The recent equal pay ruling explained

A recent Court of Appeal ruling has limited employers’ ability to set up transitional arrangements to protect the pay of council employees who lose out when their jobs are regraded under the equal pay review process. Andrew Mickel speaks to legal and local government employment specialists to find out what the implications of the ruling are.

What is the ruling about?

Until 1997, council employees were governed by different rules depending on whether they were manual workers (governed by the White Book) or white-collar workers (in the Purple Book). Both were united under the new Green Book, negotiated by trade unions and local authorities, which were supposed to remove pay inequalities that had developed between the two sets of rules.

Uniting jobs under a single pay structure meant comparisons had to be made between them, but while some people found their pay increased, others lost out. A gardener who was previously on more money than a carer, for example, could find their pay reduced as they were brought into the same pay grade.

Although these negotiations were made nationally, the specific pay scales and rates were decided locally. In the cases of Redcar and Cleveland Council and Middlesbrough Council – as with many other councils – pay protection was used to buffer the reduction of pay, consisting of bonuses and allowances over a transitional period of three to four years. Generally speaking, it was men who benefited from this pay protection.

However, the Court of Appeal ruled last week that it was a form of discrimination to use transitional pay in such a way, as only those whose pay was getting reduced were getting allowances.

What does this ruling mean for the two councils?

The ruling has the potential to be expensive. Indeed, the Equality and Human Rights Commission legally intervened in the case to argue that transitional arrangements could not be entirely withdrawn without hitting public sector finances hard and creating thousands more tribunal cases.

The amount of money that someone could claim would vary depending on the nature of the pay protection, but the women in the recent case will each receive around £2,000, with legal costs estimated at £20,000 a case for the councils.

But Rachel Crasnow, an employment specialist at Cloisters Chambers, says that councils have not adequately proven that it will be cripplingly expensive.

“From here on out, one would hope that negotiations will be more carefully costed and considered. In this case, employers didn’t have costings as to how much it would cost to put up women’s wages to pay protection levels.

“The Court of Appeal said that in this case, it’s all very well for employers to feel this would be excessive, but the Equal Pay Act has been in effect since the 1970s. To wait for someone to bring a case and be reactive is not good enough.”

Does it affect all councils?

The ruling will cause the most problems for councils who have completed their equal pay job reviews, which bring in these new rules. Only 60% of councils have done so. If they haven’t done that, then the ruling could still have an effect. Jon Sutcliffe is the principal strategic adviser at Local Government Employers. “The effect of this is that anyone bringing in new pay structures will have to offer that equivalent money to women as well. It would seem the simplest but most brutal way is to ignore it and not pay them any protection. It could result in men being two to three grand out of pocket.”

If a council is using pay protection, it does not automatically mean that employees who were not protected will be able to claim. The Court of Appeal ruled that pay protection is not necessarily illegal. Says Crasnow: “There is no reason why employers shouldn’t attempt to attain a fair compromise but you can’t do it unless you negotiate with women’s representatives, be they officially from the unions or otherwise.”

However, Sutcliffe says that it is not clear what form these transitional rules could actually take, and it “would need testing [in the courts] right up to the European Court of Justice”.

Who else is affected?

The ruling will also affect any organization that has used pay protection while harmonizing pay. The NHS used pay protection in Agenda for Change, but claim that the changes in job structures were significant enough that comparisons can’t be drawn in the same way they were with local government. The first test case for the NHS is in the autumn.

What are the unions doing about this?

One of the things that makes this case so complicated is that the unions are also being held responsible for failing to negotiate on behalf of the women. In a separate case, the GMB were found to have discriminated against women at pay negotiations with Middlesbrough Council, by prioritizing pay protection. Thousands of women will consequently be able to claim from the unions for poor representation as well. For more on this see: http://business.timesonline.co.uk/tol/business/law/article4344656.ece

Am I eligible to claim?

One result of the case against the unions was that negotiations will now have to be carried out more carefully, and although targeted at the unions, Sutcliffe believes it has wide implications for employers as well. The result of this is that councils may have little choice but to tell employees when they are eligible to claim.

But while the dust is still settling from both cases, it remains an unknown whether this will happen in practice. But you should be able to find out whether you are able to claim, by making a request to your employer to find out what allowances may or may not be being given to other people on your pay grade.

As for local authorities, Sutcliffe advises them to go away and read the recent judgements carefully before conducting risk assessments to see what they can do.

To read the Court of Appeal rulings go to:

Union case

Council case