Redcar & Cleveland Borough Council v Bainbridge; Surtees v Middlesbrough Borough Council

The Court of Appeal has handed down one of the most significant equal pay decisions for several years.

The appeals concerned ‘pay protection’ measures adopted by local authorities to provide employees whose pay was to be reduced under a new job evaluation scheme with a ‘soft landing’ whereby the reduction in pay would be introduced gradually.

The main issue was whether and in what circumstances an employer can rely on the ‘genuine material factor’ defence under s.1(3) of the Equal Pay Act 1970 to defend his decision not to afford the same protection to employees who prior to the new scheme would have been paid at the same level – and would now have experienced the same reduction – but for the employer underpaying them in breach of the Act.

The Court (Mummery and Smith LJJ and Lindsay J) heard extremely wide-ranging argument as to how the concept of discrimination applies under the Act and as to the correct operation of the s.1(3) defence. The Court held that:

• When examining the reason for the new pay disparity, it is necessary to look not merely at the immediate reason for that disparity (i.e. the fact that only those afforded pay protection were in fact suffering a pay reduction), but at the underlying reason.
  
• Where the underlying reason is that the employees excluded from pay protection did not suffer a pay reduction because they had been unlawfully discriminated against under the old pay arrangements, the new pay arrangements are tainted by sex. In such a case, the claimants need not produce statistics showing an adverse disparate impact on one gender, since statistical analysis is not the only way in which a sex taint may be established.
  
• Where the historic discrimination was direct, any continuation of that discrimination by way of exclusion from pay protection cannot be justified. However, where the historic discrimination was indirect, the employer can avoid a finding of unlawful sex discrimination in respect of the new pay arrangements if he can objectively justify his reason for excluding the claimants from pay protection.
  
• The employer’s state of knowledge about the discriminatory effect of the pay arrangements and the extent to which he tries to minimise that effect will be relevant considerations where the tribunal is considering whether the employer’s discriminatory means are an appropriate and proportionate means of achieving his legitimate objective.

Lord Lester of Herne Hill QC and Iain Steele represented the Equality and Human Rights Commission as Intervener.