UK: Length of Service and Equal Pay / Maternity Leave and Continuing Obligations (Updates)

Last Updated: 1 March 2004
Article by John McMullen

Men tend to have longer service than women. Pay scales which reward length of service will therefore tend to benefit men more than women. One of the surprising features of the recent case of HSE v Cadman is that this is apparently the first case in which that proposition has been challenged under the Equal Pay legislation, at least at appeal level. Ms Cadman was paid between £4,000 and £9,000 less than her longer serving male comparators in the same grade, doing the same job. It was accepted that the pay structure, with increments based on length of service, was indirectly discriminatory. Was it justified?

Surprisingly, the Employment Appeal Tribunal ruled that where a pay differential was based on service, no further justification was required. They followed an ECJ decision, Danfoss . They therefore avoided exploring the difficult though familiar arguments, legally untested, of whether service based differentials can actually be objectively justified in a particular case. Does service equate to experience, and if so, does experience justify the differential? Do turnover rates justify an increment in order to retain staff? Finding the evidence to support these arguments can be difficult (and the HSE struggled in this case),especially as all of the difference has to be justified: it is not enough to show that some differential is appropriate. Ms Cadman may have been worth less than her male colleagues because of her shorter service, but £9,000 less?

Other European cases have suggested a more rigorous approach than Danfoss. Bilka-Kaufhaus requires measures which have a disproportionate impact on women to be based ‘on objectively justified factors unrelated to any discrimination on grounds of sex ’. Arguably, length of service is a factor tainted by its discriminatory impact: women take more career breaks than men, for childbirth and caring responsibilities. In addition, in Rainey, the House of Lords held that the employer must show the measures chosen ‘correspond to a real need on the part of the employer, are appropriate with a view to achieving the objectives pursued and are necessary to achieve that end ’.

Practical Implications

At the moment, and subject to any appeal, pay scales with service increments need not be justified further under the sex discrimination legislation. However, the arguments will have to be faced once age discrimination regulations come into force in 2006. The government proposes an exception to allow service related benefits to continue, but only where these can be objectively justified. The HSE has gained only a brief respite. Given the significant pay differentials that may be involved, the costs of restructuring could be very large. Management should be reviewing service related benefits now, and either ensuring they have the evidence to establish justification, or taking steps to reduce or remove service related benefits.

Maternity Leave and Continuing Obligations

The case of Visa International v Paul may raise no new law, but is a telling reminder for employers of the importance of continuing to treat women on maternity leave as current members of staff. During Mrs Paul ’s absence on maternity leave, a new post was created, in an area she had wanted to work in. She only learnt of the vacancy shortly before her return,6 months later, by which time it had been filled. She resigned, claiming that management's failure to inform her, and so give her a chance to apply, had destroyed her trust and confidence in her employer. Her constructive dismissal claim was upheld, even though, on the facts, she was not qualified for the new post and would not have been appointed. It was the failure to inform her that destroyed her confidence, and so constituted the fundamental breach of contract. She also successfully claimed sex discrimination. The failure to inform her arose because she was on maternity leave, and she had therefore been treated less favourably for a reason relating to her pregnancy.

The contractual term ‘of trust and confidence ’is singled out in the Maternity and Parental Leave Regulations as continuing in force throughout Maternity and Parental Leave. This case illustrates its overarching nature. There is no implied contractual term that an employer should inform an employee of vacancies, but where an employee would normally learn of them, failure to inform the employee absent on maternity leave, can have disastrous consequences. Similar results (without the additional sex discrimination claims)might arise for an employee absent on sick leave.

Practical Implications

Employers need to ensure that their communication and other systems include absent employees. Pregnant employees in particular must be kept in mind. There may be resistance to the notion of interviewing and appointing an applicant to a post when she will be unable to start for up to a year because she is on maternity leave, but a failure to do so would constitute sex discrimination if her pregnancy or maternity leave is the reason for overlooking her. She should at least be given the chance of deciding whether or not to apply.

Do You Need To Know …?

Forthcoming Employment Law Changes

As part of their attempt to help business assimilate the numerous changes to employment law, the DTI have introduced two annual commencement dates for forthcoming legislation;6 April and 1 October. They have also published the first of an annual Forthcoming Employment Regulations list on their website, www.dti.gov.uk/er/regslist_2004.htm.While it would have been more useful simply to have a moratorium on changes for a year, it is at least helpful to see what is planned. Many of this year ’s changes are technical, or of limited application. However, in October, the new Dispute Resolution Regulations will come into effect and to go with them, a new ACAS Code of Practice and new Employment Tribunal Regulations. New TUPE Regulations are announced as 'probable' for October 2004.

Working Time and the 48 hour opt-out

When the UK agreed, reluctantly, to the EC ’s Working Time Directive, it secured a provision allowing individual employees to opt out of the average 48-hour limit on the working week. The opt out is now under review by the EC, who have produced a consultation paper on its future. Comments are invited by the EC before 31 March 2004:see http://www.europa.eu.int/comm/employment_social/labour_law/docs/workingtime_communication_en.pdf

Tribunal Compensation Increase

The annual increase in Employment Tribunals ’ power to award compensation came into effect on 1 February 2004,for dismissals taking effect on or after that date. The maximum week's pay, used to calculate the basic award for unfair dismissal and statutory redundancy pay increased from £260 per week to £270,and the maximum compensatory award to £55,000.In practice, most awards are still modest. The ETS Annual Report discloses that the average unfair dismissal award in 02/03 was £6,776 and the median only £3,225.

Cases referred to in this article:

HSE v Cadman [2004 ]IRLR 29;Danfoss [1989 ]IRLR 532,ECJ;Bilka-Kaufhaus Gmbh v Weber von Hartz [1986 ]IRLR 317,ECJ;

Rainey v Greater Glasgow Health Board [1987 ]IRLR 26;Visa International v Paul [2004 ]IRLR 42;Employment Rights (Increase of Limits)Order 2003 No 3038.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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