Service please
In Cadman -v- Health and Safety Executive (IDS 815), the European Court of Justice (ECJ) said that employers do not as a general rule have to justify differences in pay based on “length of service” as a criterion in their pay system. But they do have to justify them if longer service does not necessarily result in improved performance.
What was the history to the case?
Mrs Cadman brought a claim for equal pay, relying on four male comparators who were all on the same grade as her, but paid substantially more. They had all worked for the HSE for longer than her, although some of them in more junior posts.
The HSE accepted that she was doing work rated as equivalent to that of the men but that she was paid substantially less. She argued that as the proportion of men with longer service was greater than that of women, that the use of length of service as a determinant of pay was indirectly discriminatory against her and that her employer should be required to justify it objectively.
What did the national courts decide?
The tribunal agreed with Mrs Cadman, but its decision was overturned by the Employment Appeal Tribunal. It said that the ECJ had decided in an earlier case – known as Danfoss – that using length of service as a criterion in a pay system did not need to be justified.
It also decided that Danfoss was still good law and had only been modified by subsequent decisions of the ECJ in relation to part timers. The Court of Appeal, decided to ask it for a definitive judgement on this point.
What did the ECJ decide?
The ECJ observed that, in Danfoss, the court decided that rewarding experience so that a worker performed their duties better was a legitimate pay policy objective.
It decided, therefore, that, as a general rule, using length of service to achieve that goal was perfectly acceptable. “Length of service goes hand in hand with experience, and experience generally enables the worker to perform his duties better. The employer is therefore free to reward length of service without having to establish the importance it has in the performance of specific tasks entrusted to the employee.”
However, the court in Danfoss also accepted that there could be situations in which length of service would have to be justified by an employer. For instance, if a worker provided evidence that cast serious doubt on whether it was appropriate to award pay increases based on length of service. This was confirmed by the ECJ.
In those circumstances, employers would have to “prove that that which is true as a general rule, namely that length of service goes hand in hand with experience and that experience enables the worker to perform his duties better, is also true as regards the job in question.”
It also said that, where a job classification system based on an evaluation of the work to be carried out was used in determining pay, employers did not have to show that the individual worker had acquired experience during the relevant period that had enabled them to perform their duties better.
Comment
This decision is a significant step forward in terms of challenging pay systems based on length of service. The ECJ has said that the general rule that employers do not have to justify pay increases based on length of service can be circumvented where the worker can show that additional service does not enable them to do the job better.
The Advocate General had proposed that the ruling should only apply to claims already started before the date of the judgement, but the ECJ has not adopted this restriction.
The decision will also be important in relation to the age regulations as employees with longer service are likely to be older than those with shorter service. Courts and tribunals are likely to want to achieve consistency in equal pay and age discrimination claims.