Ms Bradley, a female professor, claimed under the Equal Pay Act 1970 and compared herself with two male professors at the same college where she taught and researched. It was accepted that they were engaged on like work or work of equal value for the purposes of the Act. The men had significant sums in addition to their original basic pay which it was found were given to them when it was learned by the employer that attempts to poach them had been made. The ET found, and the EAT agreed, that this was a wholly genuine reason for the difference in pay. Accordingly, it was decided that the genuine material factor defence provided for by the legislation had been made out, and that the differences in pay were unrelated to sex.
The EAT found that both the Act and European law called for a term by term comparison, and not an overall view of the value of remuneration and employment arrangements and so when the ET considered the terms globally it was wrong to do so. However, the error was immaterial to the decision, which appeared clear, and which was reached without error after a correct statement of the applicable law. The appeal was therefore dismissed.
Compulsory Pay Audits
The Equality Act 2010 provides that men and women should receive equal pay for equal work.
Following consultation, seeking views on how the new rules should work, the Government published the draft regulations on 19 June 2014.
When must a tribunal order an equal pay audit?
Where a tribunal finds that an employer has breached the equal pay provisions it must order that employer to conduct and publish an equal pay audit unless:
The employer carried out an audit in the previous three years;
An audit is unnecessary because it is already clear whether action is required to avoid equal pay breaches from occurring or continuing.
The nature of the breach found by the tribunal is such that there is no reason to think that any other breaches may exist.
The disadvantages of an audit would outweigh its benefits.
The exceptions are limited so the safest thing to do is to ensure compliance with the equal pay legislation. Existing micro-businesses and new businesses will be exempt from the new rules. The definition of a micro-business is complicated but as a general guide it has:
fewer than 10 employees working 37.5 hours a week; or
employees contracted to work under 375 hours a week in total.
Again the concept of a new business is complicated but as a general guide it is new if it started within a 12 month period and the complaint was initially made within that 12 month period.
Nature of an audit
An equal pay audit must:
Include relevant gender pay information related to the descriptions of employees specified by the tribunal.
Identify any differences in pay between men and women and the reasons for those differences.
Include the reasons for any potential equal pay breach identified by the audit.
Set out the employer’s plan to avoid breaches occurring or continuing.
The employer must collate and send the audit to the tribunal. The tribunal must decide whether the audit complies. If it does, then the employer has to:
publish it on their website and leave it there for three years; and
inform all persons about whom gender pay information was included in the audit where they can obtain a copy.
If publication would result in breach of a legal obligation (for example, under the Data Protection Act 1998), the employer should publish an edited version. If that does not suffice then publication is not required. In its response to consultation, the government suggested that this exception “would apply only in very limited circumstances”.
Penalties for Failure to Comply
Failure to comply without reasonable excuse can incur a penalty not exceeding £5,000. The tribunal must take the employer’s ability to pay into account and make an order specifying a new date for the audit. A further failure to comply is likely to mean a further penalty of up to £5,000.
Audits will only be ordered once an employer has lost an equal pay case and this happens less often than one might expect. Usually there is a preliminary hearing to establish any or all of the following:
identification of appropriate comparators;
establishing work of equal value; and/or
the availability of a material factor defence.
Frequently, where the employer loses on such points, it will settle and there will be no finding of a breach of the equal pay provisions as a result. This is only likely to increase given the threat of an equal pay audit and its publication.
For further information, please contact Jacqueline Kendal or the Partner with whom you usually deal.