Barton v Investec Henderson Crosthwaite Securities Limited [2003] IRLR 332
Equal pay may seem something of a misnomer where salaries of hundreds of thousands of pounds are concerned. The purpose of equal pay legislation however is to eradicate sex discrimination in pay, not address issues of fair pay and social justice. So the principles are the same whether the case is about female cleaners seeking pay parity with male refuse workers or female stockbrokers wanting equal pay with male colleagues.
Ms Barton's case is in the latter category. Both her and her male comparator received basic pay of £150,000. But her annual bonus (on top of basic pay) was £300,000 compared to his £1 million and he also received £75,000 as a Long Term Incentive payment whilst she received none and he was given a third more share options than her. Her case concerned both equal pay and sex discrimination as non-contractual bonuses come under the Sex Discrimination Act 1975 whilst the contractual elements of pay are determined under the Equal Pay Act 1970.
The Employment Tribunal accepted that her comparator was a valid comparison they were both engaged on like work, and they found that there was an unwritten, non-transparent bonus policy with neither an appraisal system nor an equal opportunities policy. However they were satisfied that the employer had established the material factor defence to an equal pay case and that her lower bonus and pay was not on grounds of her sex. The Tribunal stated that they considered it was a vital component of the City bonus culture that bonuses are discretionary, scheme rules are unwritten and individuals' bonuses are not revealed and that the bonus system would collapse if comparisons were possible.
The Employment Appeal Tribunal has given short shrift to this reasoning stressing that no Tribunal should be seen to condone a City bonus culture involving secrecy and/or lack of transparency. The EAT stopped short of substituting the Employment Tribunal decision with a conclusion that Ms Barton had been subject to sex discrimination and her equality clause breached, and so has remitted the case back to the ET for a fresh hearing. However, the Judgment provides very helpful guidance on both how Tribunals are to assess the burden of proof in sex discrimination claims, and the material factor defence in equal pay cases.
Sex discrimination burden of proof
Following the change to the burden of proof set out in section 63A of the Sex Discrimination Act 1975, it is for the Applicant who complains of sex discrimination to prove on the balance of probabilities facts from which the Tribunal could conclude, in the absence of an adequate explanation, that the Respondents have committed an act of discrimination against the Applicant which is unlawful. If the Applicant does not prove such facts the claim fails. However, it is important to bear in mind in deciding whether the Applicant has proved such facts that it is unusual to find direct evidence of sex discrimination. Few employers would be prepared to admit such discrimination, even to themselves. In some cases the discrimination will not be an intention but merely based on the assumption that "he or she would not have fitted in".
In deciding whether the Applicant has proved such facts, it is important to remember that the outcome at this stage of the analysis by the Tribunal will therefore usually depend on what inferences it is proper to draw from the primary facts found by the Tribunal. It is important to note the word is "could". At this stage the Tribunal does not have to reach a definitive determination that such facts would lead it to the conclusion that there was an act of unlawful discrimination. At this stage a Tribunal is looking at the primary facts proved by the Applicant to see what inferences of secondary fact could be drawn from them. These inferences can include, in appropriate cases, any inferences that it is just and equitable to from an evasive or equivocal reply to a Sex Discrimination Act questionnaire. Likewise, the Tribunal must decide whether any provision of any relevant code of practice is relevant and if so, take it into account in determining such facts. This means that inferences may also be drawn from any failure to comply with any relevant code of practice.
Where the applicant has proved facts from which inferences could be drawn that the Respondents have treated the Applicant less favourably on the grounds of sex, then the burden of proof moves to the respondent. It is then for the respondent to prove that he did not commit, or as the case may be, is not to be treated as having committed that act. To discharge that burden it is necessary for the respondent to prove, on the balance of probabilities, that the treatment was in no sense whatsoever on the grounds of sex, since "no discrimination whatsoever" is compatible with the Burden of Proof Directive. That requires a Tribunal to assess not merely whether the respondent has proved an explanation for the facts from which such inferences can be drawn, but further that it is adequate to discharge the burden of proof on the balance of probabilities that sex was not any part of the reasons for the treatment in question. Since the facts necessary to prove an explanation would normally be in the possession of the respondent, a Tribunal would normally expect cogent evidence to discharge that burden of proof. In particular the Tribunal will need to examine carefully explanations for failure to deal with the questionnaire procedure and/or code of practice.
Material factor defence in equal pay
Under the equal pay aspects to the case, as there was both a taint of sex discrimination and a lack of transparency in the pay system the Respondent had to prove the following seven elements to successfully argue that the reason for pay differential between Ms Barton and her comparator was not the difference of sex. (1) That there were objective reasons for the difference; (2) unrelated to sex; (3) corresponding to a real need on the part of the undertaking; (4) appropriate to achieving the objective pursued; (5) that it was necessary to that end; (6) that the difference conformed to the principle of proportionality; and (7) that was the case throughout the period during which the pay differential existed.
The guidelines set out in this case will have wide repercussions beyond the city bonus culture under investigation in this particular case. Employers ignore statutory questionnaires and Codes of Practice at their peril. The clear analysis of the approach required to establish discrimination will be relied on by Applicants from now on.