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Employers face having to justify long-service pay structures

Employers may have to justify policies linking higher pay to longer service after a Court of Appeal ruling on equal pay. The Court of Appeal said that justification would be needed if long service-based pay awards had an impact on women workers.21 Oct 2009

Christine Wilson took a case against her employer, the Health and Safety Executive (HSE), over its pay structures. The HSE linked pay to length of service, which Wilson said discriminated against her because she had taken time out to have a family.

She said that three male colleagues working at the same level as her were paid more for doing equivalent work. Wilson, and the Equality and Human Rights Commission which intervened in the case to support her, said that length-of-service based pay discriminated against women.

"[Service-related pay scales] will frequently, and perhaps ordinarily have an adverse impact on women who are less likely than men to have unbroken employment records, because of the disproportionate responsibility for family caring," the Commission told the Court. The case was an appeal from the Employment Appeal Tribunal (EAT).

"It is well established that as a general rule an employer does not have to provide special justification for the decision to adopt such a criterion because the law recognizes that experience enables an employee to work better, and thus that rewarding experience is a legitimate aim of pay policy," said the ruling.

The HSE's pay policy was governed in part by a system which incorporated fixed pay increases for length of service up to 10 years, after which such pay increases stopped.

"The dispute between the parties was not the fact of the adoption of a length of service criterion but the way the length of service criterion was applied. Mr Strawson, a trade union official who gave evidence on Mrs Wilson's behalf and was himself an HSE officer, considered five years was the right level," said the ruling. "[The HSE argued that] it was to be assumed that service-related benefits were justified and that they did not have to justify any difference in pay between men and women in any event."

The case hinged in part on a ruling on such schemes by the European Court of Justice (ECJ) in a case involving the HSE and an employee called Cadman. The Court of Appeal dismissed a claim by the HSE that that ruling only applied to the adoption of a length-of-service criterion and not its use.

"In my judgment, the important point is that it is not apparent from the terms of its judgment that the Court of Justice sought to limit claims to claims about the adoption of a service-related criterion and to exclude claims about their application," said Lady Justice Arden in the ruling. "An employer can be required, in the proceedings in which an equal pay claim is brought, to provide objective justification for his use of a length of service criterion as well as its adoption in the first place."

The ECJ had said that employers must objectively justify the use of such policies when an employee can demonstrate "serious doubts" about its fairness. The Court of Appeal said that this was not a stiff test to be applied in cases but a "filter on claims" that should only be used to help to decide which cases should receive a trial.

"The 'serious doubts' test can thus only be applied before a trial. It has no place once the trial has taken place and liability has been found," said Lady Justice Arden.

The Court found that though generally employers will not have to justify their pay schemes, there are circumstances in which employees can force employers to justify their service-related pay structures.

"Women should not be disadvantaged in the workforce because of they take time out for maternity leave or to meet caring responsibilities," said Susie Uppal, director of legal enforcement at the Equality and Human Rights Commission. "Linking pay to length of service often does them a disservice. Direct discrimination, long hours, and a lack of flexible working options are some of the biggest barriers to achieving gender inequality in the workplace."

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