Equal pay during financial difficulties

Equal pay during financial difficulties

Homophobic remarks about hypothetical recruitment processes can still be considered a breach of EU equal treatment law

In Walker v Co-operative Group Limited, the Court of Appeal has held that a tribunal was wrong in deciding that the non-discriminatory factors relied upon by an employer to explain a difference in pay between a female employee and her male comparators ceased to apply.

 

Background

In February 2014, the claimant was promoted to the position of Group Chief HR Officer of the Co-op. At the time, the company was in a desperate financial position and the executive team was given pay increases, partly to ensure retention at such a critical time. However, the claimant’s salary was lower than the pay of the male members of the executive team.

A job evaluation study carried out in February 2015 determined that the claimant’s role was equivalent to the roles of some of the other members of the executive team. The claimant was subsequently dismissed and she brought various claims, including in respect of equal pay.

The company relied on the material factor defence to explain the original difference in pay between the claimant and her male executive team colleagues. The company argued that the difference in pay was due to:

  • The comparators being deemed more important to the future of the company
  • The claimant being unproven at that level
  • The perceived flight risk of the comparators and
  • The market rate for one of the comparators being higher

The decision

The Employment Tribunal accepted the company’s material factor defence to explain the difference in pay when the claimant was first promoted. However, it held that at some point between February 2014 and February 2015 (when the job evaluation study was completed) these explanations no longer justified the difference in pay as her role was deemed equivalent to the roles of her colleagues.

The Court of Appeal held that the Tribunal had followed the wrong approach in three key ways:

  • The claimant’s role was deemed to have been equivalent from the time of the job evaluation study in February 2015 and not before. The Tribunal was therefore, wrong to have considered the period before this, as there was no evidence that her role was equivalent before this time.
  • The Tribunal was wrong to conclude that because the study determined her role was equivalent from February 2015, the factors relied on by the company to explain the difference in pay in February 2014 could no longer apply.
  • The Tribunal went too far in considering whether the factors justified the difference in pay. The correct approach is to consider whether the non-discriminatory factors operate to explain (not justify) the difference in pay. In its view, there was at least one factor which could still explain the difference in pay and therefore the claim should fail.

Comment

The case is a timely reminder of the factors which may apply to explain a difference in pay, particularly during periods of financial difficulties. Employers should, however, continue to keep pay under review and consider whether any differences in pay can be explained on non-discriminatory grounds.

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