The European Court of Justice (ECJ) has handed down its decision in an important equal pay case, Cadman v Health and Safety Executive.
In this case, Mrs. Cadman, a Health and Safety Inspector in Manchester received less pay than men in the same pay bracket. In 2001, Mrs. Cadman was paid £ 35,129 and one of her male colleagues was paid £ 44,183, over £ 9,000 more. The pay system was based on length of service. The male colleges in Mrs. Cadman's team had longer service with the Health and Safety Executive (HSE) and therefore were paid more. Mrs. Cadman argued that the pay system discriminated against women who are more likely to have shorter periods of service, being more likely to have had a career break to look after children. The Court of Appeal referred this case to the ECJ to decide whether the use of length of service as a factor in a pay system requires objective justification. The ECJ had to consider whether employers who operated a pay system based on length of service must prove that their pay system is justified because the employees with longer service perform their duties better.
The good news for employers who operate a pay system based on length of service is that the ECJ rule that employers generally do not need to provide specific justification for using length of service as a criterion in a pay system, even where results in unequal pay between men and women. Only, where a worker can provide evidence raising serious doubts as to the appropriateness of rewarding experience in this way, having regard to the particular job in question, will such justification be required. Mrs. Cadman will now take her case back to the UK courts to see whether she can raise serious doubts about the appropriateness of the pay system operated by the HSE.
The mention of length of service should immediately bring something else to the front of your minds – age discrimination. Paying an employee according to length of service is acknowledged to be age discriminatory, as older employees tend to have longer service. Will employers have to justify a pay system based on length of service under the age discrimination legislation?
Under the legislation, service related benefits provided up to five years' service are allowed. Service related benefits provided to employees with five or more years' service, are legal if the employer can show that they fulfill a genuine business need, such as rewarding experience. One issue to be clarified by the courts will be whether in this context 'benefits' includes pay. We will have to wait and see. In the meantime, if you do operate a pay system based on length of service (and this applies to employees with five or more years' service) you should consider whether the system fulfills a genuine business need.
If you have any questions on the issues raised in this Alert, please contact one of the employment team.
I do not normally stray outside the realms of employment law in these alerts, but the changes introduced by the Finance Act 2006 are so important, that I wanted to bring them to your attention.