The Supreme Court widens scope for equal pay comparisons

June 27th, 2013

Julian Milford

The question of when equal pay claimants can rely upon comparators employed at different establishments on common terms and conditions under s.1(6) Equal Pay Act 1970 (and now, s.79(4) Equality Act 2010) has long generated an inordinate amount of heat, not light. A unanimous Supreme Court (Lady Hale giving the single judgment) has now cleared away some of the fog of confusion in North v Dumfries and Galloway Council [2013] IKSC 45. In the process, it has overturned both the EAT and the Court of Session Inner House.

The background is this. Back in 1996, the House of Lords decided in British Coal Corporation v Smith [1996] ICR 515 that claimants in establishment A relying on comparators in establishment B did not need to be employed on common terms and conditions with their comparators. They only had to show that, if comparators were employed at both establishment A and establishment B, the comparators would themselves be on common terms. I.e. the test of commonality need only be between comparators, not between claimants and comparators.

What Smith arguably left open was the nature of the hypothesising required. Did it have to be at least feasible that comparators could be employed at the claimants’ establishment? And did the Tribunal have to hypothesise about how comparators’ terms and conditions might have to be varied, in order to make work at the claimants’ establishment possible?

The North case concerned school-based claimants seeking to compare themselves with manual workers such as grounds workers and refuse workers in different establishments. The EAT said that there had to be a “real possibility” of the comparators being employed at the claimants’ establishment, which was not the case here. The CSIH disagreed, but upheld the EAT in the result, on the basis that if comparators were employed in schools, their terms and conditions would need significant variation to make such working possible. So on the facts there would be no commonality of terms.

The Supreme Court disagreed with both the approach of the EAT, and the approach of the CSIH. It said that it was entirely unnecessary to hypothesise either about whether comparators ever could be employed at the claimants’ establishment, or about what adjustment would be needed to their jobs if they were. All one needed to ask was what terms comparators would be employed on, if they did their same jobs in a different location. That was a simple test, which the Employment Judge had correctly applied at first instance. So the claimants were entitled to compare themselves with manual workers in different establishments.

At first blush, it may seem surprising that the claimants in North did not argue their case in the alternative on the basis of the direct effect of Article 157 TFEU, and the test it lays down that there be a “single source” of terms and conditions for both claimants and comparators. The reason (which is not apparent from the SC’s judgment) is that the claimants had specifically reserved their position on whether the council was a “single source”, depending upon the outcome of their case on cross-comparisons under domestic law.

Lady Hale nevertheless made some interesting observations in North about the “single source” test, as support for her analysis of the relevant domestic law provisions. She referred with approval to the observations of the Advocate General in Lawrence v Regent Office Care Ltd C-320/00 [2003] ICR 1092 on when there would be a single source. The A-G had said there would be a single source in three categories of case: (i) where statutory rules applied to working and pay conditions in more than one establishment; (ii) where several establishments were covered by the same collective works agreement or regulations ;and (iii) where terms and conditions were laid down centrally for more than one organisation or business within a holding company or conglomerate. She also pointed out that the researches of counsel had discovered “no case in the Court of Justice in which the principle of equal pay has not been applied between men and women who work for the same employer”. She said (obiter) that applying the relevant principles “in this case it is quite clear that the difference in treatment between the claimants and their comparators is attributable to a single source, namely the local authority which employs them and which is in a position to put right the discrepancy if required to do so”.

Lady Hale’s approach to a “single source” casts doubt upon the Court of Appeal’s case law upon the issue:

(1)    In Armstrong v Newcastle upon Tyne NHS Trust [2006] IRLR 124, the Court of Appeal said that claimants and comparators employed by a single hospital trust in different establishments were not subject to a “single source”, because the hospital had not assumed responsibility for setting the terms and conditions of the comparators (who had transferred under TUPE). It is very difficult to reconcile that approach with North.

 

(2)    In DEFRA v Robertson [2005] ICR 750 the CA said that a single source did not apply civil servants in different government departments, who were all servants of the Crown, but whose terms were individually negotiated by departments to whom responsibilities were devolved under delegated legislation. It may be that this approach is also up for grabs in light of North. Lady Hale said that she did not need to decide the correctness of the Robertson case, but at least suggested that there was an argument to be had: see [40]-[41].

Overall, the Supreme Court’s approach simplifies the applicable principles. It also significantly widens the scope for cross-establishment comparisons in equal pay cases.

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