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Victory in equal pay claim changes the law
15 November 2005
The Employment Appeals Tribunal has departed from previous case law in deciding that men and women who perform equal work cannot be paid differently, unless employers can objectively justify the reason for doing so. This is a new and rigorous test of the employer's defence, allowing tribunals to question the validity of any difference in pay.Previously, the law had only required employers to objectively justify their reasons in claims involving indirect discrimination, that is, in cases where the difference in pay affected more women than men. However, the EAT determined that this should be the case in all equal pay disputes, at the hearing of a claim brought by Amanda Sharp against her former employer, the financial services company Caledonia Group Services.
Amanda Sharp was employed by Caledonia Group Services as a financial accountant starting in 1996. In 2002, Russell Jones & Walker issued proceedings in the Employment Tribunal on Ms Sharp's behalf, claiming she was receiving unequal benefits (pay, bonus, company car, share options and medical insurance) compared to male colleagues doing work of equal value. Although the jobs were different, an independent expert appointed by the Employment Tribunal concluded that Ms Sharp's work was indeed of equal value to a male colleague.
At the Employment Tribunal hearing, in September 2004, Caledonia argued that the extra pay received by Ms Sharp's male colleague was due to "historical considerations" and his personal situation. The Tribunal dismissed Ms. Sharp's equal pay claim for this reason, stating that it was due to a genuine material factor, which was not related to the difference in sex.
The Equal Opportunities Commission backed Ms Sharp in funding her appeal, on the basis that it was not enough to put forward such a defence, without the more robust test of objective justification. Although this had been established in an earlier European case, last year, the EAT ruled that it only applied in cases of indirect discrimination. In upholding the appeal, the EAT extended the more robust test of objective justification to all equal pay claims, by departing from their own earlier decision and approving the European case law.
The case will go to a fresh Employment Tribunal for a re-hearing. Caledonia will now have to show not only that there is a real need for the difference in pay, but that it was both appropriate and necessary to achieve the objective, as well as being proportionate in the circumstances.
Julie Morris, Ms. Sharp's solicitor, comments:
"This is a tremendous result, not only for Ms Sharp, but for all claimants bringing equal pay claims in the UK. The Employment Appeal Tribunal has departed from previous case law to shift the balance back to employees. Employers will have to watch out, because their pay decisions will now really be put to the test. Tribunals are at last entitled to look behind the defences put forward by employers to see if there are good solid reasons that really justify the full difference in pay and benefits.
Ms Sharp is delighted that, after three long years of litigation, a decision will be made on whether the reason for paying her less than a male colleague actually does hold water."
Jenny Watson, acting chair of the EOC, said:
"No employer needs to find themselves in court over equal pay. Companies that carry out a review of whether their working practices and pay systems deliver equal pay can pinpoint potential problems and take appropriate action to close the pay gap. In a tight labour market, these equality conscious employers are already seeing direct benefits to their bottom line through their ability to attract and retain the most talented staff."
NOTES TO EDITORS
1. Russell Jones & Walker Solicitors employs more than 450 staff (over 200 lawyers) and is renowned as the leading national firm of solicitors in protecting the rights and legal interests of individuals and those who represent them.
Russell Jones & Walker has a network of regional offices and includes those in the following centres: London, Birmingham, Bristol, Wakefield, Manchester, Newcastle, Sheffield, Cardiff and Edinburgh.
Julie Morris is a partner in the award-winning Employment Department at Russell Jones & Walker, recognised as the leading firm for claimants, "head and shoulders above the competition" (Chambers and Partners, Client Guide to the Legal Profession, 2006).
2. A recent ONS survey has revealed that the average hourly earnings for women working full-time are 17.2% lower than for men working full-time, and for women working part-time earnings are 38.5% lower. The latter has not significantly shifted for 30 years.
3. In a precedent-setting case, Brunnhofer v Bank der Osterrichischen Postparkasse [2001], the European Court of Justice ruled in favour of applying a requirement for objective justification to all equal pay cases. The favourable ruling in Sharp v Caledonia clarifies the compatibility of UK domestic and European law on this point.
In short, employers now need to provide a robust defence, an "objective justification", in all equal pay cases by proving that:
- The reason for the difference in pay is unrelated to sex.
- The reason responds to a real need of the employer.
- The reason was appropriate to achieving the objective pursued.
- It was necessary to that end.
- The difference conforms to the principle of proportionality
4. Sharp v Caledonia is a departure from a previous decision of the Employment Appeal Tribunal, Parliamentary Commission for Administration v Fernandez [2004], which held that Brunnhofer did not require objective justification in all cases. Sharp v Caledonia has been appealed to the Court of Appeal, where the conflict between the two Employment Appeal Tribunal decisions will be resolved.
For further information, please contact:
Julie Morris, partner, Russell Jones & Walker: 020 7447 8320 j.e.morris@rjw.co.uk
Samantha Mangwana, media enquiries: 020 7339 6661 s.a.mangwana@rjw.co.uk