UK: Supreme Court rules that equal pay comparators can be at a different establishment where their terms are not dependent on location

Equal pay claimants can choose as comparators colleagues working at one of their employer’s establishments in a different location provided they are on “common terms”; the Supreme Court has now confirmed that the purpose of this test is only to exclude colleagues whose terms are different for geographical (or possibly historical) reasons.  The ruling also confirms that there is no need for collective bargaining agreements to be in place for a cross-establishment comparison to be made.

The question is whether the comparators’ core terms and conditions would have been substantially the same had they been employed at the claimant’s establishment, even if this is entirely hypothetical because these types of jobs could not exist in that establishment. The Court stressed that it is a threshold test and cases where it cannot be met  – where it can be shown that geographical factors are the real reason for the comparators’ terms – are likely to be exceptional.

Applying this to the facts found in Asda Stores Ltd v Brierley, the Court upheld earlier rulings that shop floor employees could use distribution depot employees as comparators.  The depot employees’ core terms would not have changed had the location of their depot been adjacent to the retail stores.  It is now for the claimants to seek to establish that their jobs are of equal value and for the employer to seek to show a genuine material factor defence.

Anna Henderson
Anna Henderson
Professional Support Consultant, Employment, London
+44 20 7466 2819

Spain: new regulations on equality plans and equal pay between men and women

On 14 October Spain’s Official State Journal (BOE) published two new Royal Decrees on equality: Royal Decree 902/2020, of 13 October, on equal pay between women and men (RD 902/2020) and Royal Decree 901/2020, of 13 October, which regulates equality plans and their registration and which modifies Royal Decree 713/2010, of 28 May, on the registration and filing of collective employment agreements and collective bargaining agreements (RD 901/2020). The new regulations will have a significant impact on companies as they implement a number of obligations that had been included in Royal Decree-law 6/2019, of 1 March, on urgent measures to ensure the equal treatment of and equal opportunities for women and men in employment and in the workplace (“RD 6/2019), such as establishing a payroll record or lowering the thresholds for requiring companies to negotiate an equality plan, and imposing obligations on companies to implement a series of specific measures.

It should be pointed out that RD 902/2020 will enter into effect 6 months after it was published in the BOE (i.e. on 14 April 2021) while RD 901/2020 will do so 3 months after it was published (i.e. on 14 January 2021). This will give companies a transition period within which to prepare and plan the measures necessary to comply with the new regulations.

Royal Decree 901/2020

Royal Decree 901/2020, of 13 October, which regulates equality plans and their registration and which modifies Royal Decree 713/2010, of 28 May, on the registration and filing of collective employment agreements and collective bargaining agreements.

RD 901/2020 regulates equality plans and brings in measures aimed at preventing any kind of discrimination between men and women, fosters working conditions to avoid sexual harassment and harassment on account of gender and establishes specific procedures to prevent them; it also provides grievance and whistleblowing channels for victims.

Mandatory equality plans

RD 901/2020 establishes that all companies with 50 or more employees must design and apply an equality plan, in compliance with the transitional application established by Organic Law 3/2007, of 22 March, for effective equality between women and men, with regard to equality plans (from 7 March 2021 onwards in the case of companies with more than 100 workers, and 7 March 2022 onwards for companies with 50 or more workers). Implementing an equality plan will be voluntary for all other companies and the provisions of RD 901/2020 will apply.

Negotiation process

RD 901/2020 establishes the different deadlines for negotiation:

  • Companies must start negotiations within 3 months from the date on which they reached 50 workers. Where companies have an obligation to implement an equality plan under applicable collective bargaining agreements, they must do so within the deadlines established in the collective bargaining agreement concerned or within 3 months of the bargaining agreement being published.
  • Equality plans, including any status reviews that take place previously, must be negotiated with the workers’ legal representatives. A negotiation committee will be formed of company and worker representatives, with equal representation from both sides, as established in the regulation.
  • Companies must have negotiated and approved an equality plan and it must be been submitted for registration within 1 year from the day following the deadline for starting negotiations.
  • An equality plan will need to approved by the company and a majority of the workers’ representatives.

Content and registration of equality plans

  • A status review will have to be conducted before developing an equality plan, from which information can be gleaned to design and establish appropriate measures aimed at guaranteeing equality.
  • RD 901/2020 establishes the minimum content that equality plans developed under the regulation must have with the aim of eradicating sexual discrimination in the workplace.
  • Equality plans must implement the equality measures brought to light by the current status review conducted within each company.
  • Equality plans must be filed and registered at a public register and will be available to the public.

Adaptation of pre-existing plans to RD 901/2020

Equality plans that were already in place when RD 901/2020 enters into effect must be adapted, after a negotiation procedure has taken place, to bring them into line with the provisions of the regulation by 14 January 2022.

Royal Decree 902/2020

The main aim of RD 902/2020 is to regulate equal treatment and non-discrimination in terms of pay, using pay transparency mechanisms that make it possible to obtain efficient and significant information on the value given to pay, thus preventing salary discrimination; it is mandatory for all companies, collective employment agreements and collective bargaining agreements.

Mechanisms for ensuring that pay transparency is effective: payroll record, equal pay audit and transparency in collective bargaining

RD 902/2020 provides the instruments that make it possible to effectively implement pay transparency; specifically, it contains provisions on payroll records and equal pay audits.

From a practical perspective, companies must take into account the following when RD 902/2020 enters into effect:

  • All companies must keep a payroll record for their entire staff, including executive and senior management personnel. Although that obligation was already imposed by RD 6/2019, it had not been implemented by regulatory provisions. RD 902/2020 establishes that companies have 6 months to adapt to the new provisions from its publication date.
  • The workers’ representatives will be consulted beforehand on:
    • the keeping of a payroll record; and
    • when the record is modified, at least 10 days in advance.
  • The payroll record must include:
    • average salary across the company’s staff,
    • bonuses and other extraordinary salary items, and
    • fringe benefits, broken down by gender and by professional group, category, job position, level, or any other applicable system of classification.
  • The reference period will be one year, except in the case of necessary modifications.
  • The official websites of the Spanish Ministry for Employment and Social Economy and the Ministry for Equality provide a template on which the payroll record may be based, although use of that template is optional.
  • Where a company with more than 50 workers and where there is a 25% or greater difference in the pay received by women and men, it must include in the payroll record a non-gender-related justification for that difference in pay.
  • Workers may access the information in the payroll record through their workers’ representatives (if any) or directly, thus guaranteeing the principle of transparency enshrined in section II of RD 902/2020.
  • Equal pay for part-time workers: The principle of proportionality in the pay received by part-time workers applies when the purpose or nature of the work so requires and this is established by a legal or regulatory provision, or by collective bargaining agreement.

Equally, companies that implement an equality plan must include an equal pay audit, which will have the same duration as the equality plan itself, unless it is decided that the duration will be shorter. An equal pay audit entails companies:

(i) having to conduct a review into the current salary situation at the company; and

(ii) having to establish an action plan to correct and possible inequalities in pay.

Collective bargaining agreement must at the same time ensure equal pay for jobs with the same value, making sure that there is no gender discrimination in the pay received by professional groups.

 

 

Gustavo Arroyo
Gustavo Arroyo
Senior Associate, Employment
+34 91 423 4218
Maria Cristos
Maria Cristos
Associate, Employment
+34 91 423 41 83

UK: material factor defence to equal pay claim does not evaporate merely due to passage of time

The Court of Appeal has held that an employer can in principle continue to rely on a valid material factor defence to an equal pay claim for a period after the date of the initial decision – the material factor does not simply evaporate due to the passage of time. It may continue to be the cause of the continuing pay difference and therefore provide a defence, even if it may no longer justify the difference.

The employer had carried out a job evaluation study identifying a pay disparity in the claimant’s salary, but had successfully established a material factor defence explaining the pay one year earlier. The defence relied on four factors explaining why male comparators in the employer’s executive team were paid more than the claimant in her role as Group Chief HR Officer at the earlier date: market forces, executive experience, flight risk and the importance of the role to the immediate survival of the employer. The tribunal had found that the defence had ceased to be relevant at some point part way through the year prior to the job evaluation study, but the EAT ruled that the employer’s defence continued to operate until a further decision or omission to decide pay could be identified. On the facts there had been no pay round in the intervening period, and the claimant had not made any request for her pay to be reviewed.

The Court of Appeal agreed that the tribunal had erred. The tribunal’s conclusion overlooked the fact that in respect of each of the comparators there was at least one material factor (market forces, executive experience, or flight risk) which remained causative of or which explained the difference in pay at the end of the year. The Court emphasised that a material factor need only explain the cause of the difference, it does not need to be fair or to justify it to be relied upon, provided it caused that difference and is not ‘tainted by sex’.

The Court did not accept that the employer was under a duty to keep comparative pay under continuing review once the business rescue plan had started to succeed.

Males LJ also considered that the tribunal had failed to make a finding that the claimant was employed in work of equal value at the earlier date, and therefore the issue of material factor should not have arisen.

(Walker v Co-operative Group Ltd) 

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: rulings on time limit for equal pay claims and duration of material factor defence

Equal pay claims must be brought within 6 months of the end of employment or, if the employee has worked on a series of different contracts, from the end of the “stable working relationship”.  The EAT in Barnard v Hampshire Fire and Rescue Authority ruled that a promotion to a new managerial role did not break the stable working relationship, given that there was a natural and incremental progression within the same department entirely consistent with the continuity of the relationship.  The employee was therefore not out of time to bring equal pay claims in respect of her earlier roles prior to her promotion.

The EAT in Co-operative Group Ltd v Walker has confirmed that an employer’s valid material factor defence to an equal pay claim continued to apply until the employer made a further pay-related decision, or omitted to do so having become aware of a pay disparity. The employer had carried out a job evaluation study identifying a pay disparity in the claimant’s salary, but had successfully established a material factor defence explaining the pay one year earlier. The tribunal considered that this meant the defence had ceased to be relevant at some point part way through the year, but the EAT ruled that the employer’s defence continued to operate until a further decision or omission to decide pay could be identified. On the facts there had been no pay round in the intervening period, and the claimant had not made any request for her pay to be reviewed.

Note that an appeal is due to be heard by the Court of Appeal in July 2020.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: new family-friendly rights proposed

In July 2019 the Government published its response to a consultation on extending redundancy protections to those on family leave, but without specifying any particular timetable for doing so.

Currently women on maternity leave are given priority over any suitable alternative vacancies should their role be made redundant. An employer’s failure to offer any such available vacancies renders the consequent redundancy dismissal automatically unfair. The Government has committed to extend this right of priority over vacancies to apply from the point at which the employee notifies the employer – whether orally or in writing – that she is pregnant, until six months after the end of maternity leave (even if the mother does not immediately return to work due to taking another form of leave at that point).

Similar protection will be available for those taking adoption leave. The Government intends also to provide protection for those taking shared parental leave, proportionate to the amount of leave taken and the threat of discrimination, but has yet to determine exactly how this will work. No additional protection will apply to paternity leave.

The Government will also establish a taskforce of employer and family representative groups to make recommendations on improvements to the information available to employers and families on pregnancy and maternity discrimination, and to develop an action plan to facilitate pregnant women and new mothers staying in work.

….

The Government also published Good Work Plan: Proposals to support families setting out three new consultations on:

  • a new right to neonatal care leave from ‘day one’ of employment, with flat rate statutory pay conditional on 26 weeks’ service at the 15th week before the baby is due. Where a newborn is in hospital for neonatal care for at least 2 continuous weeks, the number of weeks, capped at a limit to be specified (suggested options are 2, 3, 6, or 12 weeks), would be added on to the end of maternity or paternity leave. Consultation ends on 11 October 2019.
  • whether larger employers (with 250 or more employees) should be required to publish their policies on flexible work and family related leave and pay on their websites, possibly with key information to be included on the government’s gender pay gap reporting portal; the consultation also asks whether and how (all) employers should be required to set out their approach to flexible working in job adverts. Consultation ends on 11th October 2019.
  • the case for a potentially radical reform of family leave and pay, including possible changes to paternity, shared parental and maternity leave and pay and their possible replacement with a single ‘family’ set of entitlements, with the aim of encouraging greater sharing between mothers and fathers of leave and childcare responsibilities. The consultation closes on 29th November 2019. The Government is currently evaluating the shared parental leave regime and expects to report on this later in 2019.

….

The Government Equality Office has published Gender equality at every stage: a roadmap for change, which mentions some of the initiatives above but also confirms plans to consult on a new right to carers’ leave, review the enforcement of equal pay legislation (including consideration of when mandatory equal pay audits could be appropriate), and assess the effectiveness of gender pay gap reporting with consultation on any changes by 2021. The roadmap also mentions the possibility of requiring employers to publish retention rates for employees returning from parental leave.

Anna Henderson
Anna Henderson
Professional Support Consultant, London
+44 20 7466 2819

UK: Court of Appeal confirms broad approach to permissible equal pay comparators and procedural requirements

The Court of Appeal has given two rulings in the long-running equal value claim against Asda, in both cases ruling on preliminary points in favour of the store workers claiming equal pay with distribution depot workers. The claims will now proceed to determine whether the roles are of equal value and, if so, whether the employer has a ‘genuine material factor’ defence (ie, a reason for the pay difference which is not tainted by sex discrimination). Continue reading

UK: Discrimination – tax treatment of compensation, zero hours claims, and equal pay comparators

  • In Pettigrew v HMRC the First Tier Tribunal has held that settlement payments made by reference to underpaid past earnings arising out of a claim of discrimination against part-time workers were fully taxable as employment income. The appellant referred to the earlier case of Mr A v Commissioners for HMRC where it was held that a settlement sum representing underpaid salary and bonuses due to racial discrimination was not taxable, a decision which HMRC did not appeal. However, the Tribunal in Pettigrew did not accept this – noting in particular that the Tribunal in Mr A were not referred to the correct legal authorities and in particular the principles in Kuehne + Nagel (that for a payment to be an emolument, employment need not be the sole cause but only sufficiently substantial) and Mairs v Haughey (that a payment will usually take its taxable character from the payment which it substitutes). Both Pettigrew and Mr A are only First Tier Tribunal decisions and so not binding, but the case is a firm indication that HMRC is now likely to seek to fully tax compensation for loss of earnings arising from discrimination during employment.

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UK: EAT rules that clustering of women at low end of a pay grade was insufficient to establish indirect discrimination

The use of length of service as a criterion for pay may indirectly discriminate against women and therefore require objective justification to be lawful (particularly long pay scales are likely to face more of a challenge). However the mere fact that women are clustered at the lower end of a pay scale and men in the same grade are clustered at the higher end is not sufficient in itself to establish that an employer’s use of length of service as a pay criterion puts women at a particular disadvantage.  The EAT held in McNeill v HMRC that women were not put at a particular disadvantage as the average pay figures showed no significant differences between pay for men and women in the same pay grade.

The EAT also made clear its obiter view that old case law (Armstrong v Newcastle upon Tyne NHS Hospital Trust), which suggested that an employer could avoid the need to show objective justification if it could show a non-discriminatory underlying reason for any disparity, is no longer good law, following the Supreme Court ruling in Essop v Home Office. Once a claimant can show that a practice puts a protected group at a particular disadvantage, the practice in question must be justified and there is no need first to establish why the protected group is disadvantaged.  If followed in other cases, this would make clear that equal pay cases should be approached in the same way as other indirect discrimination cases.

UK: Gender pay gap reporting – EHRC threatens enforcement action for non-compliance

The 4th April 2018 deadline for publication of employers’ first year of gender pay gap data is looming, yet over 90% of employers covered by the new statutory duty have still not reported. Many may have deliberately chosen to publish close to the deadline, perhaps in the hope that in the early April deluge their data will slip unnoticed through the net of media attention. Whether this strategy will itself attract negative publicity may depend on whether the GEO goes ahead with its original plan to publish three lists of employers “in early 2018”: those who have reported, those who have “demonstrated that they are on track to report” by registering on the government website (possibly as at 31 January), and those who have not yet registered. Employers who are not yet ready to publish may want at least to register to avoid being on the third list.

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