was a Highways Operative employed by the Council who compared herself to a higher-paid man, who had been a Highways Operative at the Council some years before when she first started working in the role. He had subsequently been promoted and moved into another job. The Council argued that this comparison was only valid during the time when the two were actually working in the same role and could not be used now some years later. The EAT has held that Mrs James is able to rely upon this historic highly paid worker for her claim.
This outcome is because of the way that equal pay law works. It puts a clause into a woman’s contract that says that she won’t be paid less than a valid male comparator, which means effectively her contract is amended to increase her pay to that of the relevant man at the time she is paid less. The impact of this for Mrs James is that her contractual pay was effectively increased to that of the higher-paid man at the time that he worked in the same role and it stayed at that level when he was promoted. The fact that other men were paid less at the time she claimed did not stop her using this historic comparison and theoretical contractual increase to her pay, in order to claim higher pay now.
This Judgment can cause real practical problems for employers trying to resolve historic pay anomalies. Getting your current pay structure right does not remove the risk of this sort of claim. Having just one male employee who was overpaid for the job he did, or whose pay was out of kilter with that of other staff at the time, can continue to be used now as the basis for a claim (at least until the current pay rates catch up with his higher pay, or the female employee leaves or is herself promoted).
One of the ongoing equal pay challenges is how to resolve the problem and risk once it has been identified. The only legally safe way to address such a risk is to increase the pay of all employees to the highest level. The female employees’ pay has to be increased due to their potential equal pay claims, and then the lower paid male workers also have to have their pay increased to avoid the risk of claims from them. The EAT acknowledged that this ratcheting up effect of everyone’s pay can be a possible outcome.
An equal pay claim can be addressed by evidencing that there was some valid reason which explained the difference in pay (and was not based on gender or tainted by discrimination), such as that the higher paid employee had longer service, more duties or greater responsibility. In practice that may be the real explanation for a historic difference. However, evidencing that reason many years later can present a real challenge in practice. Without being able to do so, this case is a stark warning that those who were highly paid in the past can continue to cause equal pay problems now.
Phil Allen is a Partner in the Employment, Pensions and Immigration Team and is based in Manchester. If you have any questions, please do not hesitate to contact Phil or speak to your usual Weightmans advisor.