Equal pay and operation of a material factor defence


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The Court of Appeal has held in Walker v Co-operative Group Ltd that a tribunal was wrong to find that an employer's material factor defence to an equal pay claim ceased to operate at some point between its original decision on pay and the completion of a job evaluation study (JES) a year later.

The claimant was promoted to the role of Chief Human Resources Officer around February/March 2014 which coincided with the Co-operative Group Ltd (COG Ltd) being in financial crisis.  The claimant and the rest of the Executive Committee were considered essential to the company's survival and were all offered enhanced salaries (with the claimant's enhanced salary being lower than that of other members of the group).  A JES was completed in February 2015 which showed that the claimant's work was at least equivalent to that of the male members of the group, and/or of equal value.  When the claimant subsequently brought a claim for equal pay in relation to this period, COG Ltd put forward a material factor defence, arguing that there were various non-sex-based justifications for setting her pay lower than that of her comparators.  These included the fact that the claimant's comparators were seen as vital to the immediate survival of the company as they were part of the core team, while the claimant was not; the claimant was unproven at executive level; the "flight risk" associated with the comparators was more significant; and the "market rate" for one of the comparators was higher than the market rate for the claimant's position.

The tribunal found that the material factor defence applied at the point at which the claimant was promoted to the role of Chief Human Resources Officer, but by the JES this defence was "historical". As a result it concluded that the results of the JES provided a basis on which to challenge the period prior to the JES. Both the Employment Appeal Tribunal and then the Court of Appeal disagreed.  The tribunal had stated that there were "historical explanations" for the pay differential which were no longer material by February 2015, but in relation to each of the comparators there was at least one material factor which explained the difference in pay.  The Court stated that the starting point for an equal pay claim is proof that the claimant is employed on work that is equal to that done by a comparator of the opposite sex.  It is only then that the possibility of a material factor defence becomes relevant.  As the tribunal did not find that the claimant's work was equal to that of her comparators in February 2014 and only became equal between then and February 2015 (therefore leaving the date at which this had occurred to be determined later) this left the starting point for the claimant's claim unresolved.  On the tribunal's findings the true position was that the claimant's work was not equal to that of her comparators and so her claim should not have got off the ground. 

Take note:  In establishing a material factor defence, an employer has to prove that the reason for any pay disparity is not sex and is material, but it does not need to justify any pay disparity.  The tribunal had taken the wrong approach in deciding that the explanations given for the pay disparity in February 2014 were no longer material in February 2015 which meant that the pay differential could no longer be justified.  The decision in Walker also shows that a claimant should have a clear start point for an equal pay claim, and that it won't be enough to point to a period of time during which it could potentially be argued that the value of the claimant's work becomes equal to that of their comparator.

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