Indirect discrimination arises when an employer applies a provision, criterion or practice which, although superficially neutral, advantages one gender more than the other and they cannot justify it. In The Audit Commission v Haq, the Court of Appeal said that an employer could rely on a pay protection policy that was indirectly discriminatory because it was a proportionate means of achieving a legitimate aim and therefore justified.
In 2004, the Audit Commission took on the role of inspector of social housing from the Housing Corporation. There were two kinds of administrative support jobs - Inspection and Information Officer (IIO) and Senior Inspection and Information Officer (SIIO). The employees who transferred over were placed at a point in the pay scale of SIIO to protect their existing salaries.
On 1 October 2007, the Commission decided to reorganise the two roles into one job - that of Inspection Support Officer. Nine women (former IIOs) and two men (former SIIOs) were appointed to the ISO positions. All of them were put on pay protected points in the new grade but the two men were on higher pay because of their previous senior position.
The women claimed equal pay.
Tribunal and EAT decisions
The tribunal said that, as the advantaged group was exclusively male and the disadvantaged group exclusively female, there was a prima facie case of indirect sex discrimination which the Commission could not justify.
The EAT, however, said that the tribunal was wrong to focus on “Enderby-type” discrimination (allowing it to infer indirect discrimination in the absence of an actual identifiable provision, criterion or practice), as the cause of the differential was clearly the result of a policy which allowed ‘re-structured” employees to retain their previous pay point.
The question therefore was whether the policy applied in the re-structuring put women at a particular disadvantage when compared with men. It held that, as the women (even those on lower pay than the men) benefitted from the pay protection policy, there was no disproportionate impact.
Court of Appeal decision
The Court of Appeal agreed with the tribunal that the Commission’s pay protection policy had indirectly discriminated against the women because of the “undisputed inequality in pay” after 1 October 2007 between the claimants and their comparators. The Commission had failed to establish the genuine material factor defence “because of the taint of sex in the form of the obvious disparate adverse impact on the Claimants”.
However it disagreed with the tribunal’s approach to the issue of objective justification, holding instead that protecting the pay of employees affected by restructuring and preventing an exodus of skills and experience were legitimate aims.
It rejected as “seriously flawed” the tribunal’s suggestions that the Commission should instead have “red circled” the pay of those on higher pay points, or assimilated the jobs of the IIO and ISO and made the SIIOs redundant as a way of achieving its aims. The first option would not have solved the issue of the pay differential because both the men and women were on pay protection; and the second would have failed to achieve the objective of retaining the best people for the jobs.
It held that the EAT was entitled to substitute its view for that of the tribunal and, by a majority, dismissed the appeal.
Some of the most interesting remarks in this case are from Lord Justice Mummery, in the minority, on the issue of justification. He says equal pay is difficult and takes a long time. He remarks that it might be better for all concerned to have a negotiated solution even if that means compromise. The decision itself is a clear re-statement of the law on indirect discrimination in equal pay; there must be evidence of adverse impact and what that evidence is depends on the particular case. The decision of the majority on justification is an illustration that what steps are a proportionate means of achieving a legitimate aim also depends on the facts and the views of the judges hearing the case. If the judges think there was no rational alternative that would have achieved the same objectives they will find the pay difference justifiable. But as Lord Justice Mummery says, different judges may have come to a different conclusion on the same facts.