Court of Appeal guidance on Equal Pay Material Factor defence
Andrew Burns QC and Alice Carse argued that an employer can continue to rely on material factors as long as they remain the cause of the pay disparity and are not displaced by a new explanation for the difference in pay. The Court of Appeal affirmed the long standing approach of Marshall v Glasgow City Council in rejecting the tribunal’s suggestion that a material factor could evaporate.
The main issue before the Court of Appeal in Walker v Co-operative Group Limited [2020] EWCA Civ 1075 was the operation of the “material factor” defence to a claim for equal pay (located at s. 69 of the Equality Act 2010). A job evaluation study had assessed executive pay to provide a ceiling for a company-wide grading review. The Appellant was rated equivalent to two male executives in early 2015, but when their pay had been set (in 2014) there were four material factors explaining why the men were paid more. The tribunal held that material factors for the difference in pay between the employee and her male comparators were no longer justified in 2015. The Appellant contended that material factors can “evaporate” over time relying on Benveniste v University of Southampton. The Court of Appeal accepted the employer’s submission that (absent indirect discrimination) the material factor defence does not require an employer to show that any difference in pay is justified. Rather, Bean LJ emphasised that the question the Employment Tribunal has to ask is whether the material factor is causative of the difference in pay between the employee and her male comparator. A material factor cannot simply evaporate over time, which would require an employer to keep differences in pay under continuous review. Instead, it accepted that an employer has to make a new decision on pay (or omit to decide where there is a duty to do so) in order for the material factor to require reassessment. At that point the material factor previously relied on by the employer will either continue to be the cause of the difference in pay, or it will not. If it is still the cause of, or explanation for, the difference in pay, the employer has a defence to a claim for equal pay. If not, and there is no other material factor, the equal pay claim will succeed. Males LJ added some guidance in the approach to assessing the material factor defence where equal value is not in issue.
The Appellant’s approach would have created practical challenges for all employers who would have needed to ensure that pay was reviewed frequently (even continually) during the year for fear of a material factor evaporating resulting in an unwitting breach of equal pay law. This would have caused uncertainty for both employers and employees over the frequency and quality of pay reviews and the circumstances in which a material factor could cease to apply. Instead the Court of Appeal affirmed the conventional causation test, asking simply: is that still the reason for the pay disparity?
The Court of Appeal refused permission to appeal to the Supreme Court.
Andrew Burns QC and Alice Carse were instructed by Addleshaw Goddard LLP.
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