The unjustifiable cannot be justified
Labour & European Law Review Weekly Issue 44 - March 2000 01 March 2000
Crossley and Others v ACAS (Birmingham Employment Tribunal, 1304744/98 20.12.99)
Jorgensen v Foreningen af Speciallaiger and Sygesikringens Forhandlingsudvlag C-226/98 and Jamstalldhetsombudsmannen v Oreboro Lans Landsting C-236/98
The startling headlines from last month, showing that on average a woman will earn £250,000 less than a man during her lifetime, underline the ever-present need for effective equal pay laws. These statistics are the result of an extensive analysis carried out on behalf of the Government's Women's Unit.
According to Baroness Jay, Minister for Women, these statistics will inform future policy-making on welfare support, the New Deal, childcare and career choices. Nonetheless, as the Government last year made clear in response to the Equal Opportunity Commission's demand for changes to the equal pay laws, it did "not consider the time is right for major changes in the law."
For the moment, therefore, women will have to continue to make the best of the current inadequate and arduous equal pay legislation as the main legal tool for rectifying the £250,000 deficit. And continue to make use of it they do. In 1998, there were 3,447 equal pay cases lodged with the Tribunals. This compares with 2,886 applications in 1997.
Equal pay claims can of course be financially significant, and recent legal developments reinforce the possibility of large financial settlements. The landmark Employment Appeal Tribunal case of Levez v T H Jennings (Harlow) Pools Ltd 1999 (see Issue 40 of LELR), has declared that the two year back pay limit, contained in section 2(5) of the Equal Pay Act 1970, is contrary to European law. As a consequence from now on the section 2(5) limit is to be disregarded in all equal pay cases in favour of a six year limit, in keeping with analogous breach of contract cases. However, even the six year limit is being questioned in the part timers pension cases, Preston v Wolverhampton Healthcare NHS Trust 1998 IRLR 197 (European Court of Justice decision expected later this year or next.) If successful, the part-timers will be allowed to back date their pensions to April 1976.
Together with developments relating to compensation, the impact of equal pay as a negotiating tool continues to have effect. A recent successful Tribunal case pursued for PCS union by Thompsons against, ironically, ACAS has required ACAS to revisit their pay systems. The case may also have wider repercussions across the civil service.
In Crossley and Others v ACAS (Birmingham Employment Tribunal, 1304744/98 20.12.99), the Tribunal found in favour of the Applicants. The Applicants' case was that the ACAS pay system, which rewarded length of service, was indirectly discriminatory and therefore contrary to the Equal Pay Act. Within ACAS the pay structure incorporated the old incremental point system which had automatically awarded incremental pay increases to staff each year.
Even though the incremental system had since been abandoned in favour of performance related pay, nonetheless the old increments remained embedded in the system. Employees moved on to the performance or box marking pay system with their increments preserved in tact. Because ACAS historically has operated within a male dominated environment, the longer serving staff were primarily men. The female staff had shorter periods of service not only due to joining ACAS at a later date, but also because of breaks due to child care. Statistically, therefore, a large number of men were clustered in the higher pay ranges, with the women clustered at the bottom of the scales. Since pay increases are now purely performance related, the lower paid women can never catch up with their longer serving male colleagues.
ACAS sought to argue before the Tribunal that seniority was, in itself, a sufficient objective justification defence. This argument was unanimously rejected by the Tribunal. They said that the Bilka test of objective justification presented "a formidable hurdle" for an employer seeking to justify an indirectly discriminatory pay system. If an employer wished to adopt a pay system which rewarded seniority, then they had to ensure that there was a necessary correlation between the seniority that was being rewarded, and the requirements of the job. In this case the necessary correlation had not been made out.
"Another useful equal pay case is Young v National Power plc (EAT  ICR 78). Here, the Applicant was seeking to claim equal pay in respect of work that she had carried out two years prior to the termination of her employment. She argued that the six month time limit on bringing proceedings related to her overall employment with the Company. The Company on the other hand argued that the six month limit related solely to the period in relation to which she was claiming equal pay. The EAT agreed with the Applicant. As long as the Applicant remains employed under the same contract with the employer, then she can claim equal pay in respect of any job she had done, and if she leaves her employment then she can claim within six months, again in respect of any job that she had done."
Justification is also the subject of two interesting European cases, where decisions are awaited. Apart from surely making history as having the longest case names ever, Jorgensen v Foreningen af Speciallaiger and Sygesikringens Forhandlingsudvlag C-226/98 and Jamstalldhetsombudsmannen v Oreboro Lans Landsting C-236/98 both deal with the extent of the burden on the employer to justify apparently discriminatory pay systems. Jorgensen raises the question of whether financial constraints can amount to objective justification. Previously, the assumption had been that cost cutting could not amount to objective justification, as, for example, with Hill and Stapleton 1998 IRLR 466 ECJ. Nonetheless in Jorgensen, the question being referred to the European Court is the extent to which "considerations relating to budgetary safe-guards, savings and planningÉmay be treated as objective and valid considerations."
In Jamstalldhetsombudsmannen, the primary issue is what aspect of an Applicant's pay can be compared with what element of the comparator's. The Advocate General's opinion confirms the Rainey principle ( IRLR 26) that it is each element of the pay package that can be compared: "treating each element of remuneration independently for the purpose of an equal pay comparison will in general be the only proper way to ensure equality". What is the position, however, where the separate elements cannot be disentangled? Here, the Advocate General advises that a global assessment will need to be carried out. "In that case, the mere fact that the structure is not transparent means that the employer retains the burden of disproving alleged discrimination".
It is an increasingly common feature of employers' pay systems that managerial discretion and consequent lack of transparency dictate the terms. It is precisely that lack of transparency that makes it hard to identify and locate the £250,000 shortfall, and why the pay gap between men and women is proving so difficult to eradicate. Against that background, these recent decisions and Opinions, emphasizing precisely the extent of the "formidable burden" on employers to justify what otherwise would be discriminatory pay systems, are particularly welcome.
Additionally an under used tool in equal pay bargaining and tribunal cases is the Equal Opportunities Commission Code of Practice on equal pay. Combined with these recent trends on justification, the effect could be powerful indeed.