The Employment Appeals Tribunal has departed from previous case law in deciding that men and women who perform equal work cannot be paid differently, unless employers can objectively justify the reason for doing so.
This is a new and rigorous test of the employers defence, allowing tribunals to question the validity of any difference in pay.
Previously, the law had only required employers to objectively justify their reasons in claims involving indirect discrimination, that is, in cases where the difference in pay affected more women than men.
However, the EAT determined that this should be the case in all equal pay disputes, at the hearing of a claim brought by Amanda Sharp against her former employer, the financial services company Caledonia Group Services.
Sharp was employed by Caledonia Group Services as a financial accountant starting in 1996.
In 2002, Russell Jones & Walker issued proceedings in the Employment Tribunal on Sharps behalf, claiming she was receiving unequal benefits (pay, bonus, company car, share options and medical insurance) compared to male colleagues doing work of equal value.
Although the jobs were different, an independent expert appointed by the Employment Tribunal concluded that Sharps work was indeed of equal value to a male colleague.
At the Employment Tribunal hearing, in September 2004, Caledonia argued that the extra pay received by Sharps male colleague was due to “historical considerations” and his personal situation.
The Tribunal dismissed Sharps equal pay claim for this reason, stating that it was due to a genuine material factor, which was not related to the difference in sex.
The Equal Opportunities Commission backed Sharp in funding her appeal, on the basis that it was not enough to put forward such a defence, without the more robust test of objective justification.
Although this had been established in an earlier European case, last year, the EAT ruled that it only applied in cases of indirect discrimination.
In upholding the appeal, the EAT extended the more robust test of objective justification to all equal pay claims, by departing from their own earlier decision and approving the European case law.
The case will go to a fresh Employment Tribunal for a re-hearing. Caledonia will now have to show not only that there is a real need for the difference in pay, but that it was both appropriate and necessary to achieve the objective, as well as being proportionate in the circumstances.
Julie Morris, Sharps solicitor, says: This is a tremendous result, not only for Sharp but for all claimants bringing equal pay claim in the UK.
“The Employment Appeal Tribunal has departed from previous case law to shift the balance back to employees Employers will have to watch out, because their pay decisions will now really be put to the test.
Tribunals are at last entitled to look behind the defences put forward by employers to see if there are good solid reasons that really justify the full difference in pay and benefits.
Sharp is delighted that, after three long years of litigation, a decision will be made on whether the reason for paying her less than a male colleague actually does hold water.
Jenny Watson, acting chair of the EOC, says: No employer needs to find themselves in court over equal pay.
“Companies that carry out a review of whether their working practices and pay systems deliver equal pay can pinpoint potential problems and take appropriate action to close the pay gap.
“In a tight labour market, these equality conscious employers are already seeing direct benefits to their bottom line through their ability to attract and retain the most talented staff.