25 September, 2017
Are equal pay claims and sex discrimination claims mutually exclusive?
Section 66(1) of the Equality Act 2010 (“EqA 2010”) provides that a “sex equality clause” is incorporated into every contract of employment even if it is implied and is not an expressly written term. Section 66(2) of the EqA 2010 states that:
“A sex equality clause is a provision that has the following effect-
- if a term of A’s is less favourable to A than a corresponding term of B’s is to B, A’s term is modified so as not to be less favourable;
- if A does not have a term which corresponds to a term of B’s that benefits B, A’s terms are modified so as to include such a term.”
This helps to ensure that women receive the same treatment as their male comparators. Section 69 of the EqA 2010 establishes that the employer must prove the “material factor” relied upon for any difference in pay and the employer must show that it has not treated A less favourably because of A’s sex.
Section 70(1) of the EqA 2010 provides that the sex discrimination provisions have no effect in relation to terms which, in the absence of a material factor defence or other exception, would be modified by, or included by virtue of, a sex equality clause.
Furthermore, Section 71(1) of the EqA 2010 provides that the relevant sex discrimination provision (as defined by Section 70 of the EqA 2010) has no effect in relation to a contractual payment clause unless it amounts to direct discrimination under section 13 or 14 of the EqA 2010.
This article will discuss the interplay between equal pay and discrimination claims, paying particular attention to the above provisions and in light of the Employment Appeal Tribunal’s decision in the recent case of BMC Software Ltd v Shaikh UKEAT/0092/16.
In this case, the EAT had to consider whether a breach of a sex equality clause under the equal pay regime could give rise to both a successful equal pay claim (resulting in constructive unfair dismissal) and separately, a claim of sex discrimination.
The Claimant, Ms Shaikh, commenced her employment with the Respondent, BMC Software Ltd (“BMC”), in 2004. During this time, Ms Shaikh was awarded two pay rises based on merit, and by July 2013 her basic pay had reached £60,000.
In 2014, BMC proposed a restructure within the team and Ms Shaikh was unhappy with the work that was assigned to her following this restructure. She unsuccessfully applied to be transferred into a different role. She then raised a grievance in June 2014. One of the grounds of the grievance was that “Mr A” had a higher basic pay than her.
“Mr A” also commenced his employment with BMC in 2004 and received several pay rises during his employment, taking his basic pay to £75,000 by June 2010. These pay rises were described as being based on merit, merit adjustment and general promotion.
BMC did not uphold Ms Shaikh’s grievance and held that the difference between Ms Shaikh’s and “Mr A’s” basic pay were due to reasons of grading, entry level and promotions. Ms Shaikh appealed this decision and her appeal was rejected. Consequently, she handed in her notice with immediate effect, raising seven different complaints in her resignation letter. One of these complaints was that “Mr A” and “Mr B” were being paid more than her.
“Mr B” commenced his employment with BMC prior to 2001 and by 2010 his pay had inflated to a figure between £60,000 and £68,000. BMC confirmed that this was due to merit adjustments and claimed that it had been necessary to pay “Mr B” a higher salary in order to recruit him.
Following her departure from BMC, Ms Shaikh successfully made an equal pay claim in the Employment Tribunal (“ET”).
The ET found that the Respondent had “failed to discharge their burden of proving that any discrepancy in pay with either comparator at any time was due to any merit increase, or that any merit increase was material, or that the difference in pay was not attributable to sex.” As a result of this, the Respondent’s defence failed. The ET upheld Ms Shaikh’s claim of constructive unfair dismissal, resulting from the breach of equal pay and the implied sex equality clause. However, the ET rejected Ms Shaikh’s direct sex discrimination claim. The case was referred to the EAT on appeal.
The EAT had to consider, inter alia, if the Tribunal had the jurisdiction to conclude whether the Respondent’s breach of the implied sex equality clause (constituting constructive unfair dismissal) was also directly discriminatory.
The EAT concluded that BMC’s breach of the implied sex equality clause gave rise to an equal pay claim, which under the Employment Rights Act 1996 (“ERA 1996”) could constitute constructive unfair dismissal. Nonetheless, the EAT ruled that this same dismissal could not then form the basis of any separate sex discrimination claim under the EqA 2010, as Section 70 of the EqA 2010 preserves the separation of equal pay and sex discrimination claims making the two “mutually exclusive”. The EAT held that Section 71 of the EqA 2010 is not an exception to Section 70 of the EqA 2010, nor is it a gateway for claims of sex discrimination to arise out of a sex equality clause.
The Eat held that the courts will only allow the successful pursuit a direct sex discrimination claim if it falls under Section 71 of the EqA 2010. In circumstances such as these, the EAT will only permit a claim for direct sex discrimination where there is not a sex equality clause in effect that can be relied upon.
The decision made by the EAT has clarified the way in which Section 70 of the EqA 2010 is to be applied, and the way in which it cannot be used in conjunction with Section 71 of the EqA 2010. Employers should therefore be cautious that failure to pay equal pay could result in grounds for resignation and a constructive unfair dismissal claim.
Equal pay is a claim for breach of contract whereas discrimination is a claim in tort which gives rise to injury to feelings compensation. As discussed above, although failure to pay men and women equal pay may be viewed as sex discrimination, the two claims are “mutually exclusive” which means that employees cannot succeed in both types of claim with regards to the same breach.
On a final note, this case only addresses the issues of equal pay and sex discrimination, meaning that employers should be careful because in slightly different circumstances an employee may be entitled to bring two separate claims. For example, if there is an equal pay issue and also a discrimination issue not relating to the employee’s sex.