Employment and Immigration Law Update - Equal pay: material factor defence


27 August 2020

In this case, the Court of Appeal has considered how long a ‘material factor’ defence to an equal pay claim continued to apply.

Walker v Co-operative Group Ltd and another [2020] EWCA Civ 1075

Facts

The claimant was promoted to the position of Chief Human Resources officer in around February/March 2014. The company was at that time in a financially precarious position. The Executive Committee were regarded as essential to its survival, and so they were offered enhanced salaries. The claimant’s salary was lower than other members of the committee.

The following year a job evaluation study was carried out and showed that the claimant’s work was at least equivalent, and/or of equal value, to that of the male committee members. When the claimant was dismissed, she brought a claim for equal pay.

The employer argued that a ‘material factor’ defence applied on the basis that there were a number of justifications for setting the claimant’s pay at a lower level than that of her comparators, which were not related to her sex. This included factors such as regarding the HR function as being less critical to others on the committee and the claimant’s lack of previous executive experience. The employer’s case was that these justifications persisted despite the results of the job evaluation study.

The employment tribunal accepted that the material factor defence was established by the employer in 2014, but by the time of the job evaluation study the ‘historical explanations’ for the pay differential were no longer applicable. The Employment Appeal Tribunal (EAT) upheld the employer’s appeal, finding that the material factor defence continued to operate until a further decision (or omission to decide) in relation to the claimant’s pay could be identified.

Previous case law had established that the results of a job evaluation study do not have retrospective effect. The claimant’s identification of a period of time (between 2014 – 2015) where the employer’s material factor defence ceased left the starting point of the claimant’s claim unclear, and if upheld would have meant that there would have been broad scope for the matter to be re-litigated in a subsequent hearing to decide the correct amount of compensation. The claimant appealed to the Court of Appeal.

Court of Appeal decision

The Court has dismissed the claimant’s appeal, upholding the EAT’s decision. The tribunal had overlooked the fact that in respect of each of the comparators, at least one material factor continued to apply. This meant that the employer’s original explanation for the pay differential had not ceased to be relevant, notwithstanding the results of the job evaluation study.

In relation to the claimant’s lack of executive experience, it was not a question of whether the difference in experience justified the difference in pay; for the purposes of the material factor defence the question was whether it explained the difference.

Consequences

This decision is likely to be helpful for employers in defending a potential claim for equal pay. The material factors relied upon by the employer had not ceased to exist by the time of the job evaluation study. It also confirms that the material factor defence will continue to apply until such time as there is a further decision, or an omission to decide, in relation to pay. The company had not undertaken a pay round in the intervening period and so it had not failed to address the pay discrepancy.

These articles are from the August 2020 issue of Employment and Immigration Law Update, our monthly newsletter for HR professionals. To download the latest issue, please visit the newsletter section of our website. For further information please contact Liz Stevens or another member of Birketts' Employment Law Team.

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at August 2020.