The Court of Appeal decision in Haq reminds employers of the risk of equal pay claims following a restructuring exercise. If a new job grade contains a disproportionate number of employees of one sex, who are paid less than comparators of the other sex, there is a risk that the employer will need to provide objective justification for the pay differential.

As part of a restructuring, employees from higher and lower grades were amalgamated into a single grade. Pay protection was operated so that employees transferred to their new roles at their existing point on the pay scale, meaning they retained their existing salaries. As a consequence, of 11 employees on the new grade, two men (who had previously held higher grade roles) were paid significantly more than their female colleagues (who had all been employed at the lower grade). There was no suggestion of a breach of equal pay law before the restructuring but the female employees argued that there had been a breach of the Equal Pay Act afterwards: they were employed on like work with the male comparators after that point.

The Court of Appeal had to decide two issues:

  • Was the way the amalgamation and pay protection policy operated indirectly discriminatory; and
  • If so, could the employer objectively justify the indirect discrimination.

Overturning the EAT decision, the Court of Appeal found that there was indirect discrimination at work. On the statistics, it was clear that the women, who had occupied lower grade roles regarded as "women's work" because they accommodated family responsibilities, were at a disadvantage because of the way the amalgamation and pay protection applied in comparison with the male comparators.

However, the indirect sex discrimination could be justified. The application of the pay protection policy was designed to prevent employees from suffering a loss and allowed the employer to retain employees with particular skills and experience. Those were clearly in principle legitimate aims. The Court of Appeal (by a majority) upheld the EAT decision that adoption of the pay protection policy was proportionate. It did not incorporate past discrimination and matched the loss that the employee would otherwise suffer. The fact that the employer could have "red circled" the comparators' pay as an alternative to maintaining their position on the pay scale did not make the application of the pay protection policy disproportionate.