Two recent decisions have considered the issue of incremental pay as a defence to an equal pay claim.
The most recent one is a first instance decision in the Irish Industrial Tribunal (McPolin v Department of Finance & Personnel 2012 Case Number 215-09 and 1210/10). This case involved a claim by a female solicitor of the Department of Finance and Personnel who initially progressed a claim under the Equal Pay Act (Northern Ireland) 1970, which was Northern Ireland's national implementation of the Equal Treatment Directive (akin to the Equal Pay Act 1970 in England and Wales). Later claims were progressed under the Equality Act 2010.
One of the issues for determination in the McPolin case was whether the collectively agreed incremental pay system operated by the employer, upon which employees were placed in accordance with their length of service, could be a material factor defence to a claim of equal pay. Mrs McPolin and all of her comparators were lawyers on Scale 6 of the incremental scale. The male comparators had longer service than Mrs McPolin and so were paid on higher levels within Scale 6.
An earlier case of Cadman v Health and Safety Executive established that length of service could be a justifiable material factor defence to an equal pay claim providing there were no serious doubts that such practice was discriminatory based on a generally acceptable proposition that service went hand in hand with experience in the job/role.
Mrs McPolin sought to argue that her employer should not be entitled to rely upon the incremental pay system as a material factornot related to sex and thus should not provide a defence against the unequal pay between herself and her comparators because there were serious doubts that the incremental pay system was discriminatory in its application.
Mrs McPolin argued that notwithstanding that the pay system and in particular the length of service criterion was applied in a neutral way, it had an adverse impact on women as women are more likely than men to have shorter service as a result of either entering the workplace later in life or as a result of taking career breaks to have and/or to raise their children and that the length of the pay scale cannot be objectively justified. Following Cadman it was agreed between the parties that where the material factor relied upon was an incremental pay scale based on length of service, the employer is only required to objectively justify the pay difference caused by it, where the claimant "provides evidence capable of giving rise to serious doubts as to whether recourse to the criterion of length of service is, in the circumstances appropriate to attain the aforementioned objective". On the facts presented to the Tribunal it was satisfied that the length of service criterion was tainted with indirect sex discrimination. It was therefore necessary for the employer to objectively justify the use of such criterion in the incremental pay system.
Mrs McPolin argued that she was fully effective in the role immediately and performing at the same level as her colleagues notwithstanding their greater service. Therefore, she said there were serious doubts about the continued pay difference. Again on the facts presented to the Tribunal, it was not satisfied that Mrs McPolin had established serious doubts over the link between length of service (experience) and performance.
The Tribunal were satisfied that there was no need to objectively justify in these circumstances but in the event that they might be wrong in reaching that conclusion they also went on to consider whether the pay increments system would be objectively justified. They concluded that it was.
The second case which was progressed to the Employment Appeal Tribunal (EAT) Secretary of State of Justice (sued as National Offenders Management Service) v Bowling EAT 0279/11. The facts of the Bowling case also involved an incremental pay system where the point in dispute was not length of service in the role but the starting salary due to additional experience prior to taking up the role.
The Claimant, Miss Bowling, was appointed on an incremental scale for a Service Desk User Support Team Customer Services Adviser as point 1 because she was new to the role. Her identified comparator had been placed on point 3 on commencement of employment because he had 10 years experience in providing IT support, analysis, testing and implementing change in customer service. As their employment progressed Miss Bowling and her comparator's performance were similar and in the last year before proceedings were commenced Miss Bowling was exceeding performance expectations so she was more than fully performing in the role.
Miss Bowling claimed that whilst experience, which dictated a higher starting salary may have been an original reason for the pay differential, this was no longer the reason as at the date of claim both she and her comparator were performing at the same level. She argued that by that point the employer no longer had a material reason for the pay differential.
The Employment Tribunal found that the material factor defence was no longer available due to the performance appraisals conducted in the meantime indicating that Miss Bowling was fully performing in the role.
The EAT, however, recognised that a pay differential between the Claimant and her comparator was inbuilt until they reached the top of the grade. If the original pay differential had nothing to do with sex (which both the Tribunal and the EAT concluded it had not) then nor did the differential in subsequent years. As the cause of the pay differential was not tainted by sex, no arguments as to justification arose and the employer was not required to objectively justify its progression of incremental pay in the manner in which it had. If the employer had been required to objectively justify the pay disparity then there would have been greater consideration given to whether Miss Bowling was able to perform the role to the same standard as her comparator notwithstanding that he started off with grater experience.
Both of these cases demonstrate that the focus, as in previous cases, should be on what the original cause of the pay differential was. The key question to ask will be "what caused the pay disparity"?
In McPolin it was length of service. In Bowling it was starting salary due to the greater experience that the comparator brought to the role. On the facts of that case it had not ceased to operate as an explanation for the differential complained of at the date of the claim. The employer's reason for the pay differential remained valid. The EAT did comment in Bowling that reference to the explanation as historical did not help as it implied that this was no longer reliable.