The Employment Appeal Tribunal (EAT) held that a tribunal was wrong to find that an employer’s material factor defence to equal pay claim ceased to operate.
In Co-Operative Group Ltd and anor v Walker, there was insufficient evidence that factors justifying a pay discrepancy ceased to be relevant. A material factor defence remains operational to justify the pay differential until identification of a further decision or omission to decide on pay.
COG Ltd sought to rely on a “material factor” defence under section 69 of the Equality Act 2010, asserting that there were non-sex-based justifications for setting W’s pay lower than that of her comparators in February 2014, and that those justifications persisted.
The employment tribunal accepted that the material factor defence was established as at February 2014, based on four factors:
However, the tribunal found that “at some stage between February 2014 and February 2015” the roles of W and the comparators had become more comparable. Therefore, the “historical explanations” for the disparity ceased to apply at some point during that period.
COG Ltd successfully appealed to the EAT on the basis that the tribunal should not be able to decide, without a basis for doing so, that the February 2014 material factors no longer justified the pay difference during the intervening period.
There was no evidence that COG Ltd had decided to permit the factors to cease to be relevant, or even noticed that there may be a problem.
While it is unnecessary to identify when COG Ltd became responsible for the unlawful sex discrimination, there must have been sufficient evidence that the transition from a legitimate pay award to an illegitimate one had taken place. It was only upon the effectiveness of the JES that the facts indicated that the original objective justifications no longer persisted. The tribunal had, effectively, extended the JES’ findings to the period prior to the study which was contrary to preceding case law.
Without evidence regarding whether the justifications persisted, and for how long, the tribunal could not speculate on the position between February 2014 and February 2015.
This meant that, provided that the February/March 2014 decision could not be impugned, the material factor defence continued to operate until a further decision or omission to decide on pay could be identified. It is at this point COG Ltd would be required to once again to defend the difference in pay.
This appeal demonstrates the potential difficulties with relying on historical material factor defences. The employer here was protected (on appeal) because they had taken steps to consider if their defence was still valid and had taken action as soon as there was evidence that it no longer was.
This decision underlines the importance of the services KPMG provides in respect of evidencing the reasons for differences in pay, conducting regular equal pay audits and considering equal pay issues during pay reviews.
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