The Legal 500

The EU principle of equal pay for equal work is implemented in England through the Equal Pay Act 1970. The Act implies ‘an equality clause' into every employee's contract of employment to the extent that one does not already exist from the outset. The effect of the equality clause is that where a woman can demonstrate that she is employed on:

• like or broadly similar work; or
• work that has been rated as equivalent; or
• work of equal value with a man in the same employment;

then, in the absence of the employer being able to demonstrate that the practice that has led to a pay differential is justified by a legitimate aim, the employee has the right to have her contract modified so that none of her terms are less favourable than the comparable male employee. The equality clause applies equally to male employees.

Cadman v HSE

C was paid less than her four male comparators partly due to the fact that her employer, the HSE, operated a service-related pay scheme. All her comparators had longer service than her, but some had acquired this service in more junior posts. C argued that as women in her pay band and generally in the relevant part of HSE's workforce had on average shorter service than men, the use of length of service as a determinant of pay had a disproportionate impact on women.

C's case progressed to the Court of Appeal and subsequently to the ECJ, which was asked to consider whether employers that operate service-related pay schemes are required to justify the length of service criterion.

The ECJ considered that rewarding acquired experience, which enables a worker to perform their duties better, does constitute a legitimate objective of an employer's pay policy. Length of service goes hand in hand with experience, and experience generally enables the worker to perform their duties better. On this basis it held that, as a general rule, it is legitimate for an employer to reward service on the grounds that acquired experience enables an employee to perform better. This is the case regardless of the job in question, unless the worker provides evidence capable of raising serious doubts in that regard.

C's case will now return to the English courts. It remains to be seen whether or not she can produce evidence to demonstrate that rewarding experience is not a legitimate objective for the HSE.

Impact of the decision

Although the ECJ's decision appears to be definitive, it is likely that the English courts will face a flurry of equal pay cases seeking to explore the question of what evidence is capable of raising enough serious doubt to remove an employer's automatic defence. For example, it may be argued that, in relation to certain jobs, skills can be acquired over a relatively short period and thereafter there is little or no capacity for improvement. When administering service-related pay schemes employers should also remember that periods of absence on ordinary maternity leave do count towards the employee's seniority or pension rights and towards any other similar rights that depend on a period of qualifying service, including a service-related pay increment. Only the period spent on additional maternity leave may be discounted for these purposes.

Implications for age discrimination defences

The Employment Equality (Age) Regulations 2006 permit employers to operate service-related benefit schemes (including pay) taking into account service of up to five years. Where the scheme takes into account service of over five years, a defence exists against what would otherwise be a discriminatory practice; the employer has to show that it reasonably appears to it that the service criteria fulfils a business need, eg rewarding loyalty or experience. This is thought to be a lower test than having to objectively justify the practice. Although the ECJ has stated that rewarding experience which enables a worker to perform their duties better is a legitimate objective, this decision will not necessarily assist an employer trying to rely on this service-related benefit defence. The employer will still need to demonstrate that it had a business need to reward experience (etc) and that the scheme in question did, in fact, do so. The extent to which an employer will be required to provide empirical evidence that such a business need is fulfilled has yet to be explored by the employment tribunals.

This decision does, however, provide an indication of how the ECJ will approach the question of length of service in age discrimination claims, and suggests that there should be nothing to prevent employers from taking length of service (as a performance/ experience indicator tool) into account at the recruitment stage.

Cadman v HSE (Case C-17/05)